Seed Co Limited is well-positioned for recovery due to its focus on regional exports, advanced seed technologies, and strategies to adapt to changing climatic conditions, according to stockbroking firm FBC Securities.
The company recently faced profitability challenges, with profit after tax dropping significantly from US$15.97 million in the first half of 2023 to US$1.21 million for the same period in 2024. FBC attributed this decline to rising operational costs, inflation, increased input prices, and higher processing expenses, which eroded profit margins.
“Strong revenue growth and a solid market position make Seed Co a compelling medium- to long-term option for risk-tolerant investors, provided cost management improves and regional exports grow,” FBC noted in its analysis.
The firm highlighted Seed Co’s 73% revenue growth in the first half of 2024, driven by increased seed sales, particularly in maize and wheat. This growth underscores robust market demand and the company’s success in diversifying its product portfolio and expanding its export reach.
Despite profitability challenges, FBC observed that Seed Co’s liquidity remains healthy, supported by increased cash reserves and inventory levels, which enhance its ability to meet short-term financial commitments. However, the stockpile of maize seed could become a concern if sales do not keep pace.
For conservative investors, FBC advised waiting for signs of improved profitability, better debt management, and tighter control of operating expenses before considering investments in the company.
In its financial report, Seed Co emphasized its ability to meet the needs of farmers through a resilient seed mix designed for both drought-prone and high-rainfall areas. The company’s adaptability enhances its value proposition, ensuring dependable solutions for farmers regardless of weather extremes.
Read: Simba Bhora President Simba Ndoro Withdraws from ZIFA Executive Elections
With strong demand from farmers and development partners for the upcoming planting season, Seed Co highlighted its commitment to supporting food security in the wake of the recent El Niño-induced drought that affected Southern Africa.
The company also plans to expand its regional export operations by leveraging synergies with its affiliate, Seed Co International Limited, and by utilizing advanced seed technologies tailored to varying climatic conditions.
During the six months ending September 30, 2024, Seed Co recorded a 73% increase in revenue to US$18.9 million, driven by winter cereal sales and exports. This contributed to a 24% rise in total volumes, reaching 10,625 tonnes.
Wheat seed sales grew by 9% compared to the previous year, despite challenges such as drought-related water shortages, power outages, and high input costs. The company also benefited from exchange gains on borrowings denominated in local currency, contributing to additional income.
For comments, Feedback and Opinions do get in touch with our editor on WhatsApp: +44 7949 297606.