Seed Co Limited is leveraging its strategic focus on regional exports, advanced seed technologies, and climate-adaptive solutions to navigate challenges and position itself for recovery, according to a report by FBC Securities.
The company experienced a sharp decline in profitability during the six months ending September 30, 2024. Profit after tax dropped significantly, from US$15.97 million in the same period of 2023 to just US$1.21 million in 2024.
FBC Securities attributed the downturn to rising operating costs, inflationary pressures, increased input prices, and higher processing expenses, all of which negatively impacted profit margins.
“Despite these challenges, the company’s strong revenue growth and solid market position present an intriguing medium- to long-term investment opportunity for risk-tolerant investors,” FBC noted. “This potential becomes particularly appealing if the company enhances cost control measures and expands its regional export markets.”
In its half-year review, FBC highlighted that Seed Co achieved a 73% revenue increase, driven by higher seed sales volumes, especially in maize and wheat. This growth reflects strong market demand and the company’s ability to broaden its product portfolio and export reach.
FBC also pointed out that Seed Co’s liquidity remains robust, with improved cash reserves and inventory levels. However, the firm cautioned that the accumulation of maize seed stocks poses a potential risk if they are not converted into sales.
ALSO READ: Woman Commits Suicide After Husband Catches Her in Bed With His Nephew
For conservative investors, FBC recommended waiting for clear signs of improved profitability, reduced debt, and better expense management before considering investment in Seed Co shares.
In its financial disclosures, Seed Co emphasized its commitment to meeting diverse agricultural needs by offering resilient seed varieties suitable for both drought-prone and high-rainfall environments. This adaptability, the company stated, enhances its value proposition, ensuring reliable options for farmers regardless of climatic variability.
The company noted a surge in demand for its seeds, fueled by heightened food security concerns following the recent El Niño-induced drought that severely affected Southern Africa.
“Seed Co is strategically positioned to capitalize on anticipated improvements in agricultural performance and expand its regional export operations by utilizing advanced seed technologies tailored for a range of climatic conditions,” the company stated.
The firm also plans to strengthen its export capabilities by collaborating with its regional partner, Seed Co International Limited.
During the six-month period, Seed Co reported a 73% revenue growth, reaching US$18.9 million. This was primarily driven by winter cereal sales and exports, contributing to a 24% increase in overall sales volume, which reached 10,625 tonnes.
Despite challenges such as drought-related water shortages, power outages, and high fertilizer costs, wheat seed sales rose by 9% compared to the previous year. The company also recorded increased income from exchange rate gains on local currency borrowings.
