Seed Co’s H1 profit rises

Despite a volumes decline, local seed producer Seed Co Limited swung back to the black, posting  a $34,4 million profit for the half year to September 30, 2019 from a $29,1 million loss in the same period last year.

Gross profit rose 36 percent to $61,2 million while other income surged 600 percent to $29 million compared to $4,2 million recorded during the same period in the prior year.

At 14,02 cents, basic earnings per share grew 16 percent from prior year comparable period’s 12,04 cents.

According to the seed producer, volumes for the period under review went down 46 percent on the back of non-recurrence of early maize seed sales made in the comparative period.

Seed Co also attributed the decline to reduced open-market demand due to squeeze on customer disposable income as well as lower wheat seed acreage planted resulting from limited irrigation capacity caused by electricity and water shortages.

Zimbabwe has been experiencing utility challenges that have had a knock-on effect on businesses as well as the domestic market.

The low open-market demand of the group’s product could be pointing to a generally low spread of planted crop, especially maize, in the current agricultural season.

Despite the challenges that led to volumes decline, Seed Co’s revenue for the six months under review more than doubled from the previous year due to alignment of selling prices with inflation to enable inventory replacement.

The period closed with a $96,7 million in revenue compared to $85,2 million achieved in the same period last year.

“The margin increase is largely due to the mismatch between valuation of stock sold at the respective cost incurred at the time of production and processing and the selling prices at the time of dispatch to customers,” said Seed Co in a statement accompanying the group’s financials.

Operating expenses were three and half times the prior year level, which is lower than the implied year-on-year inflation for the year to date due to concrete cost control initiatives by management during the period under review.

Increased borrowings resulted in a jump in finance costs, ending the period at $6 million compared to $389 000 recorded in the same period in the prior year.

During the period under review, associated companies had a mixed set of results. But the Zimbabwean based vegetable and cotton seed business achieved better than last year results driven by selling price increases.

Total assets jumped 71 percent to $1,062 billion from $620 million. According to the company, fixed assets were revalued to current market values hence the huge increase in property, plant and equipment, equity and deferred tax liability from prior year end.

Other financial assets consist of Reserve Bank of Zimbabwe savings bonds, Grower Transformation Initiative (GTI) receivables and fixed deposits.

Inventory balance soared on the back of seed receipts from growers at current costs and the stock comprises of commercial seed, other production and processing inputs for instance fertilisers, chemicals and packaging and foundation seed.

Meanwhile, management’s focus going forward will be on retaining value as well as sustainable pricing among others in order to survive the unpredictable business environment.

The group did not declare a dividend for the six months in line with its policy.