- Rebounded to a ZWL15.8 billion profit against a prior year loss of ZWL2.2 billion.
- Inflation-adjusted revenue soaring 56% to ZWL42.7 billion
- Maize seed sales volumes increased 12% while soyabean volumes rose 49%
Harare - Leading Zimbabwean seed company Seed Co Limited overcame a myriad of economic challenges to deliver impressive top line growth in the financial year ended 31 March 2023. With inflation-adjusted revenue soaring 56% to ZWL42.7 billion, Seed Co proved the resilience of its business model amidst a hyperinflationary economy.
Mirroring buoyant regional demand, maize seed sales volumes increased 12% while soyabean volumes rose 49%. However, unreliable inputs and uncertainty around wheat pricing tempered winter wheat seed sales. Overall, a 14% volume improvement coupled with regular price adjustments lifted turnover, confirming Seed Co’s strong competitive positioning.
Seedco Limited continues to maintain a significant market share in the country, evidenced by the fact that they sold approximately 6,000 metric tonnes of wheat seeds, which could potentially translate to 75,000 hectares. This is a substantial portion of the overall wheat planting in the country, which amounted to around 86,000 hectares. The remaining difference can be attributed to smaller players in the market.
The government is a major customer of Seedco Limited, purchasing between 40-50% of the company's total production. The CEO of Seedco Limited has identified that the government's involvement in the market provides advantages, particularly in terms of distribution cost reduction. Despite this, the pace of payments from the government has slightly weakened in the past three weeks due to tighter liquidity. However, open markets such as Tanzania tend to perform well in terms of cash cycles, as most transactions are cash sales, resulting in quicker cash flow on the balance sheet.
Gross profit jumped 93% to ZWL17.5 billion, though margin eased slightly to 41% from 33% previously. To cushion smallholder farmers, Seed Co absorbed significant input cost hikes, resulting in gross profit growth lagging revenue. Nevertheless, judicious overhead control contained operating expenses to 43% of revenue.
Buoyant top line expansion filtered through to operating profit which surged five-fold to ZWL35.9 billion. However, at an elevated 26% of turnover, net finance costs weighed on profitability due to rising interest rates between 80-200%. Consequently, profit before tax settled at ZWL22.2 billion, a 15-fold improvement.
Seed Co’s 27% owned associate, Seed Co International, was impacted by regional currency depreciation, contributing lower equity-accounted earnings. Nevertheless, Seed Co Limited delivered a stellar bottom line turnaround, swinging to a ZWL15.8 billion profit against a prior year loss of ZWL2.2 billion.
With revenue growth outpacing expenses, cash generation remained strong. This funded ZWL749 million of capital expenditure, further expanding production capacity. Working capital requirements increased to support business expansion, lifting borrowings to ZWL24.9 billion.
Seed Co’s financial position remains healthy, with shareholders’ funds doubling to ZWL79.8 billion. The main driver was a revaluation gain on property plant and equipment which cushioned the effects of hyperinflation on asset values. With gearing of just 31%, Seed Co retains significant funding headroom.
In FY2022, Seed Co increased maize and soyabean seed sales across the region. However, performance was muted by foreign currency shortages, policy inconsistency and power outages locally. Nevertheless, Seed Co’s leading brand and Zimbabwe’s vast agricultural potential leave it well positioned to drive regional food security. Backed by a resilient business model and climate-smart seed technology, Seed Co looks set for a bountiful future harvest.
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