LIVINGSTONE MARUFU
Listed seed producer, Seed Co Limited, says strong wheat seed show in the quarter to June 30 drove the group’s performance, contributing more than 90% of the total sales volumes.
As a result, revenue for the group grew 49% in the period under review compared to the same period last year on the back of the wheat seed sales.
“Total sales volumes for the first quarter increased by 23.1% from the corresponding period last year with wheat seed making up 93.0% of the total sales volumes which is typical for the period under review,” Seed Co company secretary Terrence Chimanya said.
He said the wheat seed sales volumes were 25% higher than prior year on the back of a government import substitution drive.
“This was further enhanced by the improved irrigation capacity which benefited from rising water levels following the good rains received during the summer,” Chimanya said.
The turnover increase in inflation-adjusted terms, Chimanya said was a relatively modest 49%.
However, Chimanya said Seed Co’s operating results swung by 115% from a profit to a loss in inflation adjusted terms, largely due to gross margin shrinkage from 70.3% achieved in the previous year to 30.1% in the period under review.
The shrinkage was largely due to distorted exchange rate movements.
The share of loss from associated companies widened mainly due to the translation of the foreign associate’s US$ denominated loss at a much weaker average exchange rate compared to prior year.
Chimanya said the first quarter was mainly a cost-accumulation phase in preparation for the main maize seed selling season in the second half of the financial year.
During the quarter under review, the government gazetted Statutory Instrument 127 of 2021 which empowers the Reserve Bank of Zimbabwe to enforce and penalise offenders of exchange control regulations mainly relating to trading on the foreign currency auction, exchange rates and acceptance of the local currency as legal tender under the multi-currency regime.
Chimanya said this new regulation may impact the group’s value preservation efforts negatively due to the difficulty in pricing its seed at sustainable levels.
In spite of this potential challenge, subject to favourable climatic and economic conditions, the group is poised to ride on the good performance achieved in the previous financial year on the back of the anticipated continuation of government programmes targeted towards enhancing food security amidst the Covid-19 pandemic and improving agricultural production to eliminate food imports, Chimanya said.
The completion of the seed drier should enable the group to accelerate seed availability to the market in the future while simultaneously improving its quality, he said.
