Seed Co Limited, a prominent firm listed on the Victoria Falls Stock Exchange, has showcased its resilience and prowess by registering a robust turnover in the financial year ending on March 31, 2023, even amidst the challenges of global supply shocks and high inflation.
According to Eric Kalaote, the company’s secretary, this achievement is a testament to the group’s strong market standing and brand equity. While the group’s profit for the year experienced a decline, dropping to US$2.9 million from US$7.1 million in the comparable period last year, the revenue demonstrated significant growth, soaring from US$88.5 million to US$103 million for the same period.
The notable increase in revenue can be attributed to the commendable volume performance in east Africa and Zambia, a testament to Seed Co’s ability to excel even in challenging economic conditions. However, the gross margin faced pressures from imported global inflation, which proved challenging to pass on in prices to small-scale farmers. Despite this obstacle, Seed Co managed to maintain a steady gross margin, showcasing their ability to navigate through complex economic circumstances.
During an analyst briefing on Tuesday, Kalaote explained that the increase in receivables was mainly a result of the company’s business growth during the year. Included in the receivables was US$5.5 million owed to related parties, indicating a reduction from the US$5.9 million owed in the previous year. This suggests that Seed Co has been proactively managing its financial obligations to ensure efficient business operations.
Moreover, the group’s net profit to debt ratio saw an increase, primarily due to lower profitability and the impact of exchange losses on equity. This indicates the importance for Seed Co to carefully manage exchange rate fluctuations and implement effective risk management strategies.
While the company achieved business growth, external factors, especially exchange losses, remained a challenge, leading to a reversal of some of the business growth gains and impacting the group’s profitability. The decline in other income into negative territory was driven by exchange losses as regional currencies weakened against the US dollar. Additionally, overheads increased in line with business growth in East Africa in response to global inflation developments.
Despite these challenges, Seed Co’s cash generation remained positive, although at a lower level compared to the previous year. Borrowing costs increased due to capital expenditure and working capital growth.
During the period under review, the group’s non-current assets decreased due to the impact of depreciating regional currencies, while the carrying value of investments in associate and joint ventures reduced due to foreign currency-induced losses.
Despite the hurdles faced, Kalaote expressed optimism about the group’s outlook, particularly with regard to the prioritization of primary food production in Africa as a measure to limit the impact of global shocks.
Seed Co Limited’s strong turnover and impressive performance in the face of economic challenges demonstrate the company’s resilience and commitment to maintaining its market position. By navigating through various difficulties and focusing on strategic growth opportunities, Seed Co continues to play a vital role in contributing to the agricultural sector’s growth and promoting food security in Africa.
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