eBusiness Weekly
Tawanda Musarurwa
Local seed producer, Seed Co Limited’s revenues for the FY2021 could go up by over 600 percent on the basis of the country’s positive agriculture sector outlook, analysts at Morgan & Co have said.
This week, Seed Co Limited resumed trading on the Zimbabwe Stock Exchange (ZSE) after the group abandoned plans to merge the firm with its Botswana Stock Exchange (BSE) listed associate Seed Co International. The move would have seen the company shifting its listing to the Victoria Falls Stock Exchange (VFEX). According to estimates by stockbrokers Morgan & Co, Seed Co Limited’s revenues could rise by 623 percent to $3,8 billion for FY2021 from $536 million over the prior comparable period.
In line with the improved topline, the analysts expect profit after tax for the current year to rise 252 percent to $1,69 billion from $313 million last year.
“Our earnings projections for Seed Co Limited consider the expected growth in the Zimbabwean agricultural sector as well as the impact of inflation. We also highlight that Zimbabwe is set to benefit from an anticipated maize bumper harvest.
“The forecast record maize harvest of 2,8 million tonnes and significant output of other crops such as soyabean, cotton and traditional grains is positive for the sector in 2021 and 2022. Our EPS estimates below also take into account the 43,18 percent stake in Seed Co International,” said the analysts at Morgan & Co.
“SCL reported its interim results to 30 September 2020 showing a 1,115 percent growth in revenues to $752 million on a historic cost basis. EBITDA was up 1,089 percent and EPS increased 1,643 percent to $116c. In inflation adjusted terms, revenues were up 55.5 percent on the back of an increase in local and export sales volumes.
“The B/S was 27.8 percent stronger because of increased inventories which were funded by debt. No interim dividend was declared. For SCL, the first half of the year is usually a cost-accumulation period and is associated with winter crop seed sales.
“A much stronger performance in the second half should therefore be expected given that the business records most of its maize seed sales in the second half of the financial year.
“It should also be highlighted that SCL emerged as a post Covid-19 winner in 1H 2021 because of the rising food security threat in the region. The solid performance was also a result of improved rainfall patterns on the continent that follows consecutive droughts.
“Further, strong government support through the SMART agriculture programme has been key to sustained volumes demand.”
As at the close of trading yesterday, Seed Co Limited’s share price stood at $65,3c, a significant jump from the 21,6c when it resumed trading on Monday.
The proposed merger between Seed Co Limited and Seed Co International fell apart after the latter could not fulfil one of the conditions precedent to the completion of the transaction; that is, the Reserve Bank of Zimbabwe Exchange (RBZ) Control approval.
Resultantly, Seed Co withdrew the application for delisting and reverted to its status quo on the local bourse.
