Seed Co revenue down 5 percent
A combination of adverse factors saw pan-African seed giant Seed Co record lower than expected sales volumes and revenue for the year-ended March 31, 2018. According to chief executive officer Morgan Nzwere, the group experienced production challenges stemming from high disease pressures, erratic rainfall (drought) and poor pollination due to high temperatures among others resulting in more than 23 percent of seed maize production being discarded after failing to meet the expected quality.
This resulted in critical shortages with product demand outstripping supply in all markets. The decline was, however, mitigated by improved volume of winter cereals and soya beans.
As a result, the Group reported a 5 percent decline in turnover to $128,5 million from $134,6 million in the prior year comparative. There was, however, growth in the other lines of income, namely commission, non-seed sales, doubtful debt recoveries, up to $4,4 million from a negative $98 379.
Financial director John Matorofa attributed growth in other income to increased volume of commission-based sales and non-seed sales. Mr Nzwere said the Group had to in-source some products from other players.
Margins, however, remained unchanged due to increased volumes of lower margin winter cereals and soya beans. This was against a reduction in volume of high margin long season varieties.
Profit for the year grew by 5 percent to $21,4 million buoyed by increased other income from commission based sales and exchange gains, reduced finance costs at $2,5 million from $4,1 million and strong performance of the associate cotton seed business.
Mr Matorofa said associate income improved due to increased volume of cotton seed sales to Government inputs programme.
The Group declared a normal dividend of 2,95 cents at 3 times cover plus an additional special dividend of 1,48 cents to bring overall cover to 2 times.
Despite product shortages, the group had got a lion’s share of the Government of Zimbabwe’s business with high demand for premium varieties by commercial farmers. Mr Nzwere said the business was currently in stock-out position.
Following the challenges and stock outs experienced in the period under review, Mr Nzwere said the group was targeting a 40 percent maize seed production increase in the coming year.
He, however, said there were still challenges related to production in high disease pressure areas, erratic rainfall and poor pollination due to high temperatures experienced.
To mitigate some of the challenges experienced in financial year 2018, Mr Nzwere said the group was exploring cob harvesting and seed drying technology to speed up seed availability and contain diseases associated with late harvesting.
He said Seed Co would also capacitate growers with working capital, centre pivots, on farm weather stations, farming equipment, silos and grading sheds.
Mr Nzwere also talked of key developments in other markets saying seed growers in Nigeria were now showing signs of improvement.
“Seed production in Nigeria more than doubled,” said Mr Nzwere.
“In Ethiopia, developments show political will to attract new investors and breakthrough is Eminent.”
In Ghana, the Group now has a physical presence to be used as a spring board to develop Francophone West Africa territory using already registered products. In Zambia the local maize seed sales had also reduced by 31 percent due to the, among several issues, maize commodity price slumping to a low of $120 and thus dissuading farmers from planting. There was also drought during the planting period from mid-December to January 25. In Kenya, despite strong demand, the business experienced serious stock shortages in all the popular varieties.
Meanwhile, Seed Co is currently in the processes of unbundling its regional operations, a process which according to Mr Nzwere will allow the group to capacitate regional operations.
Mr Nzwere said the unbundling will enhance the Group’s capacity to raise capital to finance R&D, growth and expansion opportunities in the seed business in Africa and beyond.
The operations have since been classified as discontinued operations with property, plant and equipment worth $42,2 million. The operations also have inventories worth $13,7 million as well as trade and other payables worth $36,1 million.