HomeBusiness DigestSeed Co double its borrowings

Comment: Zimbabwe must avoid pitfalls of indigenisation

Finance director John Matorofa told an analysts briefing earlier in the week that as a result of the increase in borrowings, net finance costs were up 70% to US$4,33 million from US$2,92 million. Finance charges increased to 4% of turnover from 3%.

Turnover in the period rose 20% to US$117 708 million after a 22% increase in sales volume to 67 240 metric tonnes. The group was last year  focusing on production, which resulted in an oversupply situation. Increased production led to an 80% increase in inventories.

Stocks were adequate in all markets for the first time in 10 years. Chief executive Morgan Nzwere said, “We had to go through an extensive grower recruitment exercise until we got to a stage where we overlooked the market size. But now we have discovered the size of the market, therefore production is forecast at 68 200 metric tonnes in 2012/13.”

A total 57 400 metric tonnes was produced in 2011/12. Seedcosaid grower yields were increasing and should grow to 3.7t per hectare from the current 2.7t and improve to 4.5t in the future season. Nzwere said the group was excited about the growing yields as it reduces the cost of seed that is produced.

In terms of contribution by market, Matorofa said Zimbabwe brought in 38% to turnover, Zambia 23%, Malawi 10%, East Africa 9% Botswana 7% and Quton 13%. Zimbabwe sales volume grew 74% as the group fought to increase market coverage taking into account the abundant viability of stocks.

Market share in Zimbabwe remained flat at 70%, Zambia had fallen to 51% from 55% at half year, while Malawi had also dropped to 50% from 53% and Tanzania had picked to 46% from 40%. Group margins eased 5% due to oversupply while overheads increased by 5%.

The group reported a net profit of US$19,08 million, an increase of 10% in the comparable period. Earnings per share also grew 10% to US9, 90 cents.  A dividend of 1.64 cents was declared at six times cover. Nzwere said the cover had increased from four times last year, adding; “Given the way the general market liquidity is going, that is the right thing to do.”

The US$8 million processing plant in Zambia was now fully operational and the group had huge benefits in tax savings while East Africa production is being ramped up. — Staffwriter.

Recent Posts

Stories you will enjoy

Recommended reading