Seed Co International profit rise by 62% coupled with strong product demand

AFRICA – Regional seed producer, Seed Co International Limited has reported a 62% rise in profit for the year ended March 31, 2020 to US$6.07 million from US$3.77 million achieved in the prior year, on the back of strong product demand across the region.

Its revenue increased by 19% from US$60.1m registered in 2019 to US$71.3m, due to sharp depreciation of the Zambian Kwacha against the reporting currency.

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According to the group, the past season was mixed, marked by good rainfall in Eastern and Central Africa which drove seed demand.

But in Kenya for example, excessive rains in the first season coupled with Covid-19 movement restrictions in the second season towards the end of the financial year stalled the sales volumes in this market which resulted in increased inventories at year end.

The Southern Africa region experienced below average rainfall resulting in subdued performance.

Overall, the Group experienced a rebound in product demand following devasting drought experienced in all markets last year.

A combination of normal to above normal rainfall in Tanzania, Malawi and some parts of Zambia together with improved maize commodity prices drove product demand resulting in maize seed sales volumes growing by 37%.

The company’s basic earnings per share rose 63% to US%2.86 cents from US%1.75 cents recorded in the comparable year.

Net operating expenses decreased by a marginal 1% due to the reduction in credit losses and the positive impact of local currencies’ depreciation on translation to the group’s US$ presentation currency.

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Towards the end of the financial year, unfavourable currency movements had an adverse effect on the vegetable business in Zambia and South Africa with exchange losses negating the positive trading results that had been achieved.

According to the seed producer, delayed settlement of receivables from major government customers kept facilities at higher levels resulting in increased finance costs.

“A combination of increased revenue growth and slow movement in the regional government debts increased the receivables at year end. Efforts to get these paid are continuing,” stated the company

“Amounts due from related parties, mainly from Zimbabwe, declined by 25 percent compared to prior year and initiatives to have these balances settled are ongoing.”

Non-current assets rose to US$44 million from US$40 million due to the acquisition and capitalisation of the seed production farms in Zambia, and capitalisation of right of use of assets as well as breeding rights.

Total equity eased 4% to US$127 million from US$134 million on the back of net exchange differences on translation of foreign operations whose currencies weakened against the reporting currency.

Net debt increased due to higher seed production volumes as well as capital expenditure.

Despite the challenges posed by Covid-19 restrictions, the group is adequately stocked to meet anticipated demand in the ensuing season.

Management is also upbeat of maintaining a growth trajectory with adequate stocks and competitive product performance.

The group will continue with its market development initiatives in East Africa and the adjacent markets of Angola, DRC and Mozambique. No dividend was declared in order to preserve cash during the Covid-19 induced uncertainties.

Seed Co International was de-merged from Seed Co Zimbabwe and is listed on both the Botswana Stock Exchange and the Zimbabwe Stock Exchange.

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