LISTED seed manufacturer Seedco Ltd (Seedco) has sold a sizeable stake in its wholly-owned cotton seed developer Quton to a technical partner, group CEO Morgan Nzwere has said.
Speaking at the company’s annual general meeting on Wednesday, Nzwere said an undisclosed stake valued at about US$10 million, according to insiders, was sold to a listed cotton seed company.
While he would not be drawn into giving more details on the technical partner, he said: “Discussions with a technical partner for Quton business have been concluded and CP to be completed by end of September.”
He said the cotton seed business continued to be affected by structural issues in the industry, hence the group’s decision to reduce its exposure by bringing in a new technical partner at an equity level.
Nzwere said the transaction was less than 10% of the Seedco stake.
The disposal of a stake in the cotton seed developer follows media reports early this year that Seedco was close to selling part of its shareholding in Quton to an Indian company, Mahyco.
According to the report, Mahyco would bring expertise on cotton seed development after acquiring a stake ranging between 43 and 49%.
In January, British firm, Limagrain, bought over 20 million Seedco shares which saw its subsidiary Vilmorin & Cie taking up a 25% in the local company through different phases.
In a trading update, Nzwere said demand for winter cereals seed remained flat with increases in wheat being offset by reduction in barley owing to the main customer holding carryover stocks.
He said sustainable winter cropping funding and reliable electricity for irrigation remained problematic, affecting winter cereal production in Zimbabwe.
Nzwere said seed deliveries were currently progressing well, with current estimates within targets.
“We are rebranding our products across all markets with the new packaging difficult to replicate which is going to take fake seeds producers out of the market while also increasing the product appeal to the consumer,” he said.
Since financial year end in March, Nzwere said a total US$16 million had been collected from debtors.
Of the US$6,8 million outstanding at year end from the donor funded programme in Malawi, Seedco said it collected US$5,3 million with the balance expected before end of August 2014.
Nzwere said payments from the Cotton development Fund of US$4 million were progressing slowly in Tanzania with almost US$500 000 paid to date while the bulk of the amount due from traders have been paid up in Botswana, Kenya and Tanzania.
Borrowings stood at between 5 and 9% with the exception of the Malawian kwacha borrowings which stood at 33%.
Nzwere said the kwacha borrowings are in the process of being converted to US dollar. On the regional outlook, the company said it would continue growing its footprint in Nigeria despite challenges relating to Muslim insurgency in the country which affected major towns, as well as the Ebola outbreak which is expected to slow progress.
“The local staff has no problems, but the problem is moving goods from this part under such circumstances,” he said.
In terms of capitalisation of the business, Nzwere said the second tranche of the equity from Limagrain totaling US$27 million was expected before December 2014.
“The second tranche of the Limagrain money is going to help with reduction in finance charges through liquidation of borrowings,” he said.
Going forward, Nzwere said earnings were expected to grow on the back of market share growth in East Africa and other programmes such as the subsidy programme in Malawi, government input scheme in Zambia and setting up distribution systems in the democratic republic of Congo.
In the company’s latest full year financial results for the year ended 31 march 2014, the group reported a 6% dip in after tax profit to US$11,8 million due to an impairment of a US$3,2 million deposit receivable, US$2 million general provision for bad debts and stock write downs totaling US$3,7 million.
Group revenues grew by 9% to us$120 million in the year under review.