SEED Co International Limited is poised to maintain its market dominance by capitalising on its extensive geographical presence to introduce innovative seed varieties tailored to specific market needs, NewsDay Farming can report.
According to an analysis by IH Securities of Seed Co’s financial results for the year ended April 31, 2024, the company is projected to achieve a 14,8% revenue increase to US$135,46 million in 2025, up from US$118 million in 2024.
This growth is anticipated to be driven by a recovery in sales volumes following the El Niño-induced drought.
“The group is expected to retain its stronghold in its operating markets as it will leverage on its wide geographical footprint to introduce new seed varieties across markets in line with their needs,” the research firm said.
“Key downside risks include persistent power outages and logistical delays in moving seed across borders.”
Furthermore, IH said a La Niña phenomenon could result in below normal rainfall in East Africa, posing downside risk to volumes in that region.
However, the business expects continued growth in East Africa, particularly in Ethiopia where its products have been well received.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) is expected to come in at US$21,67 million, while EBITDA margin is expected to remain flat at 16%, then inch up going forward as imported inflation decreases following interest rate cuts.
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“We have taken a conservative approach and assumed associate income revenue will continue to be negative,” it said.
According to the World Meteorological Organisation, a La Niña weather event is likely to form in the second half of 2024, increasing chances of wetter conditions in southern Africa during the 2024/25 cropping season.
The group anticipates positive business performance in southern Africa from a rebound in demand to restock grain reserves and mitigate the impact of the El Niño-induced drought.
There is, however, a risk that flooding may impact on the cropping season.
During the financial year 2024 period, the group experienced several regional and global challenges, including inflation, high interest rates and depreciating currencies compounded by climate change.
Nevertheless, the company registered strong performance mainly in East Africa, which helped to offset poor performance in some markets in southern Africa that were impacted by the El Niño-induced drought.
Sales in East Africa reached record levels, with turnover in Tanzania and Kenya increasing 28% and 17%, respectively, owing to favourable weather, demand creation and price reviews.
The group also saw a good showing in Zambia and the Democratic Republic of Congo, where revenue uplift of 15% was driven by good maize seed sales.
Performance in Malawi was buttressed by successful winter and summer sales as well as price reviews.
Overall, maize seed volumes grew 20% year-on-year to 42 454 metric tonnes, while soya volumes faltered 53% due to subdued commodity prices and a bad rainfall season in southern Africa.
Revenue for the period was 14,01% ahead of the prior year at US$118 million on the back of volume increases and strategic price reviews.
The group localised its borrowings during the period, resulting in a 76% reduction in exchange losses.
However, net finance costs were relatively higher due to rising local and United States dollar interest rates globally and in the region.
Moreover, goodwill impairment in the South African investment drove contributions from associates to a loss of US$1,4 million from US$1,1 million in the financial year 2023.
