SeedCo Limited: Withdrawal of Cautionary Announcement

Harare - On the 23rd of February, 2023, the seed producer, SeedCo Ltd, withdraw a Cautionary Announcement made on the 18th of January, 2023. “Accordingly, the cautionary announcement made on January 18, 2023, is hereby withdrawn,” read the withdrawal statement.

The Cautionary Announcement made in January read, “Shareholders of SeedCo Limited and the investing public are advised that the board has approved the migration of the company’s listing from the Zimbabwe Stock Exchange to the Victoria Falls Stock Exchange,” and went on to inform the investing public to exercise caution when dealing in the company’s securities. The withdrawal of this cautionary announcement came as a change of plans from the initial resolution as the board now resolved to suspend indefinitely the proposal to migrate the company’s listing from the ZSE to VFEX. This is also the second time the company has reversed its plans to migrate from the ZSE, following another proposal in 2021.

Following the announcement to shift to VFEX on the 18th of January, the SeedCo stock surged by a staggering 64% in nominal terms to 23 February, which is more than 1-fold up from the overall market average of 29% over the specified period. The precedented reversal in the proposal to migrate to VFEX followed the policy changes in the 2023 Monetary Policy Statement, which included the standardization of all export retentions at 75% across all sectors as well as the reduction in borrowing costs to encourage borrowing, which induces demand on ZSE. The market interpreted these measures as the removal of one of the main incentives for companies to list on VFEX while inducing more liquidity on ZSE which already holds the leverage of high investment return due to more activity and volatility compared to VFEX which continues to suffer from low liquidity. Armed with these changes, SeedCo Ltd weighed the pros and cons of migrating to VFEX and opted for better investor returns and more liquidity which outweigh the benefits offered by VFEX which include tax incentives for shareholders, easier repatriation of funds and more transactional flexibility.

GetBucks: Further Cautionary Announcement

The financial company, GetBucks, issued a further cautionary statement on the 23rd of February, 2023, as a follow-up to the cautionary statement issued on the 23rd of January, 2023. In January, the company issued a statement pertaining to a consideration to delist from the ZSE and in a recent statement, the company advised shareholders of the ongoing process of the proposal.

While the company said it is still determining the impact of the delisting and recapitalization on the company, shareholders and the price of the security, the counter’s share price on ZSE has garnered a mild 3% nominal growth over the period from the initial cautionary statement to the further cautionary statement, while the overall market surged by a whopping 27% over the period. Prior to the cautionary, the stock was sailing at a stable price from the beginning of the year to the 23rd of January while the ZSE All Share Index notched up 12% over the period. On the other hand, GetBucks surged by a record 4700% in 2021 while the overall market went up by 311% in nominal terms, followed by another whopping growth of 263% from GetBucks in 2022 while the ZSE All Share Index rose by 80%. Annual inflation closed the year 2022 at 244%, which means GetBucks performed ahead of inflation while the overall market recorded a loss in real terms. However, the high investor returns are only reflective of price movement and not liquidity. The counter performs below market average in terms of turnover, which means investors of high volumes may fail to liquidate their portfolios despite the high returns. The ongoing recapitalization process proposed by the board may be projected to also address the company’s market capitalization which significantly influences volumes and turnover. While the Cautionary Announcements are silent about the plans to list on VFEX or any other listing, it is highly likely that the company will seek a listing in due time.

Trading Updates: CAFCA & CFI

In a Trading Update for the 3 months to December 2022, CAFCA reported a -12% decline in conductor tonnes sold from 634 tonnes in the corresponding period in the prior year to 559 tonnes in the period under review. Export volumes dwindled by 34 tonnes in the quarter to 31 December 2022 as the company reports that stock replacement in Malawi continues to be dragged down by foreign currency shortages while Mozambique recorded a large once-off order in the prior year which meant a higher base of comparison in the period under review. The company is, however, expecting large orders to be delivered in March in Mozambique and DRC respectively, while a consignment stock arrangement was opened in Tanzania.

In the local market, the company recorded a decline of 8% in local volumes owing to a fall in the Utilities sector and Factory cash sales. However, the company expects Utilities to recover in the period to March 2023 as 2 of the 3 Utilities are placing new orders. The company also alluded that the uncompetitive US$ price significantly weighed on financial performance, and is expected to cool down in the proceeding period due to a policy change in the retention rules.

On the other hand, CFI also issued a Trading Update for its first quarter ended 31 December 2022. The Group reported a 9.9% increase in inflation-adjusted revenue against the corresponding period in the prior year.

The Group’s Retail division recorded a 9% growth in sales volumes from the unit’s key revenue drivers which exclude fertilizer. The disrupted global supply chains amid the Russia-Ukraine war negatively weighed the real price of fertilizer and resultantly constrained the fertilizer sales from CFI.

Sales volumes in the Agrifoods division were constant in the period under review as demand for stock feeds remained stagnant.

In the Victoria Foods segment, wheat supplies were stable in the first quarter due to a successful winter wheat season. However, power outages in the period subdued the capacity of the flour mills and led to a 19.8% decline in sales volumes as production volumes were low.

Meanwhile, the Glenara potato harvest fell by -5% in the period under review as planting was constrained by seed supply shortages. On the upside, the Estate increased its planted under commercial maize and soya bean by 11% and 19% respectively and this is projected to assist in underpinning raw material supplies to Victoria Foods and Agrifoods.

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