Seed Co in US$7.1m capex drive

LIVINGSTONE MARUFU

Listed seed producer Seed Co International is investing US$7.1m in strategic supply chain infrastructure across East Africa as it moves to strengthen distribution capacity and meet rising demand in the region, Business Times can report.

The investment, which targets Tanzania, Ethiopia and neighbouring markets, comes as demand for certified seed continues to outstrip supply in several African countries, forcing the company to expand production, storage and logistics capacity.

Group chief finance officer Tineyi Chatiza told Business Times the capital expenditure programme is designed to reinforce Seed Co’s dominance in East Africa while reducing reliance on seed imports from Zambia.

“Our total capital budget for FY2027 is US$7.1m to support supply chain infrastructure in the region. By supply chain infrastructure, we are referring to warehouse depots, irrigation for our growers and funding strategic projects such as dams,” Chatiza said.

“We have already invested US$4.6m in Tanzania, where a new seed processing and storage facility was commissioned in September. The facility has capacity to handle 10,000 metric tonnes of seed. The objective is to reduce dependence on imports from Zambia and eliminate border-related delays as demand in the market continues to grow.”

Tanzania has emerged as Seed Co’s largest maize seed market, with annual sales now reaching approximately 15,000 metric tonnes, making it the group’s biggest maize seed-producing country.

The company has also expanded into Ethiopia after acquiring a seed processing plant and plans to construct a warehouse to support its operations there.

“This financial year, US$1m of the US$7.1m capital budget has been allocated to Ethiopia,” Chatiza said.

The regional expansion comes as Seed Co posted a robust financial performance despite adverse weather conditions and macroeconomic volatility in several of its key markets.

The group said its diversified portfolio of climate-smart seed varieties, strengthened brand and expanding market footprint enabled it to weather drought conditions in Kenya, Nigeria and Ethiopia while sustaining growth.

Group revenue rose 30% to US$161.3m, driven by improved product mix, stronger pricing and sustained demand for its premium seed varieties.

Gross profit increased to US$85.1m, lifting the gross profit margin to 53% from 50% a year earlier, reflecting pricing discipline, operational efficiencies and a higher-value sales mix.

The company said other losses largely stemmed from foreign exchange volatility in selected markets and hyperinflation-related monetary losses in Malawi.

Meanwhile, tighter cost controls, improved working capital management and stronger cash generation significantly reduced finance costs, helping lift profit after tax by 130% to US$13.1m.

Seed Co also strengthened its balance sheet through continued deleveraging and strategic capital allocation.

Non-current assets increased following investment in production infrastructure and favourable currency translation movements, while receivables rose mainly because of higher grower advances under production expansion and mechanisation programmes.

“These investments are expected to improve future productivity and strengthen long-term seed supply security,” Chatiza said.

The group’s financial position continued to improve, with gross debt-to-equity declining to 21% from 34%, while net debt-to-equity narrowed to 11% from 16%, reflecting stronger cash flows and prudent liquidity management.