SEED | Seed Co Limited HY24 Earnings Update; Winter cereals outperform maize in first half

    The period was characterized by liquidity and foreign currency shortages, local currency devaluation, prohibitive borrowing costs, policy uncertainty and disrupted supply chains. Power outages not only impacted Seed Co Limited's plant operations and production, but also farmers' irrigation capacity. Notwithstanding, winter sales were buoyant as wheat and barley sales registered 8% growth to 6,828MT despite the challenges experienced by farmers. However, the impending drought conditions delayed the start of the government-related input support initiatives. which slowed the summer selling season. Consequently, maize volumes fell 22% to 1,638MT, resulting in a 3% drop in total volumes to 8,572MT. Nevertheless, value tracking price adjustments drove a 604% growth in historical revenue from ZWL$5.92bn in 1H23 to ZWL$41.69bn. Operating costs, however, outpaced revenue owing to inflationary pressures and exchange rate volatility, and saw 825% growth to ZWL$34.62bn from 1H23. Seed Co Limited registered ZWL$226.06bn in other income, derived from exchange gains on US$-denominated sales converted to ZWL at the closing rate. Therefore, EBITDA closed the period 120% higher than the prior year at ZWL$216.59bn. The business predominantly accessed funding at productive sector rates, easing finance costs, which constituted 16% of revenue compared to 57% in 1H23. The average interest rate fell to 95% from 113%. The Group paid ZWL$80bn in taxes and closed the period with a PAT of ZWL$137.18 bn, up 2176% from ZWL$6bn in 1H23. The business accessed existing facilities to fund incoming deliveries and other key operational costs, bringing total borrowings at the end of the period to ZWL$133.26bn, against cash balances of ZWL$6.13bn, reflecting a high debt burden on the Group. Seed Co Limited did not declare an interim dividend as the first half of the year is typically a cost accumulative period for the Group.


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