Global warming threatens Seed Co’s outlook
• Intensifies R&D in drought-resistant seed varieties
Seed Co, a certified seed company authorised to market seed varieties developed by itself, the government and associated seed breeders in over 15 African countries have reported a fairly good half year. The company says they have maintained a strong market share among communal and commercial farmers from years of intensive investment in Research & Development (R&D).
Seed Co’s just-released results for the half-year ended 30 September has complain of the ever changing weather patterns, saying they have a potentially significant impact on the group’s future financial performance. With the emerging risks of global warming and erratic rainfall, the group says currently their R&D is increasingly focusing on breeding more drought-tolerant varieties.
Turnover remained unchanged at $17.7 million as the increase in maize seed sales volumes in Malawi, Tanzania and Zambia were neutralised by unfavourable currency movements and delayed start to the planting season in Kenya due to late arrival of rains.
Group management has noted that it is forecasting strong growth in full year earnings from prior year. This they have explained will be driven by the likely increase in revenue following recovery of demand in Kenya and Tanzania with normal to above normal rainfall forecast after the drought experienced in that region in the last financial year. The group explains that it has anticipated improvement in margins and planned operating cost control initiatives.
It was reported earlier in May this year by World Grain.com that Kenyan millers were on the verge of running out of maize as disputes continue between the government, their Strategic Food Reserve (SFR), millers and the National Cereals and Produce Board (NCPB). According to the United Grain Millers Association, about 50 of the country’s 200 millers had closed then because of the maize shortage. The shortage has increased prices for a bag of maize and also added to feed costs. The same publication reported that Martin Kinoti, secretary general of the Association of Kenya Feed Manufacturers (AKEFEMA), said animal feeds have hit a three-year high and will continue to rise if the government does not act.
At the reporting date, current group borrowings are reported to have been standing at $46.8 million to cover the working capital gap created by the current high levels of inventories and receivables. This the results have explained that affected the bank balances which decreased to $13.0m after payments for seed production, capital expenditure and the dividend to shareholders.
The increased stock value is said to have been influenced by the stock from the previous year. The results explain registered growth in stock value of $30.3m arose from current year’s production in preparation of the main selling season in the second half of the financial year. According to the group, the current stock position is therefore expected to unwind as the year progresses. Interest costs rose to $1.6m on the back of increased borrowings with working capital tied up in receivables and inventories.
Seed deliveries by growers which were received just before the reporting date had not yet been paid for then, hence the increase in trade and other payables to $16.8m. The group results indicate that there was an increase in the value of fixed assets from $38m in the same period in the previous year to $39.2m resulting from capital expenditure partially offset by depreciation and exchange adjustments. The bulk of the capital investment is explained to have gone towards the purchase of a farm for seed production at Mkushi in Zambia.