Seed Co Limited (Zimbabwe) – Abridged Group Audited Results FYE 31 March 2022

By Published On: July 20th, 2022Categories: Corporate announcement, Earnings
Seed Co Limited 2022 Abridged Results

Seed Co Limited (SEED.zw) 2022 Abridged Report

Overview
The period under review witnessed an unstable economic environment dominated by a weakening currency, volatile exchange rates and pricing distortions. Although the decline in Covid-19 cases and the subsequent removal of lockdown restrictions was a notable development towards normalization of operations, the cost of production soared because of inflationary pressures. Most farmers delayed planting due to late rains and a mid-season dry spell compounded the situation which resulted in notable crop write-offs during the season. The country now expects a below-normal harvest.

Financial Performance
Inflation-adjusted turnover was 8% lower than prior year and this is attributable to volume reduction and pricing challenges.

Other income increased when compared against prior year due to exchange gains on inter-company debtors and non-seed sales.

Operating expenditure rose in response to market rate-based purchase prices. The rise was also partly attributable to payroll-related costs and depreciation on revalued assets and expenses that were billed at market rate instead of the Inter-Bank Rate.

Finance costs were 9% of turnover compared to 8% prior year. The appetite to borrow more was caused by a mismatch between receipts and payments arising out of delayed payments from Government schemes and a sharp increase in prices for both operating expenses and seed deliveries.

The contribution from associates and joint ventures was nearly a third lower than prior year mainly due to the 35% reduction in profitability of the continental associate operations.

Financial Position
The rise in property, plant and equipment was driven by new acquisitions and revaluation of old assets. Notable among the additions was the artificial maize seed drying plant completed and commissioned during the year under review.

Inventories were higher than prior year due to larger volumes of wheat seed held at year end in preparation for the winter cropping season and the unsold maize seed stock carried over into the next trading year.

Borrowings rose by 35% from prior year historical levels and this was driven by the need to cover the funding gap created by increased grower payment rates, rising operating costs and delayed payments from key customers including Government schemes.

Outlook
The challenging Zimbabwean economic situation is not expected to end soon with increasing uncertainty in view of upcoming elections next year. The Global economy is also facing unprecedented challenges stemming from Covid-19 as well as climate change and now new shocks arising from the conflict in Ukraine. Whilst these developments impact fragile economies the most, the unavoidable need to focus on food security and import substitution is expected to spur investment in agriculture in Zimbabwe and on the African continent. The Group is better positioned to leverage its strong brand and intellectual property to actively participate in enhancing primary food production to plug supply gaps.

The continuation of the gap between official and alternative market exchange rates in Zimbabwe will however continue to weigh down real profitability as selling prices are linked to official rates while virtually all business costs track alternative rates.

D. E. B. Long
Chairman
7 July 2022

M. Nzwere
CEO
7 July 2022

T. Chatiza
Group Secretary
7 July 2022


Seed Co Limited (SEED.zw)

Share price: 9,000.00 ZWL cents (-3.85 | -0.04% – 11/08