Chronicle Editor
Business Reporter
INTERNATIONAL seed producer, SeedCo, says the completion of installation of its planned US$12,5 million Artificial Seed Drying facility in Harare has been delayed by Covid-19 restrictions and liquidity challenges.
In August, the firm announced plans to commission the drying facility before the end of this year.
However, in a statement accompanying the firm’s financial results for the half-year ended September 30, 2020, SeedCo indicated that most of its capital expenditure was spent on the drying facility project.
“Capital expenditure was mainly directed towards the artificial seed dryer project whose completion was unfortunately delayed by a combination of foreign currency shortages, liquidity challenges and Covid-19 restrictions,” said the company.
The setting up of the Artificial Seed Drying plant would be a game changer in Zimbabwe’s farming sector and the seed company hopes that upon completion, the project will curb seed post-maturity losses and help in further advancing processed seed market readiness.
During the period under review, the firm said the macro-economic environment was characterised by hyperinflation, high interest rates, tight liquidity and accelerated local currency depreciation following the introduction of the foreign currency auction system by the Central Bank.
“However, the period subsequent to the reporting date witnessed both inflation and exchange rate stability though settlement modalities are yet to be determined,” said SeedCo.
The firm said its inventory levels increased due to seed deliveries from contracted seed growers for processing in preparation for the main selling season in the second half.
“Both capital expenditure and seed production were financed by expensive local borrowings, which are expected to unwind in the second half when the main selling period commences,” it said.
“The average cost of existing borrowing facilities is 45 percent and these borrowings are unsecured.”
In terms of financial performance, the group’s profit was underpinned by the strong sales volume growth and selling price increases effected in response to the inflation-induced rise in operating costs.
During the period under review, SeedCo’s inflation adjusted profit stood at ZWL$2,2 million from ZWL$656 727.
“Increased focus on local wheat production to reduce import dependence and improved irrigation capacity due to better electricity supply drove the increase in wheat seed sales volumes.
“In addition, there was increased uptake of maize seed on the back of a Lowveld winter grain production initiative targeted to enhance food security in the Masvingo province in the wake of recent devastating droughts in that area.”
The group’s half-year results were enhanced by a combination of the positive contribution from the foreign associate on account of early maize seed demand across the region and an encouraging out-turn from the local cotton seed associate and the vegetable seed joint venture.
In the outlook, the group said the prevailing macro-economic stability and relaxation of lockdown restrictions augurs well for local operations for the remainder of the financial period.
“With initial weather forecasts indicating normal to above normal rainfall, seed demand is expected to remain strong,” it said.
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