…as inflation ravages economy
Listed seed producer, Seed Co is banking on advanced purchases of inputs to hedge against price increases as it moves to protect the company’s investments from rampant inflation.
The economy is grappling with rising inflation which was 737.3% in June down from 785.6% in May.
The outbreak of the coronavirus pandemic has affected local companies after the government implemented a lockdown to contain the spread of the virus.
Seed Co said the lockdown resulted in the closure of other services in the value chain thereby disrupting seed production despite the seed producer regarded as an essential service.
In its financial results for the year ended March 31, 2020, Seed Co company secretary Terrence Chimanya said the firm has recorded an increase in inventories “due to advance purchases of chemicals, fertilisers, packaging and other consumables to hedge against price increases and prepare for the upcoming season”.
“All the inputs for the next production season have been acquired in advance to protect value of cash received and business should not have any significant challenges in seed production,” Chimanya said.
Operating profit went 296.8% up to ZWL$642.5m during 2020 from ZWL$161.9m in 2019 due to rising prices caused by inflation.
Revenue was 90% up to ZWL$1.07bn in the financial year from ZWL$563.m in the previous year due to the alignment of selling prices with inflation.
Maize volumes were down 36% due to a combination of poor rainfall and disposable incomes.
SeedCo said hyperinflation resulted in operating costs increasing by 628% during 2020 compared to the prior year.
The increase in the contribution from associates and joint ventures was mainly driven by SeedCo International Limited’s 61% profit growth compared to prior year.
The increase in profit was driven by the contribution by associates and joint venture as well as the inflationary increase in selling prices, the company said, adding that the increase in equity was due to profit for the year and revaluation of property, plant and equipment.