US$ sales, export prospects to anchor Seed Co Limited
LIVINGSTONE MARUFU
The country’s leading seed producer, Seed Co Limited, says harnessing US$ local sales and exploiting regional export opportunities will cushion the company against economic headwinds.
The country is grappling with hyperinflation, usurious ZWL$ interest rates, local currency depreciation on both the official and alternative markets, crippling shortage of power and other utilities and a crippling liquidity crunch.
“Despite the harsh and uncertain operating environment, we will focus on stakeholder value enhancement by harnessing hard currency local sales as well as exploiting regional export opportunities,” Seed Co group finance director John Matorofa said.
Seed Co Limited revenue went up 5% to ZWL$8.44bn during the half-year results ended September 30 2022 from ZWL$8.06bn recorded during the same period last year.
The company is back in the black, posting a profit of ZWL$2.6bn from a loss of ZWL$7.4bn in the same period last year.
“Value in the business was preserved through revenue contracts in US$ but settled in ZWL$ at prevailing forex rates and US$ royalties– hence the sizable other income amount.
“Finance costs were a major drain to the business, despite the jump in overheads, finance costs, lower volume and monetary loss; value and profitability were hedged through the forex gains,” Matorofa said.
He said year-to-date sales volume and US$ local and export sales are now significantly higher than the same period the prior year buoyed by the onset of rains which are forecast above normal for most parts of the country.
“Also increased uptake under government-related programs, brand equity and strong research and development capabilities remain our competitive advantage and will continue to receive priority investment,” Matorofa said.
Seed Co group chief executive officer Morgan Nzwere said the currency conundrum remains the elephant in the room for the seed company.
“Pricing and reporting currency quagmire – the economy is largely dollarised, but the ZWL$ is still the official local currency,” Nzwere said.
He said sharp increases in the prices of critical imported agro-inputs because of the conflict in Europe and regional power crisis as hydro sources dry up and power infrastructure failure are some of the challenges that continue to affect the company.
Nzwere said Zimbabwe’s first-half half sales volume was 20% lower due to the liquidity crunch in the economy, the delayed launch of the government programs and the non-repeat of wheat exports to Nigeria.
Despite a stellar performance by Seed Co Limited, Seed Co International had a poor performance due to spillover of global inflationary challenges and droughts.
Seed Co International recorded a US$4.3 m loss from a profit of US$1.5m in the previous period.
“US$4.3m first half loss outturn mainly attributable to normalisation of seasonal revenue performance because of delayed government programme in Malawi unlike prior year when sales were registered early, stockouts in Nigeria [due to production challenges], stockouts in Kenya due to drought and production challenges, inflationary increase in overheads and increase in finance costs as interest rates increase globally and in regional markets,” Matorofa said.
