HomeBusinessSeedCo records $120.4 m loss due to drought

SeedCo records $120.4 m loss due to drought

BY TATIRA ZWINOIRA

SeedCo Limited posted a loss of $120,38 million in the financial year ended March 31, 2020 due to the combined effects of below average rainfall and the depreciation of the Zimbabwe dollar.

The loss was from a profit of $153,57 million earned in the comparative 2019 period.

“This was a difficult season for the business due to a combination of below average rainfall experienced in southern Africa and high inflation compounded by severe depreciation of the local currency.

“This resulted in weak product demand with most businesses and consumers embarking on survival strategies,” said SeedCo group secretary Terrence Chimanya, in a statement accompanying the results.

“Erratic rainfall during the production season significantly reduced the expected yield levels.

“However, the healthy inventory carryover position added to expected deliveries puts the company in good stead to meet all market requirements in the coming selling season.

“All inputs required for the next production season have been acquired in advance to protect the value of cash received, and the business should not have any significant challenges in seed production”.

The 2019/20 agricultural season was marred by below average rainfall with farmers across the country reporting lower harvests as a result of drought-like conditions.

To compound SeedCo’s problems, the depreciation of the Zimbabwe dollar stoked inflation and eroded revenues for business.

Several companies, including RioZim Limited, British American Tobacco Zimbabwe and Econet Wireless Zimbabwe Limited, have reported losses also due to the depreciation of the local currency.

SeedCo recorded a net loss of $695,99 million as a result of the depreciation of the local unit in the period under review.

This was despite the fact that revenue for the period nearly doubled to $1,07 billion from a 2019 comparative of $563,44 million.

“Revenue was up compared to prior year mainly due to alignment of selling prices with inflation,” Chimanya said.

“Maize volumes were down by 36% due to a combination of poor rainfall and reduced disposable incomes.

“Low dam levels and inconsistent electricity supply resulted in a 13% reduction in wheat offtake.”

As a result of currency volatility and other macroeconomic shocks, finance costs were significantly higher than during the prior year due to rising interest rates.

Chimanya said other factors that played a role in finance costs rising were the increasing risk and attendant inflation, which made borrowing more expensive.

Operating expenses in the period under review rose 63,16% to $274, 58 million, on the back of hyperinflation from a 2019 comparative of $168,28 million.

Total assets grew nearly 34% to $2,4 billion from $1,79 billion compared to the similar period in 2019. The increase was driven by increases in inventories of 262,68% and 24,08% in non-current assets.

“The increase in inventories was mainly due to advance purchases of chemicals, fertilisers, packaging and other consumables to hedge against price increases and prepare for the upcoming selling season,” Chimanya said.

“The increase in non-current assets was due to the revaluation of property, plant and equipment as at year end.” 

SeedCo registered a basic earnings per share loss of 49,19 cents for the period under review from a 2019 profit of 285,03 cents. This shows the firm is currently not in a stable position.

In outlook, Chimanya said the group had designed a robust plan to ensure business continuity amid the challenges caused by the Covid-19 pandemic whose full effects would be felt in the new financial year.

“The completion of the seed-drying facilities was delayed by the challenges emanating from the global lockdowns and consequent slowdown of supply chains due to the Covid-19 pandemic,” he said.

“It is now expected that the project will be completed before the next production season harvest comes in.

“Being at the forefront of all farming activities, the business is poised to continue playing the globally important role of ensuring quality seeds are provided to farmers to feed a growing population affected by a debilitating pandemic and other economic challenges.”

Chimanya said the designation of agriculture as an essential service had ensured that the impact of the Covid-19 lockdowns on the company’s operations would be minimised.

“The effect on consumer spending patterns emanating from the pandemic, however, remains unknown at this stage,” he added.

“The group expects to remain resilient in the difficult environment given the position it occupies in the food value chain.”

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