eBusiness Weekly
Enacy Mapakame
Seed processor, Seed Co Limited’s vegetable unit is maintaining a growth trajectory albeit the challenging environment characterised by inflationary pressures and exchange rate volatility.
In addition to the economic headwinds, the region has been susceptible to bad weather conditions, with the El Nino weather phenomenon projections for Southern Africa during the 2023/2024 farming season.
But the vegetable segment has been doing well supported by demand from the non-governmental organisations (NGO) sector especially in the Mozambican market.
The NGO sector is mostly instrumental in helping vulnerable members of communities especially in rural areas alleviate hunger through capacitating communities in various ways such as providing agriculture inputs.
In the dry regions of the country, the sector also steps in with mechanisms that tackle drought-induced food insecurity.
Through its subsidiary, Prime Seed Co trading as Seed Co Vegetables, the group has constantly churned out seed varieties ranging from tomatoes, cabbages, cucumbers and sugar beans to address farmers’ need for cost effective high yielding seed vegetables as well as for ordinary backyard cultivation.
Seed Co Vegetables was established in 2014 through the acquisition of Prime Seeds, which is one of its joint ventures and associates.
With forecasts indicating below-normal rains in Southern Africa, seed demand going into the summer cropping season is likely to be subdued, according to analysts’ projections.
But group chief executive officer, Morgan Nzwere, told analysts that the segment was doing well and upbeat of maintaining the growth trajectory for the full year and beyond.
While global meteorologists have projected normal to below normal rainfall for the region, Seed Co Limited has emphasized its commitment to research and innovation to address changes in climate and farmer needs.
Outside vegetables, the group has seven new varieties registered in Zimbabwe and 12 in the region during the period. Nzwere added the group has almost concluded the intake and processing of raw seed for this year’s season and has sufficient stocks to meet the season’s anticipated demand.
“Margins to FY24 are expected to increase as the bulk of stock the group currently hold is from the last production season,” said I Securities.
Seed Co Limited is upbeat that the recommendation to remove the 10 percent foreign exchange trading margin may facilitate favourable multi-currency pricing.
In the meantime, focus for management will be on increasing the contribution of exports and US$ denominated sales. During the period under review, Seed Co opened direct stores to bypass traditional channels paying in local currency and increase access to US dollar sales.
“Although Seed Co is currently trading at a rolling PER multiple of 1,41x, the bulk of its earnings are non-cash, hence in the interim we maintain a cautious approach,” said IH Securities.
