Dividend not too far away – SeedCo

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SeedCo Limited says shareholders of Zimbabwe’s premier breeder of a variety of hybrid seeds are quite close to receiving a cheque from the company after it closed its books for the full year with a comfortable post-tax profit of $13,4 million or $6,69 basic earnings per share.
Seed production in all its operating and export markets increased after demand soared, led by Malawi, Zambia, Tanzania and Zimbabwe, which received a boost from intensifying government and non-governmental organisations summer input programmes.
Donor activities in Malawi still have three more years to go, an excited Morgan Nzwere, Seedco managing director told investors ahead of the company’s results published yesterday.
“We have not declared a dividend in the last five years, but now that is about to change. Zimbabwe is coming back,” said Nzwere
The dividend drought, which set in during the years of Zimbabwe’s over-a-decade-long recession, still hangs over Zimbabwe’s companies, including public-listed companies.
Assuming demand remains robust over the next production cycle, Nzwere predicts that seed production — mainly maize and cotton — in the country will treble to about 30 000 tonnes in 2010/11 and peak at around 35 000 tonnes by 2012, driving operating profits higher.
Maize seed — commanding 85% market share in Zimbabwe — contributes 73% to group turnover, followed by cotton that accounts for 12% with the rest of the turnover coming from soya, wheat, barley, sorghum and groundnut seed.
If this target is achieved, then Zimbabwe should be able to systematically ramp up its share of group turnover to over 50% from the current 40%. Seedco international in Zambia contributes 35% followed by Seedco Limited in Malawi, which at the moment turns in about 15% of the total revenue.
For the full year ending March 31, Seedco reported that revenue surged 43% to $77 million from $58 million turned in during the previous year as a result of robust demand in all its markets, including Zimbabwe.
However, basic earnings per share declined to $6,69 in 2010 from $6,77 the year before as margins dropped inversely with the increased in output, which bid up overheads related to intensifying research activities and the acquisition of a research farm in Zambia.
Gross margins dropped to 42% from 51% in 2009 owing to high input costs, which could push seed prices up over the next agriculture season, despite buoyant demand.
Earnings could have been higher had it not been for Zimbabwe’s power crisis and the global liquidity crisis, which affected winter cereal production and sales across the region, except in Mozambique.
Apart from Zimbabwe, Seedco has operations in Botswana, Kenya, Malawi and Zambia, Tanzania and Swaziland and agencies in Angola, Benin, the Democratic Republic of Congo Mozambique and South Africa.
It’s completed its expansion to Tanzania this year and hopes to fly its flag in Ethiopia in the near term.