Seed Co Limited has reported its full-year results for the fiscal year ending March 31, 2024 which show that the company faced a range of economic and environmental challenges but managed to maintain its operational stability and make strategic advancements in several markets.
The year was marked by prolonged geopolitical conflicts in Ukraine and Israel-Palestine, exacerbating global economic challenges.
Locally, Zimbabwe and the surrounding region struggled with faltering currencies and socio-economic issues, including climate change, unsustainable public debt, and inflation. Political instability in key markets such as Burkina Faso, DRC, Ethiopia, Nigeria, Mali, and Sudan further hampered business growth.
Despite these challenges, Seed Co continued its research and breeding activities across various markets. The company released a new wheat variety in Zimbabwe and is in advanced stages of commercializing a sunflower variety in Zimbabwe and East Africa. A promising highland maize hybrid is also in trials for the East African Highlands.
The production segment faced significant challenges due to drought, leading to yields being a third lower than planned. However, Seed Co’s significant carryover stocks, particularly in Zimbabwe, helped mitigate regional shortages. The company successfully commenced commercial production in Ethiopia and is focusing on equipping growers with irrigation infrastructure to secure future production.
Seed processing in Zimbabwe operated at full capacity, with efforts to assist growers in early delivery. A new processing plant in Tanzania is set to be commissioned by the end of the financial year, and a medium-sized plant is planned for Ethiopia.
Sales were mixed across regions. Zimbabwe, Mozambique, and Botswana saw reduced sales due to El Niño effects, while East Africa experienced record sales, particularly in Tanzania and Kenya, with notable export opportunities in Uganda and Burundi. The company emphasized the sustainability of open market sales, which are primarily cash or near cash.
Seed Co Limited reported a 10% drop in revenue due to reduced volumes, with a 27% decrease in volume performance attributed to the El Niño, which led the government to reduce traditional orders in favor of small grains. Operating expenses increased in response to hyperinflation as suppliers indexed their pricing to the USD.
The company’s gross margin improved by four percentage points, benefiting from price reviews and older wheat stocks. However, finance costs amounted to 16% of turnover, compared to 57% in the previous year, reflecting a lower average interest rate on ZWL$ borrowings.
Seed Co International, a significant associate, reported strong profitability driven by volume and turnover growth. Revenue increased to $118 million from $103.5 million, despite adverse currency effects. Key markets such as Zambia, Malawi, Tanzania, and Kenya showed robust performance due to volume growth and strategic price reviews.
Looking ahead, Seed Co anticipates a rebound in local demand due to a better rainfall outlook. The company is well-positioned with adequate stocks to meet local and export demands. Value preservation strategies include increasing exports, focusing on local open market USD sales, and containing overheads.
Regionally, the outlook remains positive, supported by good rainfall forecasts, a diversified geographical footprint, and increased demand to refill granaries impacted by El Niño in Southern Africa. Key risks include logistical delays, power shortages, and socio-economic challenges in many markets.
