Chairman’s Letter
Dear Stakeholders
On behalf of the Board, I am honoured to present to all our stakeholders the results of the Group for the year ended 31 March 2023 (“FY23”). This has been a challenging year for the Group contending with the effects of climate change and economic difficulties in most or our regional markets. The war in Ukraine continued to fuel global and regional inflation, currency devaluations and rising interest rates as authorities try to rein in inflation. The aggregated result was contracted Group profitability despite a commendable demonstration of brand resilience that delivered volume and turnover growth against all odds.
Operating Environment
Debt crises and climate change compounded by imported global inflation continue to militate against economic stability and progress in our various markets. Markets like Kenya, Malawi, Nigeria, and Zambia saw their currencies weakening significantly during the past year. The direct impact to our business has been production challenges in East Africa and Southern Africa due to drought and incidences of flooding, respectively. In addition, currency fluctuations resulted in pricing difficulties and unmitigable exchange losses given the low-income profile of most of our customers, the smallholder farmers.
We are, however, seeing the dividends of our investment over the years in our brand and intellectual property as farmers and development partners continue to trust and prefer our climate-smart seed solutions.
Financial Performance
Group turnover at $103.5m was 17% above prior year ($88.5m) benefitting from increased volumes in Tanzania, Kenya, and Zambia which helped to neutralise the effects of decreased volumes in Mozambique and Nigeria. The Group achieved a $5.7m PBT and $2.9m PAT for the year and these were 40% and 50% lower, respectively. This was mainly because of a $6m negative swing in foreign currency movements that resulted in $4.5m exchange losses compared to $2.5m exchange gains last year. Reduced profitability also impacted the Group’s financial position as measured by equity declining by 10% and the net debt level weakening to 31% of equity from 23% at prior year closing.
Production and Quality
In the face of climate change, the Group leveraged its multi-geography and country production hubs to ensure adequate seed was available for sale during the year. Markets like Kenya that were impacted by drought were adequately supplied by sister business units in other countries. The Group proactively plans its production relying on weather forecasts, diverse production hubs and consistently incorporates contingent stocks in production planning helping to avoid shortages.
In response to the growing demand for our products, we are ramping up our investments in production, processing, and quality assurance capacity across the Group, with particular focus in Tanzania.
Research and Development
I am pleased to report that our commercial and upcoming products maintained strong performance in field trials across various crop species. Numerous varieties spanning different crops were registered at national levels and subsequently added onto SA and COMESA regional catalogues.
As part of showcasing and providing agronomic advice to our farmers, the Group conducted several field days with remarkable success. We value these interfaces and direct feedback moments with our key stakeholder, the farmer. Testimony to our customer centric and solution-oriented breeding thrust, our existing and upcoming products continue to receive preference on the market and positive reviews.
We continue to tap into our rich genetic bank built over the years to meticulously make combinations in our breeding programs to come up with the finest seed solutions that are affordable, drought resistant and tolerant to emerging diseases as well as pests.
Business Development
Business development work is continuing in the new frontier markets of Angola, DRC, Ethiopia, Mozambique, and Nigeria as well as Francophone West and Central Africa regions. Security concerns are, however, delaying progress in establishing and growing business in these new territories, but we remain committed and buoyed by the untapped opportunities.
Prospects
The global landscape continues to be marked by supply shocks and imported inflation, compounded by a range of economic complexities that persist across our regional markets, posing considerable challenges to our business on a regional scale. It is crucial to acknowledge that the demand for food exhibits relative income inelasticity, rendering the demand for agricultural products less susceptible to economic slowdowns.
We maintain our belief that governments and development partners will uphold their commitment to prioritizing primary food production as a countermeasure against the adverse repercussions of economic hardships. Primary food self-sufficiency is at the core of both our strategic and sustainable objectives as a business, and we are always ready to play a pivotal role in the endeavour to achieve this goal that helps to improve livelihoods and catalyse other economic activities.
While early regional weather projections for the upcoming season might not be encouraging, the Group possesses a diverse array of sub-normal and drought-resistant seed varieties, well-equipped to satisfy market demands as shaped by weather developments.
We wish to point out to our stakeholders that Seed Co’s pivotal position at the inception of the food supply chain within Africa positions the Group to capitalize on the elevated investment emphasis directed toward the continent’s agriculture sector, which seeks to cater to the escalating needs of both the regional and global populace. This focus on primary food production in Africa is driven by a medley of factors, including evolving demographic trends, diminishing arable land worldwide, and the all-encompassing influence of climate change.
Responsible and sustainable business
The Group has a strong and deliberate approach to the management of economic, environmental, social and governance (ESG) impacts and opportunities to deliver sustainable value to our stakeholders. Great attention is being paid towards resource conservation, carbon footprint, biodiversity conservation, and overall adverse climate change mitigation.
Furthermore, in our commitment as conscientious members of society, we firmly uphold the notion of creating enduring and constructive impacts by fostering the growth and empowerment of our communities, thereby promoting sustainable development. We are resolute in our approach to addressing prevalent challenges by means of corporate social investments strategically devised to alleviate socio-economic disparities within our communities. During the year under review, our business continued to contribute positively to the following socio-economic activities:
Improved food security;
Enhanced agricultural productivity;
Empowering the contracted growers of our seed;
Knowledge sharing and capacity building;
Employment generation and empowerment of local communities; and
Fiscal revenue generation by being a responsible and compliant corporate citizen in all our markets.
Human Capital
The Group has consistently embraced an ethos centred on our human capital resource, our employees. We are committed to attracting and retaining the best talent as we are cognisant that the best and satisfied talent is the bedrock of our science-based business. To this end, various enticing incentives have been put into action, encompassing subsidized housing initiatives, educational advancement programmes, and comprehensive well-being initiatives for our employees.. To preserve invaluable institutional knowledge while ensuring business continuity and the infusion of new ideas, a comprehensive succession planning framework has been established, encompassing internships and graduate training initiatives.
Appreciations
I extend my heartfelt appreciation to our esteemed staff, dedicated management team, and board members for their resolute commitment to the organization, even in the face of numerous external challenges. It is through your invaluable efforts that the business has maintained a steadfast path of growth. My gratitude also extends to our external partners including farmers, governments, development collaborators, and our shareholders. Your trust and support have been instrumental in our mission to provide accessible and advantageous seed solutions to every farmer on our beloved continent.
Colleagues and stakeholders, this year my tenure as your chairman is coming to an end as I am preparing to retire during the upcoming AGM, marking the culmination of a fulfilling chapter. The past year has served as my swansong. Reflecting on the journey I have shared with Seed Co, I am struck by the challenges, invigorating experiences, and deep fulfilment that have enriched every step. Leading and collaborating with what I believe to be an unparalleled team in the seed sector, both within Africa and on a global scale, has been a unique privilege. This path has been a humbling one, where my role as a Non-Executive Director and subsequently as Non-Executive Chairman has allowed me to make what I hope have been meaningful contributions to the Group’s expansion and progress across Africa.
I hold my fellow Board members in the highest regard for their exceptional partnership throughout this journey. As I depart, my earnest desire is for the Group to uphold and embody our core principle – “The African Seed Company” – as it embarks on strategic mission to strengthen and extend its presence, serving the needs of every farmer across the African continent.
D.E.B. Long
Chairman