Seed Co sees gloomy prospects for season

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					Seed Co sees gloomy prospects for season
Thursday, 08 April 2004 02:00




Staff Writer

LOCAL seed producer Seed Co Ltd (Seed Co) says prospects for the upcoming season remain
low with the group expecting 40% of its normal local deliveries.




However, the company says overall deliveries should be 90% of those last year with the slack
taken up by regional operations.




While Zimbabwe is going to be severely affected by the slacken-ing of the regional weather
patterns, it still represents the largest supplier to the Seed Co group with an estimated 28 000
tonnes.




Management is expecting Zambia to supply between 18 000 and 20 000 tonnes for the
upcoming season, with Malawi expected to produce 7 000 tonnes.




South Africa and Mozambique should both supply 3 000 tonnes each.

"As the company is unable to export any of its Zimbabwean supply the group is likely to sell the
majority of its regional supply on the regional markets, which represents 54% of total supply," a
company official said.




He said on the research and development front the Zimbabwean research team was nearing
the release of seven new maize hybrid seeds with improved disease resistance and yield.




Also in the pipeline are new strains of wheat, soyabean and groundnuts.

Regionally the new research site at Mpongwe in Northern Zambia is now up and running, and
the research site south of Maputo is also making progress in producing varieties suitable for the
south eastern coastal belt from Mozambique to Kenya.




"We believe the stock to have excellent prospects for the medium to long-term," a stock market



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Seed Co sees gloomy prospects for season
Thursday, 08 April 2004 02:00




analyst with Barnfords Securities Services (Pvt) Ltd said.




He said traditionally the group transacts 80% of its business during the second half of its trading
year and management indicated that this year should be no different.




"With a possible long overdue devaluation the group may be poised for additional windfall
exchange rate gains," the official said. "The stock is currently trading on a rolling PE of 7.49x."




He said the company had revised its forecasts upward to forecast $110 earnings per share for
their full year to the end of February, which gives the group a cheap forward PE of 2.9x.




The Seed Co group produced a good set of results for its half year as evidenced by the 2 464%
increase in profit after tax from $142,9 million in the prior comparable period to $3 665 billion for
their first half.




This was significantly ahead of inflation for the period under review.

The company said this coincided with an increase in operating margins from 36% in the prior
period to 48% for this period.




The rise in profit was largely driven by a huge increase in other operating income up 1 772%
from $346,5 million in the previous comparable period to $6 485 billion derived mostly from net
exchange gains of $5,9 billion.




The sustainability of these earnings, according to a company official, had to be questioned.




Analysts say the country's agricultural output could have been affected by the late delivery of
imputs.




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Seed Co sees gloomy prospects for season
Thursday, 08 April 2004 02:00




"It is likely that food imports will have to continue into the 2004 season," an official from NDH
said.




"Given the acute shortages of foreign currency, food imports, while necessary for sustenance
will exert further pressure on the foreign exchange situation."




He said the agricultural sector had witnessed a significant reduction in output which was
ascribed to depressed aggregate demand, prohibitive input costs and the generally
unfavourable macro-economic environment.




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