By Alois Vinga
LISTED seed manufacturer, SeedCo Limited has witnessed quarterly volumes decline by 18%, amid a return to profitability attributed to strong margins recovery.
Presenting a trading update for the period ended June 30, 2022, the company’s group secretary, Tineyi Chatiza said volumes during the period were depressed.
“Total sales volumes for the first quarter decreased by 18% from the corresponding period last year with wheat seed making up just under 90% of total volume sold which is typical for the period under review.
“The volume decline is because of a 13% reduction in wheat seed sales due to stringent measures applied on farmer selection by input funders and no repeat early legume and sorghum sales during the 1st quarter as happened during the same period in FY22,” he said.
However, compared to prior year, the operating profit swung 12 times and 3,3 times from the prior period historical and inflation-adjusted loss position respectively to a profit this year.
The improved fortunes are attributable to margin recovery, which margins however remain under pressure due to official and alternative market exchange rate disparities whose negative effect on the cost of doing business cannot always be sustainably recouped through local currency selling price adjustments.
Historical cost revenue for the quarter more than doubled compared to the same period last year on the back of inflation tracking price adjustments as the local currency depreciating by 332% from ZWL$85.37/US$ at the end of June 2021 to ZWL$368.72/US$ as of 30 June 2022.
On an inflation-adjusted basis, first quarter revenue is up by 36% compared to the same prior period on the back of price adjustments to preserve value in view of the general increase in the cost of doing business during the comparative period under review.
“Going forward, the group has adequate stocks both in Zimbabwe and on the continent to contribute meaningfully to primary food production subject to favorable climatic and economic conditions.
“Various measures are being taken to harness real value in the Zimbabwean market where the use of hard currency appears to be dominating transactions. On the continent, Seed Co International is taking various measures to reclaim the erosion of margins that was experienced in the last financial year,” added Chatiza.