SeedCo has defied regional turbulence to post a robust 14 percent growth in revenue for the fiscal year ending March 21, 2024. According to figures garnered from Imara Capital Securities results scorecard, the agribusiness juggernaut reported a revenue increase to USD118.0 million, up from USD103.5 million in the previous fiscal year.
The company’s top-line growth was predominantly driven by significant revenue gains across several key markets, with the notable exception of Mozambique and Botswana as revenue declined by close to a quarter and a third across the two markets respectively. Mozambique’s revenue fell to USD5.7 million from USD 7.5 million, while Botswana saw a drop to USD4.1 million from USD 6.0 million.
Despite these setbacks, Seed Co’s diversified market presence cushioned the impact, enabling overall growth as Tanzania emerged as the star performer, with revenues surging by 24.32 percent to USD 32.6 million from USD 26.2 million. Zambia also made a notable contribution, with an 11.10 percent rise to USD 54.8 million. The company saw remarkable gains in other African markets, including South Africa, Angola, DRC, Ethiopia, and Rwanda, where revenues catapulted from USD 1.4 million to USD 6.1 million. Malawi, Kenya, and Nigeria also posted impressive growth, with revenues climbing by 30.23 percent, 17.38 percent, and 27.64 percent, respectively, as revealed by the stockbrokers’ equity research results scorecard.
Seed Co’s crop sales were led by a substantial increase in maize sales, which soared by 27.33 percent to USD 101.9 million, accounting for a commanding 86.31 percent of total sales, up from 77.28 percent the previous financial year. Other crops, including wheat, sorghum, barley, rice, groundnuts, cowpeas, and beans, also saw a modest increase of 6.17 percent to USD 11.4 million.
In contrast, soybean sales experienced a steep decline of 62.80 percent to USD 4.8 million from USD 12.8 million, accounting for 4.03 percent of total revenue.
Despite the mixed results across different crops, Seed Co’s overall profitability improved significantly. The company’s cost of sales rose by 9.28 percent to USD 62.9 million, resulting in a gross profit of USD 55.2 million, up 19.92 percent from USD 46.0 million. This improvement boosted Seed Co’s gross profit margin by 230 basis points to 46.75 percent.
Seed Co’s operating expenses rose by 17.57 percent to USD 38.6 million, primarily due to increases across various expense lines, except for sales and marketing costs, which decreased by 9.13 percent as reported on the results scorecard. Despite the rise in expenses, the company reported an operating profit of USD 16.0 million, marking a 50.76 percent increase from the previous year.
The company’s operating margin improved by 330 basis points to 13.55 percent, and its cost-to-income ratio contracted by 487 basis points to 70.72 percent. Net finance costs also increased by 35.99 percent to USD 5.2 million due to a rise in interest expenses on borrowings, despite a 20.93 percent reduction in total borrowings to USD 36.5 million.
Profit before tax surged by 64.21 percent to USD 9.4 million, with an effective tax rate improvement of 165 basis points to 47.34 percent. This resulted in a net profit of USD 4.9 million, up 69.53 percent from the previous year, and an improvement in the net profit margin to 4.18 percent.
Total assets decreased by 8.89 percent to USD 142.9 million, due to reductions in trade and other receivables and inventories. However, the company’s inventory turnover improved by 11.96 percent to 2.50x. Total liabilities also decreased by 11.00 percent to USD 62.8 million, driven by a reduction in borrowings and trade payables. Consequently, Seed Co’s debt-to-equity ratio fell by 793 basis points to 45.56 percent.
Looking ahead, Imara Capital projects Seed Co as a company well-positioned to capitalise on favourable agricultural growth prospects across Sub-Saharan Africa. The region’s economic outlook is mildly positive, with the International Monetary Fund (IMF) forecasting growth to rise from 3.4 percent in 2023 to 3.8 percent and 4.0 percent in 2024 and 2025, respectively.
According to the results scorecard, Seed Co plans to leverage its robust research and development capabilities, as evidenced by a three-year compound annual growth rate (CAGR) of 14.87 percent in R&D spending, to enhance its product offerings. The company is focusing on climate-smart seeds, which are gaining traction in the market, and expanding into new markets such as Angola, the DRC, Ethiopia, and Nigeria.
Domestically, Seed Co’s involvement in initiatives like Thuo Letlotlo and Temo Letlotlo, aimed at promoting crop production through improved access to inputs and credit, positions it to benefit from government-led agricultural support programs.
