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SAGIT – Mixed fortunes for agricultural concerns

By Epifania Gorowa

FINANCIAL results continue to trickle in and agro-based concerns Seedco and Tractive Power Holdings (TPH) are among firms that recently released theirs. As expected Seedco’s first half per

formace was lukewarm while TPH did much better overally.

The farming season is already underway buoyed by the wet spell two weeks ago which has helped kick-start the preparation of land and the scramble for agricultural inputs.

Seedco develops and markets certified seeds and their sales are primarily of hybrid seed maize, wheat and soyabeans whilst TPH supports a broad range of agricultural implements and vehicles.

Performance in the first half of Seedco’s financial year was not satisfactory as anticipated, given that the second half produces better results than the first. Although the historical attributable profit increased slightly by 22%, from $3,6 billion to $4,42 billion this year, the company posted a $3,048 billion loss in inflation-adjusted terms, reflecting the tough environment all sectors within the economy have to endure.

Regional turnover figures increased by a mere 0,97 times from the previous year but locally, figures increased from a historical cost of $1,95 billion to $43,3 billion owing to increased wheat sales here.

However, government-imposed price controls on seeds are hindering viability since the prices set do not tally with the higher production costs. These controls have repercussions on the amount paid to growers in that less is given to them.

Currently, a 5kg bag of seed maize is pegged at $38 000 in the retail outlets and is fast disappearing from the shelves. Overheads on the other hand have swelled, up 418% from the previous year’s $4,4 billion to $22,85 billion.

Earnings per share have increased by a dismal 11% from $24,88 to $27,83, a far cry from the predicted $100. There is a need for Seedco to reduce its borrowings, especially since its non-current liabilities figure grew by 4 736% up from $467 million and the bank borrowings from $14,3 billion to $38,4 billion lest they fail to pay and get tangled in interest costs.

Apart from these set-backs, Seedco can boast that to date their research has resulted in breakthroughs in 35 maize hybrids, 12 soyabean and another 12 wheat hybrids. Deliveries domestically and regionally have also improved and production growth has been stimulated by intensive grower recruitment combined with upgraded training programmes.

They may also benefit from the financing package established by the government for farmers in the 2004/5 season worth $3,2 trillion. This money is earmarked for purchasing seeds, fertilisers and chemicals, so production will have to be increased to meet the imminent boom in demand.

Tractive Power Holdings – soldiering on!

The conglomerate consisting of Puzey and Payne, Farmec and Barzem performed well in their financial year despite the harsh economic climate.

Turnover figures (historically based) increased from $21,2 billion to $144,4 billion representing a 581% change, bringing about an attributable profit of $22,25 billion which has moved 374,9% from last year’s figure.

The most likely reason behind this large turnover is that there is increased expenditure on equipment repairs and spares, rather than on whole goods.

A rise of 374% in earnings per share was recorded from $35,22 to $166,85 accompanied by a healthy dividend cover of 5,0 times, although this figure declined from last year’s 6,0 times.

Total assets increased to $81,5 billion from $13,2 billion and repayment of debt to leave no long-term borrowings for this year. However, they were not able to beat down the operating costs incurred in wages and key skills retention needs which increased by 634%.

The contract with the Reserve Bank of Zimbabwe that entails refurbishing old tractors and selling them thereafter, should rake in some income for the group.

Overally, TPH has managed to focus on its core competences in farm machinery and vehicle units, even more so after the disposal of the customs clearing and forwarding division, Expeditors, in March 2003. Provision of quality service and retention of skilled labour are the strategies that will help to keep them afloat.

*Information contained herein has been derived from sources believed to be reliable but is not guaranteed as to its accuracy and does not purport to be a complete analysis of the security, company or industry involved.

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