Mixed fortunes for Seed Co in El Nino season

Audrey Galawu

Seed Co, a leading Zimbabwean seed producer, reported a near-third decline in overall sales volumes for the year ending March 31, 2024. This drop is attributed to the El Niño-induced drought that severely impacted maize and soybean seed sales.

The drought forced farmers to scale back planting due to concerns about crop failure caused by moisture stress. Seed Co's flagship product, maize seed, saw sales volume fall by nearly a third compared to the previous year.

However, a bright spot emerged in the form of increased export sales, generating much-needed foreign currency for the company and mitigating the impact of lower domestic demand.

"Wheat sales volumes remained steady year-on-year despite challenges faced by farmers, including power cuts, high fertilizer costs, and exchange rate volatility," the company reported.

Seed Co's overall revenue dropped 10% due to the lower sales volume. This decline was partially offset by a rise in other income, driven by exchange rate gains and increased non-seed sales. Operating expenses, however, surged due to the hyperinflationary environment, where pricing is often indexed to the US dollar.

The company's reliance on borrowing to manage cash flow gaps caused by delayed government payments and rising operational costs led to finance costs consuming 16% of turnover, down from 26% the previous year.

Despite the sales volume decline, Seed Co's profitability improved by 8% year-on-year, primarily due to exchange gains from revaluing US dollar-denominated receivables.