- Revenue growth of 17% to US$103.5 million, underpinned by a 20% increase in maize seed sales volumes
- Gross profit edged up 15% to US$46 million, as the company strived to minimise input cost pressures
- Profit declined 59% to US$2.9 million, due to the exchange effect
Harare - Despite navigating myriad economic headwinds, African seed company Seed Co International posted steady results characterised by turnover growth, volume gains, stable margins and robust cash generation for the financial year ended 31 March 2023.
The leading seed producer realised revenue growth of 17% to US$103.5 million, underpinned by a 20% increase in maize seed sales volumes. This top line growth confirms the strength and appeal of the Seed Co brand across its markets, even amidst global volatility. East Africa and Zambia were bright spots, while business contracted in other markets.
Gross profit edged up 15% to US$46 million, as the company strived to minimise input cost pressures for smallholder farmers. With judicious cost control, operating expenses contained to within 6% of prior year. The resulting operating profit of US$10.6 million represents a 23% decline, though still a commendable outcome given strains on consumer spending globally.
Seed Co's associate investments and joint ventures weighed on profitability, registering increased losses of US$1.1 million compared to US$0.2 million previously. This primarily reflected transactional exchange losses as regional currencies weakened against the US Dollar.
Overall, attributable profit declined 59% to US$2.9 million, due to the exchange effect also impacting the Group's net finance costs and tax expense. However, the company continues to be strongly cash generative, with operating cash flows of US$0.6 million funding increased capital investment of US$4.2 million.
While Seed Co's profitability was clearly impacted by macro-economic challenges outside of its control, the balance sheet remains healthy. As at 31 March 2023, shareholders' equity stood at US$86.3 million, down 10% on prior year. Lower profitability and the translation effect of weaker regional currencies on foreign assets explained this change.
Nevertheless, Seed Co's sound liquidity position was evidenced by cash holdings of US$19.2 million and unutilised debt facilities at year-end. The company sensibly took on additional borrowings to fund working capital and expansion, lifting net debt 21% to US$46.2 million. With a net debt-to-equity ratio of 53%, Seed Co retains financing headroom.
Looking ahead, lingering inflationary pressures and exchange rate volatility present ongoing risks within Seed Co's African markets. However, the company is proactively adapting its business model and leveraging its robust brand and distribution footprint to navigate these challenges.
The Reach team at Seedco is highly focused on developing crop varieties that can withstand the impacts of climate change on agricultural cycles. The team's research goals aim to ensure that they produce crop varieties that assist farmers in terms of the period to maturity and the expected amount of rainfall. Seedco has developed different series of varieties to target specific markets and regions, ensuring that the crop can survive in diverse environments.
Seedco's intellectual property for their seed varieties is primarily registered in Botswana and Zimbabwe. The international market headquarters are based in Botswana, where there are better intellectual property and exchange controls, making it easier to move money. The borrowing cost for Seedco's international business is around 6%, which has facilitated the expansion into other countries such as Tanzania, leading to increased profitability for the company. Seedco is currently exploring opportunities for expansion into Ethiopia.
With the fundamental importance of food security in Africa, Seed Co remains well positioned to unlock the continent's agricultural potential. Backed by its climate-resilient seed varieties and steadfast commitment to smallholder farmers, this pioneering seed company is set to reap continued success.
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