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Enacy Mapakame – Business Reporter
ZIMBABWE Stock Exchange-listed seed maker Seed Co Limited intends to expand its vegetable business in order to spread risk and boost future earnings growth as maize seed sales fall due to inclement weather, group chief executive Mr Morgan Nzwere has said.
Seed Co recently bought 100 percent of Prime Seeds, a local vegetable seed producer.
Sales of maize seed, its traditional cash-cow, tumbled 15 percent in the year to March 31, 2015 due to poor rains.
Farmers opted for short season varieties that were in short supply.
Mr Nzwere said Seed Co would also establish niches for the vegetable business in Zambia, Tanzania, Malawi and Kenya, where the company also has a presence.
“The group will also leverage on the vegetable expertise of the Limagrain group,” said the chief executive in Seed Co’s 2015 annual report.
Limagrain, the biggest plant breeding and seed producer in the European Union, last year bought 30 percent of Seed Co Ltd in a multi-million dollar deal. Mr Nzwere said this had opened “increased access to cutting edge technologies and quickened Seed Co’s product release cycle” and availed money to fund new and existing projects across Africa.
One such area is development of short to medium maturing maize seed varieties and expansion of the distribution network in East Africa.
Seed Co recently released 300 early maturing varieties suitable for dry conditions.
The early maturing variety, the group said, were yielding better than some medium varieties, which increased demand for them.
This year, the company expects to spend US$5,1 million on research and development – up from US$4,6 million in 2014 – with most of this going to drought-tolerant varieties.
“The adoption by farmers in dry areas of the early maturing series is also expected to push the group’s top-line and bottom line,” said Mr Nzwere.
Changing climatic conditions are forcing farmers to look for seed that grows faster, giving them a better chance of a reasonable yield.
Seed Co intends to increase production of its short and medium season varieties for the coming season.
In the year to March 2015, Seed Co sales tanked on weather-induced slow demand.
Turnover slumped 11 percent to US$95 million from $107 million a year earlier, though attributable profit climbed to $15 million from US$11 million a year ago.
By year-end, Seed Co was owed over US$20 million by different governments across Africa.
The ZImbabwe Government’s debt of US$24 million has since been converted into Treasury Bills with a maturity of three to five years.
Seed Co mainly produces hybrid maize seed and thrives on huge government orders.
The stock traded unchanged at 96 cents on Wednesday and is down one percent since January.
Over the past 52 weeks, Seed Co touched a high of $1,06 and a low of USc90.
Currently, the seed producer is actively establishing its business in Nigeria “amid challenges of securing production contracts with competent growers as well as instability from political extremists in that country”.
The group is also facing challenges securing a business licence in Ethiopia, which is affecting progress in penetrating that market.
Online Reporter