HomeBusiness DigestSeed Co counts on price increases

Seed Co counts on price increases

Conrad Dube

SEED Co Group financial director Morgan Nzwere says the healthy order book and significant price increases awarded mid-June will help the company post a sati

sfactory year to February 28 2004.

“Prices across the seed industry were revised by about 380% in mid-June to enable the seed companies to pay viable prices to seed growers and to cushion the companies in the current hyperinflationary environment,” Nzwere said.

“However the unabated inflation levels are already pointing to the need for another urgent price review. We are confident that whatever we produce will sell on the basis of the orders we have received.”

Asked how Seed Co expected farmers to afford the new prices, Nzwere said the price increase was in line with the general movement of prices across the economy and in terms of priorities the need to ensure food self-sufficiency would always play a pivotal role in the farmers purchasing decisions.

He said favourable local prices would compensate for the decline in sales volumes.

The Seed Co boss said price controls on seed, which had the effect of curtailing pricing capability with margins declining by 6% to 42% in the year to February 28, were collapsed at the end of May and this would allow the company to charge market related prices on seed products.

Seed has now been reclassified to a price-monitored product.

The financial director said the company had received double orders for seed in the region due to the huge seed shortage.

Nzwere said the first quarter, which normally contributed only 6% to total turnover but accounted for 25% in expense, was generally good.

Seed Co was expecting the Mozambican subsidiary, SEMOC that made an operating loss of $250 million last year, to turn around this year.

The subsidiary was downsized and production had been localised to provide cheaper products to the Mozambican market, Nzwere said.

On other markets, the financial director said business development strategies were ongoing in East Africa, particularly Kenya where the group established an operating office last year.

He said the office would operate as a springboard to consolidate the group’s position in the Horn of Africa and surrounding environs.

Seed Co would benefit from synergies emanating from the coming in of The Cotton Company of Zimbabwe (Cottco) through its 34,75% shareholding in the company. Nzwere said the company would use Cottco’s 22 depots countrywide to distribute their products to farmers.

He said the company would also benefit from Cottco’s research facilities and economies arising from working with Cottco’s seed company, Quton.

Regional operations contributed 46% to total turnover in the year to February 28 and the company said regional seed production would account for 50% of the group’s seed harvest in the 2003 financial year as seed production had doubled in the external markets.

The Zambian operation contributed significantly to operating profit while breakeven positions were recorded in Botswana and South Africa during the past year. Unavailability of seed in the region affected the Botswana and South African markets, as the company could not generate enough volumes to meet demand. Seed Co produces seed in seven African countries and has a “presence” in the form of sales, research trials representation in a further nine.

In the year to February, Seed Co said that between 15 000 and 16 000 seed in the ground converting to about 5 200 hectares under plantation, which was 40% down on the year comparative.

The company attributed the decline to the reduction of land suitable for seed production, lack of experience among new farmers and the near drought that existed in early January.

The Seed Co boss said it would be difficult to import seeds to make up for the shortfall, as the region was also short of seed and the prices were significantly higher.

Although local turnover at $6,5 billion was only 132% up on previous year, volume sales increased to an all time high of 33 000 tonnes, a 28% increase on the year.

Attributable profit increased by 206% to $3 billion from $989 million and headline earnings at 2 119,77 cents per share were 177% up on the previous year of 765 cents.

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