Seed Co Limited (Zimbabwe) – HY 2024 Results Presentation

By Published On: December 8th, 2023Categories: Corporate announcement, Earnings
Seed Co Limited 2024 Presentation Results For The Half Year

Seed Co Limited (SEED.zw) HY2024 Presentation

General environment

  • Zimbabwe’s economic crisis went on unabated, compounded by:
    • Post-election political and continued policy uncertainty weighing on economy
    • Mixed signals around dollarisation despite the 2030 Gvt declared multi-currency use timeframe
    • Widening of gap between the official and alternative currency markets
    • Compulsory 25% export surrender across the board
    • Recommendation to remove 10% FX trading margin cap might help multi-currency pricing
  • Unfavourable weather outlook (drought) further compounding Zimbabwe and regional economic headwinds
  • Globally, the continuation of the Russo-Ukraine war and outbreak of Israel-Palestine war compounding global challenges (logistics, inflation & soaring interest rates)
  • In the region, economic headwinds being experienced characterized by power shortages, inflation and depreciating currencies with limited global donor support
  • Government programs continuing in most markets though under budgetary constraints

Research

  • Satisfactory product pipeline renewal to address the ever changing climate and farmer needs
  • New varietal registrations in Zimbabwe
    • Soyabean: – Two new releases (SC SZ06 & SC SZ08)
    • Beans: – Three new releases (SC PV 04, SC PV 06, & SC PV O8)
    • Sunflower – Two hybrids: LG 50745 & SC HAH02 and one Open-Pollinated Variety (SC HA01)
  • Regional maize varietal registrations:
    • Kenya: SC739 & SC805- Highlands adaptable hybrids
    • Zambia: SC669 & SC 671- Cob rot tolerant 600 series hybrids
    • South Africa: SC710, SC657 & SC653 came top in silage trial evaluations
    • Nigeria: 5 hybrids undergoing on farm evaluation including SC417
  • Significant progress made towards developing fall armyworm tolerant breeding

Production

  • FY22/23 production exceeded targets due to significant yield and quality gains achieved.
  • Total maize seed stocks available in Zimbabwe for sale this year stood at 31,600MT that is 40% higher than PYr
  • Total maize seed stocks for sale in the region this year stood at 58,850MT that is 14% higher than PYr
  • Available maize seed stocks more than adequate to satisfy anticipated demand this year across markets with intercompany exports
  • Whilst overall stocks are adequate some varieties like SC719 have already stocked-out as they are highly in demand

Processing

  • The newly commissioned Zim drier handled its design capacity 5,000MT this year.
  • Processing plants working very well but power outages are a challenge in Zimbabwe, Zambia, Malawi, and Tanzania
  • Back-up power investments are being made but these are however costly to run compared to the grid
  • Broke ground to build a new factory in Tanzania to address the needs of this growing market
  • Work in progress to increase maize seed drying capacity and storage capacity in Zambia

ZIMBABWE OUTLOOK

  • The Zimbabwean operating environment remains highly uncertain
  • Recent national budget taxation proposals are causing anxiety, and we await the passing of the Finance Bill
  • The country is facing a drought induced by the El-Nino and this is dampening farming activities
  • Small-scale farmers will still however attempt to plant, and we have seen increased open market demand despite the challenges of weather and the economy
  • We have an optimal varietal mix suitable for both drought and good rainfall
  • To preserve shareholder value in a highly uncertain environment we are:
    • increase exports and harnessing USD sales from the open market
    • containing overheads in line with the obtaining level of business
    • liquidating costly borrowings from cash collections

REGIONAL OUTLOOK

  • A mixed selling season is being anticipated benefiting from:
    • the Group’s diversified geographical footprint; and
    • a diverse climate-smart product portfolio.
  • Potential downside from unfavourable rains in Southern Africa though sales to date are not showing signs of being adversely impacted by the bad weather
  • Attractive commodity prices in the region motivating farmers to stock seed regardless of weather forecasts in Malawi and Zambia
  • YTD sales are well ahead of same period PYr and expectations despite the El-Nino
  • Tanzania solid performance growth trajectory continuing riding on growing demand driven by good rains and the fertiliser subsidy
  • Kenya is on the rebound buoyed by good rains and fertiliser subsidy
  • Nigeria is however expected to perform below expectation due to low disposable incomes and absence of Gvt agricultural inputs support
  • Business unit balance sheets successfully restructured:
    • to mitigate exchange losses by refinancing USD liabilities with local currency borrowings
    • increased finance costs from local currency borrowings expected to be significantly lower than potential exchange losses without the refinancing
  • Key risks being monitored and managed going forward:
    • Inflation in most regional markets due to imported global inflation
    • Currency devaluation pressures in most regional markets
    • Mixed rainfall outturn El-Nino phenomenon

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