Seed Co International Limited 2019 annual report

We have extracted below the Chairman’s Statement from the 2019 annual report of Seed Co International Limited (SCIL.bw), with a primary listng on the Botswana Stock Exchange, and a secondary listing on the Zimbabwe Stock Exchange:

I am pleased to present to you my first Annual Report on your Company for the Financial Year ended 31 March 2019. Following the unbundling of the regional operations of Seed Co Limited under Seed Co International, the later was successfully listed on the Botswana Stock Exchange on 5 October 2018 with the secondary listing on the Zimbabwe Stock Exchange. The Group believes that it now has better capacity to raise capital to finance Research and Development, growth and expansion opportunities in the seed business in Africa and beyond; and in addition provide improved visibility of the Company’s brand and regional operations to the investing community. This would not have been achieved without your support. This past season has seen the worst droughts for more than forty years in some of our markets. Most parts of southern Africa, covering Zambia, Zimbabwe, Botswana, Namibia and South Africa experienced way below normal or erratic rainfall which made it difficult to establish any crops. Heavier but erratic rainfall in late December resulted in localized flooding in parts of Malawi, Zambia and Zimbabwe. East Africa was not spared either with this region experiencing the worst drought in more than 3 decades. These weather conditions severely reduced seed uptake during the year.

Financial Review

The Group posted turnover of $60m which was 7% below last year while Operating Profit of $7m and PBT of $5m reduced by 4% and 2% respectively as compared to prior year. Performance during the period under review was adversely affected by the subdued demand in East Africa due to the severe drought experienced there. In addition, the adoption of the IFRS 9 accounting standard necessitated a $1.7m (Note 13.2) impairment charge on the income statement.

Product Quality and Seed Supply

Despite the weather challenges during the season, seed production was not severely affected and the Group has adequate stocks to supply the market unlike previous seasons where there were product shortages.

Research and Technology

The Group continues to invest in Research and Development with the completion of development work at the research station in Potchefstroom in South Africa and the establishment of a lowland research station at Tokwe in Mozambique.

People

As your Company continues to nurture and develop talent, I am proud to congratulate those of our staff who attained doctorates, enhancing the company’s pool of very experienced and skilled scientists and agronomists. The new office for group senior management management has been established in South Africa.

The Competitive Landscape

While the competitive landscape remains intense in Africa, your company is keeping ahead of the game by releasing new and better products that outcompete the competition.

New Business Development

I am happy to report that your Company is making pleasing inroads into new untapped markets and is expanding its income streams into the Vegetable space. Seed production challenges seem to have been overcome in Nigeria and your Company is now developing the distribution network to upscale the business there. The Maize Lethal Necrosis Disease (MLND) resistant products for East Africa that are in their final stages of testing are expected to be released in the near future. In Ethiopia, efforts are still being made to secure the necessary licenses for this promising market where our registered products are already in huge demand. The strategic input and participation of your Company’s equity partners Limagrain in both our field seeds and vegetable seeds businesses is increasing and am confident that this partnership will give your company a firm foundation for future growth.

Future Prospects

Despite the setback this year where both our markets were ravaged by drought, I am optimistic that your company will rebound and resume it’s growth path and that this will be supported by several factors including:

  • Increase in anticipated demand due to expected grain shortages caused by drought in East Africa and floods in Malawi and Mozambique;
  • Adequate stocks on site on all major markets; and
  • The contribution from the Alliance Seeds whose acquisition was concluded just after year end.

Directorate

I would like to take this opportunity to welcome those directors who were appointed during this past year and to thank all my fellow board members, management and staff for their support and dedication in achieving the milestone of listing the Company as well as for showing great resilience during this very challenging year. Antonio Colombo stepped down from the Board following his appointment as CEO of Limagrain Europe. We wish him all the success in his future endeavours.

D.E.B Long
Chairman