Seed Co Limited (SEED.zw) 2022 Presentation
Income Statement: Inflation Adjusted
- ZWL0.6BN Inflation adjusted PBT a significant reduction from Prior year’s ZWL1.9BN, despite a significant monetary loss decline from ZWL3.3BN to ZWL1BN,
- PBT reduced due to:
- 8% revenue drop as volume declined by 20% -late rains & pricing confusion in the market
- margin shrinkage from 64% down to 33% in a distorted market with de facto price controls
- 15% increase in Opex due to both local [FX] & global pressures [Oil]
- Finance costs went up 10% due increased interest rates and growth in working capital funding needs
- Associates & JV contribution was lower mainly because the continental associate, Seed Co International, posted 35% reduced USD profit from US$11.1M to US$7.1M in FY22
Notable margin loss a manifest of:
- marked increase in the cost of production
- no relatively lower cost produced stock was carried over from FY21
- pricing conundrum from the huge disparity between official and alternative market exchange rates – selling prices somewhat controlled at official rates while growers and suppliers of other inputs demanded viable prices
Other income – increased due to: –
- Increased profit from chemicals & fertiliser (inputs) sales
- Exchange gains from foreign denominated receivables
- The 15% jump, despite revenue coming down 8%, due to cost of living catch up adjustments labour costs and inflation-forward pricing by suppliers chasing the alternative market exchange rates
- Global supply shocks from Covid and now the Ukraine war causing shortages and inflation that is compounding the woes of already fragile African economies.
- Zimbabwe’s economic situation is not expected to improve soon in view of upcoming elections next year.
- the gap between the official and alternative exchange rates in Zimbabwe set to continue weighing down real profitability as it is not easy to de-link selling prices from official rates given the sensitivities around stapple seeds in the country.
- further currency headwinds expected in Malawi following the recent 25% devaluation
- uncertainty hovering in Kenya (August 2022) and Nigeria (Feb/March 2023) ahead of elections
- Zambia is however showing signs of recovery based on political confidence and ongoing discussions with international community to work out a debt rescue package
- Tanzania continuing to show signs of stability
- continuation of development partner activities in Mozambique to help mitigate national budgetary constraints
- Zimbabwe and continental food security will however remain top of the agenda to mitigate global supply shocks as African governments activate import substitution local production strategies.
- The Group is better positioned to leverage the strong brand and intellectual property to actively contribute to primary food production to plug supply gaps.