Seed Co battles exchange losses

LIVINGSTONE MARUFU

Seed Co Limited, Zimbabwe’s largest seed producer, faces mounting challenges in preserving value and maintaining viable pricing as the company continues to suffer significant exchange losses due to currency depreciation and economic headwinds.

In its half-year financial results to September 30, 2024, Group CEO Morgan Nzwere described a turbulent economic environment marked by rising inflation, exchange rate disparities, and liquidity issues.

“The first half of the trading year was characterized by uncertainty in economic fundamentals. The economy continues to grapple with inflation, disparities between official and alternative exchange rates, and liquidity constraints. Balancing value preservation and maintaining viable pricing has been difficult,” said Nzwere.

Revenue surged by 73% to US$18.9m in the period under review from US$10.92m, driven by a 24% volume growth to 10,625 metric tonnes, supported by robust winter cereal sales and exports.

Wheat seed sales rose 9% year-over-year, overcoming challenges such as water shortages, power outages, and high input costs.

While other income increased due to exchange gains on ZWG borrowings, hyperinflation drove operating expenses higher, with dollar-based pricing becoming the standard. Profit after tax dropped sharply by 92% to US$1.21 million, compared to US$15.96 million in the prior year.

Finance costs declined to 8% of turnover, down from 16%, but the company remains reliant on borrowings to manage cash flow gaps from delayed government payments and escalating operational costs.

Losses from joint ventures and associates were linked to Seed Co International Limited’s subdued trading during the off-season. The company’s property, plant, and equipment values remained flat, with no capital expenditure during the period.