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Seed Co Limited’s strategic focus on regional exports, advanced seed technologies, and adaptive strategies for unpredictable climatic conditions positions it well for recovery, stockbroking firm FBC Securities says.
This comes as the seed company faced significant profitability challenges in the six months ended September 30, 2024, with profit after tax declining sharply from US$15,97 million in the half-year 2023 to US$1,21 million in the half-year 2024.
FBC said the major reasons for the decline in profitability included increased operating costs, rising inflation and input costs, and higher processing expenses, which pressured margins.
“Strong revenue growth and market position make it an interesting medium- to long-term opportunity for risk-tolerant investors, especially if cost control improves and regional exports expand.
“The company demonstrated robust top-line growth in HY24, with a 73 percent increase in revenue driven by higher seed sales volumes, particularly in maize and wheat.
“This reflects strong market demand and the company’s ability to expand its product offerings and export footprint,” FBC said in its review.
FBC said the listed group’s liquidity remained healthy, with improved cash balances and inventories, indicating its ability to cover short-term obligations.
“However, inventory build-up, primarily maize seed stocks, could pose a risk if not converted into sales.
FBC said conservative investors may want to wait for signs of improved profitability, reduced debt, and better management of operating expenses before buying the company’s share.
In its financials, Seed Co Limited said it was well-positioned to meet the diverse needs of farmers by offering a resilient seed mix designed to perform in both drought-prone and high-rainfall conditions.
The company said this adaptability strengthened the business’s value proposition, ensuring farmers have dependable options irrespective of climatic fluctuations.
“Both farmers and development partners have shown strong demand for increased seed orders this coming season, driven by a commitment to food security following the recent El Niño-induced drought that severely impacted Southern Africa.
“The company is strategically positioned to harness potential improvements in agricultural performance and strengthen its regional export business by leveraging advanced seed technologies tailored for both harsh and favourable climates,” Seed Co said.
Additionally, the seed company said it would continue to expand its regional export opportunities, building on synergies with its regional affiliate, Seed Co International Limited.
During the half-year period, group revenue increased by 73 percent to US$18,9 million, primarily driven by growth in winter cereal sales and exports, which contributed to the overall 24 percent volume increase to 10,625 tonnes.
Wheat seed sales went up by 9 percent over the previous year despite drought-related water shortages, power outages, and high prices for essential inputs such as fertiliser. Other income increased due to exchange gains on ZWG-denominated borrowings.
daniel chigunwe
