Seed Co Limited, Zimbabwe's listed producer and marketer of certified crop seeds, has suffered a significant credibility setback after receiving an adverse audit opinion from KPMG, which concluded that the company's latest financial statements do not fairly present its financial position due to multiple breaches of International Financial Reporting Standards (IFRS).

The adverse opinion coincided with a difficult financial year in which the company reported a 54% decline in profit and reduced its dividend to shareholders.

In its audit of the financial statements for the year ended March 31, 2026, KPMG concluded that the accounts do not present a true and fair view of Seed Co's financial position under IFRS. An adverse audit opinion, the most severe form of modified audit opinion, signifies that auditors believe the financial statements contain material and pervasive misstatements.

KPMG said the opinion stemmed from Seed Co's continued use of accounting treatments that do not comply with IFRS. The auditors identified three key concerns: the company's accounting treatment following its transition to the United States dollar as its functional currency under IAS 21, its previous use of internally generated exchange rates for transactions with growers, and the accounting treatment of its investment in associate company Quton Seed Company (Private) Limited under IAS 28.

According to KPMG, these issues also affected the prior year's financial statements and remain unresolved, making both the current and comparative figures unreliable.

The auditors further noted that Quton continued to carry its property, plant and equipment at historical cost rather than revaluing those assets at least every three years, as required by Seed Co's accounting policies. Because Seed Co did not align Quton's financial information with its own accounting policies before recognising its share of the associate's profits and net assets, KPMG said the carrying value of the investment, the share of profit and other comprehensive income could be materially misstated.

Although the financial impact could not be quantified, KPMG said the matter was significant enough to warrant an adverse opinion for both the current and previous financial years.

"Our opinion on the current year's financial statements is also modified because of the significance of the matter on the affected elements of the financial statements and comparability of the current year's figures and corresponding figures," the auditors said.

Despite the audit findings, Seed Co posted a profit after tax of US$8 million, down 54% from US$17.5 million in the previous financial year. Revenue declined 28% to US$51.5 million as seed sales volumes fell and export demand weakened, while operating profit dropped to US$9.6 million from US$20.6 million.

Sales volumes decreased by 40% to 18,084 metric tonnes after the company tightened credit risk management, while regional demand softened following recovery from drought-induced seed shortages experienced the previous year. Gross profit margins narrowed to 50% from 57% as lower sales volumes reduced economies of scale.

The board declared a final dividend of US0.68 cents per share, down from US0.91 cents in the previous year. During the year, the company paid total dividends of US$2.3 million to shareholders.

Operating cash flow improved by US$8.8 million to US$7.8 million, supported by stronger cash sales and faster collections from local and export markets. Cash and cash equivalents increased to US$2.5 million from US$300,000 a year earlier.

Total assets grew to US$184.3 million from US$172 million, while shareholders' equity increased to US$140.9 million. Borrowings rose to US$28.3 million from US$24.4 million as the company financed working capital requirements linked to higher receivables. Trade and other receivables climbed 10% to US$57.1 million, while inventory fell 7% to US$24 million.

Management said the company continued to operate in a challenging environment characterised by climate variability, liquidity constraints and intense competition, but maintained that it remains a going concern with strong long-term growth prospects driven by research, innovation and climate-smart seed technologies. During the year, Seed Co released two new maize varieties and one new wheat variety.

Company secretary Faithful Sithole said: "Despite market challenges, climatic variability and global supply chain pressures, the Company remains well positioned to deliver sustainable long-term growth through continued innovation, disciplined execution and market-focused strategies."

KPMG maintained that because the identified accounting issues remain unresolved, Seed Co's financial statements do not fairly present the company's financial position, financial performance and cash flows in accordance with IFRS Accounting Standards and the Zimbabwe Companies and Other Business Entities Act.