Seed Co in subdued performance
LIVINGSTONE MARUFU
Listed seed producer, Seed Co posted a subdued performance in the quarter to December 31, 2021, largely due to the slow onset of the rainfall season which negatively impacted on the seed uptake, volatile currency environment, high interest rates and harsh economic conditions.
Zimbabwe and other parts of the African continent, where Seed Co operates, received below normal rainfall in the quarter under review, casting serious doubts of a good summer cropping season.
This resulted in reduced hectares.
In a trading update for the quarter to December 31 2021,Seed Co company secretary Tineyi Chatiza said the late start of the rainy season impacted the company’s performance in the period under review.
“Coming off last financial year’s good sales season, sales volumes in Zimbabwe declined by 20% for the nine month’s period and by 40% for the quarter mainly attributable to the late start of the rainfall season,” Chatiza said.
“Maize and wheat seed sales volumes were 20% and 6% lower than prior year for the 9 months ended 31 December 2021 due to the slow uptake of seed in the wake of the late onset of rainfall season.”
He said revenue marginally declined by 3% year on year and by 14% in the quarter to December 31, 2021 compared to the same quarter prior year reflecting the volume drop.
The average consumer price indices used for inflation adjusted calculations were 3,977.46 and 2,474.51 while average conversion factors were 1.23 and 2.36 for the current and comparative periods respectively.
“The foreign associate, Seed Co International Limited, positive contribution to the group performance receded mainly on account of somewhat late rains in Southern Africa, drought in Kenya and product shortage in Nigeria,” he said.
“On the other hand, the local associates, Quton and Prime Seed Co, posted losses due to delayed cotton seed sales caused by the late rains and exchange losses from vegetable seed imports.”
Chatiza said the Covid-19 variant afflicted the country during the quarter under review and the government heightened control measures to manage the pandemic.
He also bemoaned the continued widening of the gap between the official and parallel exchange rates presenting pricing and value-preservation challenges to the company.
Worsening the situation, he said, the high interest rates, under the monetary policy regime aimed at containing local money supply, made the trading environment extremely difficult.
He, however, said the full establishment of the rainfall season in January 2022 stimulated seed uptake activity in some areas of Zimbabwe as well as in the region whilst in some areas the rains came too heavy to allow for normal planting activities.
Volumes have been recovering in the last quarter and the extent of the recovery will become apparent by the end of the financial year.
In addition to delayed rains in Southern Africa and the drought in Kenya, the global fertiliser shortages affected the company.
Seed Co expects the Zimbabwean business environment to remain challenging and unpredictable characterised with countless policy and regulatory interventions.
These challenges, and in particular the local currency pricing quagmire in Zimbabwe, are expected to continue weighing down the company’s performance in real terms.
Notwithstanding the largely external threats, Chatiza said the board and management remained committed to grow and preserve the company’s value in Zimbabwe and beyond for the benefit of farmers, shareholders, and all stakeholders.
