Seed Co sinks $3m in Kenyan drying, processing facilities

Seed manufacturer, Seed Co has invested $3 million in drying and processing facilities in Kenya meant to shore up its foothold in East Africa.

BY TATIRA ZWINOIRA

The company’s chief executive officer, Morgan Nzwere, said the commissioning of the project expected to produce 5 000 metric tonnes, is expected before the end of next February.

“With the impending commissioning of the new seed drying and processing facilities in Kenya, our foothold in the highlands market is expected to strengthen,” he said.

Seed Co said the vegetable business was now gathering traction, with revenue growth expected next year to offset the loss they made.

During the period ended September 30, 2016, the seed company experienced a 32% increase in revenue to $24,8 million from a previous of $18,78m from vegetable sales.

Nzwere said, as part of establishing their foothold in that region, they had also completed talks to produce seed in the Nigerian market.

“We are expecting between 400 and 500 tonnes (per annum), but going forward, anything is possible. It has got the potential to take more seed than what we are selling in all current existing markets. Remember, there are about 174 million people in that country, so that is a big market, which is why we have been working hard to try and make that market successful,” he said.

“It is a moving target, so we have set a medium and long-term strategies. So if in the medium term we can start achieving 5 000 tonnes (per annum), I think we would have done well. But, there is nothing to say we cannot achieve 20 or 30 000 tonnes (per annum) in the long term we do not have a time frame.”

The group’s finance charges increased due to the 7% to 8% discounts in $10m Treasury Bills (TBs), which resulted in a loss.

Nzwere said the problem was that banks bought the TBs at a lower value while still continuing to earn the interest income paid by the government.

“What basically happened is, I think, all of it had to do with people being worried and wanting to put their money in more secure documents. So, when you look at the profits of most banks, they have made those profits from TBs, from people who are holding TBs. So if a person is holding TBs, they go and buy them, then they are now earning the interest that the government has been paying on the TBs,” he said.

“So if you have TBs, you can sell them to the bank at a lower rate, while continuing to earn that interest until maturity.”

He said for them, the finance charges were a result of the discrepancy of the discount rate and interest that they had paid from borrowing.

The company had a loss of $9,29m from a previous of $5,56m recorded last year due to higher finance charges and delays in payments of debts by the governments of Malawi and Zambia.

The Zambian government completed paying its $3m debt to the company as of Friday last week, while Malawi now owe $1,3m.