SeedCo reports interims loss, as per tradition

SeedCo Group Chief Executive Officer Morgan Nzwere

Published: 07 November 2013

SeedCo recorded a first half loss of $12.8m compared to $8.9m in the prior year. This is as per SeedCo tradition.

Group Chief Executive Officer Morgan Nzwere said the company was looking forward to a year of steady growth under pinned by better support for agriculture in Zimbabwe which is being implemented by the new government.

"Continued growth in east Africa with further gains in market share in Tanzania and entry into the highland variety market in Kenya will boast the company operation going forward, so will the continuation of the subsidy programme in Malawi and improved product pricing in this market," Nzwere said.

He said the recently released 300 early maturing series should also increase uptake by communal farmers in drier areas.

"Business development work in West Africa will continue to be intensified," he said.

Revenue for the six months at $17m was 30% higher than prior year on the back of a 34% increase in winter cereals and a 17% increase in maize seed volumes. Gross margins at 39% were marginally higher then prior year's achievement of 36%. Management indicated that gross margins are expected to further improve as the selling season picks up in the second half of the financial year.

The increase in the loss position was due to a $3.1m impairment of deposits at Interfin Bank which was put under curatorship and an increase in the general provision for bad debts by another $1.0m to take account of slow moving retail debtors from previous years. Without these once off costs the operating costs were lower than in the prior year.

Accounts receivables reduced by 31% to $44.0m on the back of payments from both private players and governments. A total of $8.0m was received from the governments of Zambia and Zimbabwe after cut off for the first half. Due to the seasonal procurement of maize seed inventories were up 49% to 26,100 mt (maize 16,500mt and soya 9,600mt).

The company continue to make investments locally and in the region and during the period they spend $4.0m compared to $3.3m last year (the budget for the year is at $7.5m). During the year Seed Co released 11 new seedvarieties, 5 maize hybrids while 4 were soya beans and 2 were sugar beans.

The equity injection of $40.0m from Vilmorin Cie expected by January 2014 will significant increase the capital position of the business. The deal is expected to enable SeedCo to leverage on expertise from Limagrain on genetic technology and enable the company to access cheap funding from international markets. SeedCo expects to save close to $3.0m annually on interest cost after receipt of the capital injection from Vilmorin and Cie with the bulk of these savings expected in FY 15.

Tonderai Maneswa of Imara Edwards recommended shareholders to buy SeedCo because it is a solid company.

In a note to Imara Edwards clientshe wrote, "In our view, Seed Co is a solid company with a very good business model. We continue to recommend purchase of the stock due to the company's steady and predictable earnings growth, a concept with market dominance, and prospects for continued capital appreciation."

Seed production has been reduced especially in Zimbabwe where there was significant carryover stock and SeedCo hopes to end FY 14 with a stock carryover of approximately 19,000 tonnes.
- businessdaily

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