eBusiness Weekly
Nelson Gahadza
Dual – listed seed company, SeedCo International (SCIL), says it is restructuring both its business model and balance sheet to respond to the rising cost of doing business and to hedge against weakening currencies.
Domiciled in Botswana, SCIL is listed on the Botswana Stock Exchange (BSE) and the Victoria Falls Stock Exchange (VFEX).
The group has subsidiaries, an associate and joint ventures located in Botswana, the Democratic Republic of the Congo (DRC), Ghana, Kenya, Malawi, Mozambique, Nigeria, Rwanda, South Africa, Tanzania and Zambia.
Its operations in Angola, Ethiopia and parts of West Africa, are in the developmental stages.
“The financial year under review was of mixed fortunes, as evidenced by record business growth in some markets, reduced business in others and loss of value from exchange losses as regional currencies depreciated against the USD.
“Despite achieving business growth that is testimony to brand resilience, external factors mainly caused exchange losses rather than business growth gains and reduced the group’s profitability,” the company said in its financials for the year ended March 31, 2023.
During the financial year under review, SCIL saw increased input costs due to global dynamics, seed production challenges in drought-impacted parts of Africa and loss of value from exchange losses as regional currencies depreciated against the USD.
The group’s volumes were also affected by late starts to the planting season, however, performance was not uniform in the various markets, as some segments exhibited strong growth within the year.
Volumes in Zambia and East Africa supported topline growth, with aggregate maize seed sales registering 14 percent year on year.
SCIL registered revenue of US$103.5 million in the period, up 16.95 percent as compared to $88.5 million FY22.
Margins were, however, under pressure from imported global inflation that could not be passed on in pricing to small-scale farmers.
EBITDA margins as a result, fell from 19 percent in FY22 to 13 percent in FY23.
The group also suffered exchange rate losses of US$4.5 million compared to exchange gains of US$1.5 million in the prior comparable period, while losses from Associates and Joint Ventures compounded to US$1.1 million.
Consequently, profitability fell 59 percent to US$2.90. The group closed the period under review with a net debt-to-equity ratio of 31 percent, compared to 23 percent recorded last year.
IH Securities, in its earnings review, said the effects of the Russia – Ukraine war are still lingering with global inflation and supply chain shocks yet to fully dissipate and this will play into elevated input costs for the company in the short term.
“The US science agency has also announced the arrival of El Nino conditions, which are normally synonymous with hotter weather and droughts in Southern Africa, thereby potentially affecting demand for seed,” IH said.
It said, however, that the group remains optimistic about the prioritisation of primary food production in Africa and is also leaning on climate-smart products suitable for mixed rainfall patterns.
