Listed seed manufacturer Seed Co Ltd is pinning its hopes on normal rains to push its huge stocks in order to turn around a US$9 million loss in the interim to September that resulted from delays in purchases by major customers.
Seed Co CEO Morgan Nzwere told analysts this week the company's net loss widened to US$8,9 million in the interim to September 30 2012, compared to a loss of US$1,4 million in the same prior year period.
He said the loss was on the back of delayed seed sales as typical rainfall was yet to be experienced in Zimbabwe, the company's main market. It was also due to weak demand for winter cereals and slow uptake of seed cotton.
Nzwere said demand for winter cereals had been weak due to poor commodity prices and power shortages, while maize seed sales were set back because the Malawi and Zambia governments had delayed launch of their input programmes.
Revenue for the period fell by 56% to US$13,2 million. Seed maize sales were down 41% to 3 989 metric tonnes, winter sales were down 52% to 2 617 metric tonnes but there were no seed cotton sales at all.
Quton MD Edworks Mhandu said there was a slow uptake of seed cotton due to prolonged price disputes between farmers and ginners. Quton is Seed Co's seed cotton division.
Despite the pricing woes, Mhandu said farmers were slowly making purchases and the unit was on course to beat last year's sales.
"Right now we have confirmed orders of 8 500 metric tonnes, mostly from contractors, compared to 8 000 metric tonnes last year," he said.
Operating costs were up 10% due to increased business development activity in the new markets and expenses associated with increased marketing and promotional activities in the face of growing competition.
Seed Co's market share in Zimbabwe dwindled to 56% from around 72% in the prior period, while in Zambia, market share stood at 50%, Malawi 53%, Tanzania 40% and Kenya 10%.
Nzwere said strategies around the current selling season would revolve around depot establishments and the strengthening of existing distributor relations.
"We have adopted a 12km rule across the country in terms of the supply and distribution of our seed," he said.
Net finance costs increased 135% to US$3,3 million after borrowings rose US$19 million to US$63,7 million.
However, borrowings were expected to reduce significantly in F13 because the main debtor, government, had shown a commitment to pay, said Nzwere.
At the end of last year, Seed Co was struggling to collect payments mostly from the Zimbabwean and Zambian governments, which owed the seed manufacturer US$14 million and US$7 million respectively.
Giving an update on the performance of debtors, Seed Co FD John Matorofa said there had been good progress on the US$14 million due from the Zimbabwe government after they paid US$7,7 million.