SeedCo debtors' book reduced to $29.1 million from $43.77 million

HARARE â€" SeedCo's debtor's book has reduced from $43.77 million in March 2012 to $29.1 million as of today, Chief Executive Morgan Nzwere told the AGM this afternoon.
 
"Of the total debtors Zimbabwe constitutes $17.8 million, representing a 16% decline from the March figure, of which $13.5 million is due to sales made to the Zimbabwe government which has promised to make the payment this coming week," he said.
 
Nzwere also noted all other governments had performed well on their debts after Zambia and Malawi had reduced their debts by 66% and 57% respectively.
 
The general operating environment's fundamentals for the SBU's are "very very strong," Nzwere said adding that the business is operating in "stable economies" as witnessed by the economic boom in Zambia, the increased forex availability in Malawi after the return of donor funding which has seen seed orders growing by 6% and the East African economies are stable.
 
The group's first half cereal seed sales, constituting between 5% and 7.5% of total turnover, declined significantly after Zimbabwe experienced weak demand due to poor commodity prices and increased power outages. The sales volumes were almost half of the prior period's H1 volumes.
 
Commenting on product competitiveness, Nzwere said Seedco's products are "still topping competition and the group has healthy margins and very strong sales volumes".
 
The group has also curtailed production in the wake of a high carryover stock position targeting to produce only 24 000 tonnes which will mean a total of 25 000 tonnes in carryover stocks this year which will reduce to 7 000 tonnes next year.
 
"Sales grew exponentially since 2009 but since then production has grown faster than sales and we need to reduce production output and release more working capital by reducing carryover stocks to match our sales volumes," he said.
 
The group is continuing to ramp up its processing capacity after it commissioned a new acid delinting plant at Quton Tanzania and replacing the 18-year old cotton plant at Glendale in Zimbabwe whilst the Malawi cotton plant is now on the cards again as the country's economy has improved making it feasible for SeedCo Malawi to acquire a new plant for around $4 million, Nzwere said.
 
The group is making serious efforts to increase product visibility and "making sure that the product is always on the shelves".
 
New market development is on track and the strategy is to ensure that the business has a presence in all agro-economic environments and bargain for orders.
 
Elections in Kenya and Zimbabwe are likely to boost volumes in the second half of the year and the return of donor funding in Malawi will be another boost to sales.
 
Government backed farming programmes in Zambia and East Africa will also increase sales volumes and the group has managed to increase prices in all markets which, combined with increased volumes, should see revenues growing.
 
The stock position is expected to start unwinding going forward which should lead to an improved working capital position and the reduced production levels will mean reduced borrowing as well.
 
With gearing expected to decline from 38% in March 2012 leading to lower financing costs, earnings are set to increase and improve in quality despite the liquidity challenges obtaining in Zimbabwe.
 
The meeting approved board fees of $189 715 and retained Ernest and Young as the auditors for the following financial year after being paid audit fees amounting to $308 266.