Seed Co International Limited (SCIL.bw) HY2024 Interim Report
The period was marked by continued global economic headwinds as the Russo-Ukraine and Israel-Palestine conflicts exacerbated global supply-chain disruptions and inflationary pressures. Regional currencies continue to weaken against the USD owing to unfavourable economic developments.
Despite enormous and largely exogenous challenges, the Seed Co brand continues to demonstrate resilience as evidenced by open market sales growth in our various markets.
First half performance was in tandem with the seasonality of the business. However, the Group achieved an interim operating profit of $1.3M. This outturn is a rebound from prior year’s $2.6M interim operating loss.
A combination of volume growth and better product mix boosted revenue by 23% compared to the comparative period. Encouraging first half maize sales were booked in Kenya, Malawi, Mozambique, Tanzania, and Zambia bouyed by firm grain prices in the region and globally.
Improved margins and containment of overheads below the USD inflation rate also helped the business to post an interim operating profit.
Net finance costs increased due to higher interest rates and more local currency borrowings facilities utilised to expunge USD denominanted liabilities and manage elevated foreign exchange risk from depreciating regional currencies.
The Group’s share of losses from associates and joint ventures increased significantly driven by exchange losses.
The net result is 8% better than last year’s interim net loss.
The lower carrying value of PPE is attributed to translation losses caused by weaker regional currencies, fixed assets’ depreciation and the Group’s policy not to perform interim PPE revaluations.
The carrying value of investments decreased because of equity-accounted losses during the first half.
Receivables decreased by 11% as the Group collected prior year debtors but the impact of collections was partially offset by increased early sales on credit.
As is the norm, the Group’s inventory levels were at peak this time of the year in preparation for the main summer selling season.
The change in shareholders’ equity was primarily due to the net loss incurred during the first half of the financial year.
The increase in debt was primarily to fund working capital during this period of receiving and processing seed. In addition, local borrowings increased substituting USD liabilities in order to derisk the balance sheet from exchange rate fluctuations and benefit from local currency weaknesses.
Payables mainly relate to amounts outstanding on seed delivered by growers settled subsequent to the reporting date.
Significant yield and quality gains were achieved in the previous production season. Resultantly, the Group has adequate seed stocks to satisfy anticipated demand across markets.
Research and development
The Group continues to deliver improved products from its R&D investment over the years. Several new and improved seed varieties are being released in response to climate change and the evolving needs of our farmers.
Latest forecasts are indicating normal-to-above normal rainfall in most parts of East Africa, and below normal rains in Southern Africa from November 2023 to January 2024.
The Group is well prepared to respond to the needs of farmers in light of the mixed rainfall forecasts. A mixed selling season is being anticipated benefiting from the Group’s diversified geographical footprint and a diverse climate-smart product portfolio with potential downside from unfavourable rains in Southern Africa.
By Order of the Board
E. M. Kalaote
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