Seed Co expects strong growth in forex revenue
ZIMBABWE Stock Exchange ( ZSE) listed seed producer Seed Co Limited is upbeat about prospects for enhanced foreign currency earnings on the back of anticipated growth of export and increased local US dollar sales.
This comes as the group expects marked volume growth, which should drive foreign currency- denominated sales volumes in the next fi nancial year going ahead.
“In Zimbabwe, the business is expected to experience volume growth as well as a notable increase in the contribution of hard currency revenue from encouraging export growth and a significant increase in domestic sales in USD,” said company secretary Tineyi Chatiza in a trading update for the third quarter to December 31, 2022.
Seed Co Limited has previously indicated the group is opening its own selling depots for direct cash sales while also renegotiating distribution agreements to ensure it earns and realises real value from the sale of its products. This strategy, the group said, was meant to offset the 20 percent volume decline the group experienced during the year to March 31, 2022.
On a regional level, Mr Chatiza indicated a mixed volume performance was predicted, with growth forecast in some regions of Southern Africa and East Africa and a drop due to drought in other regions of East Africa.
In terms of volume performance, volume increased by 14 percent over the past nine months compared to the same period prior year, and by 46 percent compared to the same quarter prior year, helped by ample stocks, exports, record local sales of wheat and soyabeans as well as favourable rainfall projections towards the start of the main planting season.
The positive volume performance was achieved despite a challenging business environment, global shocks caused by the conflict in Ukraine as well as local factors such as erratic power supplies.
“Zimbabwe’s internal socio- economic issues were compounded by the continued global economic unrest to make the local business environment even more difficult and uncertain.
“Some of the major challenges the business is dealing with include the ongoing energy crisis, the lack of and high cost of fertilisers and agrochemicals, the loss in consumer purchasing power, and the shortage of liquidity in both local and hard currency.
“Positively, value was maintained in real terms during the business’s peak period of revenue generation because of the stability of the exchange rate and the increase in hard currency sales in Zimbabwe,” said Mr Chatiza.
In line with volume growth and the evolution of the exchange rates, revenue increased by 516 percent for the quarter and 425 percent during the 9 months compared to the same period prior year in historical cost terms.
Revenue in inflation-adjusted terms grew by 12 percent compared to the same 9 months’ period prior year, and by 14 percent compared to the same quarter prior year reflecting the volume rise.
Going forward the environment remains uncertain due to various factors which may pose challenges for the group as it nears its year end – March 31, 2023.
Mr Chatiza said: “Inflation, foreign exchange, and interest rate risks remain significant in Zimbabwe and throughout Africa as the group nears the end of its fiscal year.”