BY MTHANDAZO NYONI SEEDCo International Limited (SCIL) says its Zimbabwean unit reported revenue of $975 million (inflation adjusted) for the half year ended 30 September 2020, up 55% compared to the same period last year.
In historical terms, the revenue increased by 1 115% to $752 million.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 71% to $588 million.
In the period under review, sales volumes for maize seed increased by 100% while for wheat rose seed by 10%.
In a statement accompanying the group’s financial results, SCIL group secretary Terrence Chimanya said the macroeconomic environment was characterised by hyperinflation, high interest rates, tight liquidity and accelerated local currency depreciation following the introduction of the Zimbabwe dollar by the central bank.
However, he said the period subsequent to the reporting date witnessed both inflation and exchange rate stability though interest rates rose.
“The group’s profit performance was underpinned by strong sales volume growth and selling price increases effected in response to the inflation-induced rise in operating expenses,” Chimanya said.
“Increased focus on local wheat production to reduce import dependence and improved irrigation capacity due to better electricity supply drove the increase in wheat seed sales volumes,” he said.
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“In addition, there was increased uptake of maize seed on the back of a lowveld winter grain production initiative targeted to enhance food security in the Masvingo province in the wake of recent devastating droughts in that area.”
Chimanya also said the group’s half year results were enhanced by a combination of positive contribution from the foreign associate on account of early maize seed demand across the region and an encouraging out-turn from the local cotton seed associate and the vegetable seed joint venture.
The group said capital expenditure (Capex) was mainly directed towards the artificial seed dryer project whose completion was unfortunately delayed by a combination of foreign currency shortages, liquidity challenges and COVID-19 restrictions.
The company last year revealed plans to set up a US$10 million seed drying facility to reduce post-harvest losses and enable farmers to utilise land at least twice a year.
“Inventory levels increased due to seed deliveries from contracted seed growers for processing in preparation of the main selling season in the second half,” he said.
“Both Capex and seed production were financed by expensive local borrowings which are expected to unwind in the second half when the main selling period commences. The average cost of existing borrowing facilities is 45% and these borrowings are unsecured,” he said.
Chimanya said during the period under review, foreign-dominated payables were successfully registered under the central bank legacy debt framework though settlement modalities were yet to be determined.
In the outlook, he said the prevailing macro-economic stability and relaxation of lockdown restrictions augured well for local operations for the remainder of the financial period.
“With initial weather forecasts indicating normal to above normal rainfall, seed demand is expected to remain strong, though, the prolonged dry spell had pushed back the anticipated start to the planting season which could have impacted on the group’s varietal sales mix.”
In the period under review, the group recorded a revenue of US$27,9 million from its international operations, up 57,3% compared to the same period last year.
SCIL has operations in Nigeria, Zambia, Rwanda, Malawi, Kenya and Tanzania.
EBITDA at these operations increased by 434,2% to US$6,1 million.