Govt sweetens Hippo Valley land lease

TINASHE MAKICHI

The government is fast tracking the Zimbabwe Stock Exchange-listed sugar processor Hippo Valley Estates’ 99-year lease application, a move which is likely to instill confidence and stability in the company’s operations.

Executives at Hippo Valley, a unit of South Africa’s sugar producer, Tongaat Hulett’s, this week claimed significant progress on the matter has been made.

 They are now banking big on such progress.

 “Government has assured the company that its application for a 99-year lease will be attended to with urgency and significant progress has been made in this process providing further confidence and stability to the operations,” Hippo Valley said this week in a statement accompanying the company’s financial results for the six months to September 30, 2020 signed by board chairman Dan Marokane and chief executive officer, Aiden Mhere.

Hippo said efforts to maximise sugar production through yield improvement initiatives are on-going for both company owned and private farmer owned cane fields through strategic partnerships to resuscitate non-productive land to above break-even yields.

The company said work on the 4,000 hectares’ cane development project, the Project Kilimanjaro, which it has embarked in partnership with sister company, Triangle Ltd, the government and local banks, has seen a total of 2, 700 hectares of virgin land being cleared, ripped and 588 hectares planted.

 Project works have been slowed down on account of delays in obtaining the requisite funding from financial institutions at the back of adverse economic conditions.

According to the company, while alternative funding structures for completion of the project are being considered, some 80 hectares of maize has been planted on the cleared land, while an additional 1,500 hectares will be planted to sorghum in partnership with the government as part of efforts to improve food security in the country.

Hippo Valley  said on completion, Project Kilimanjaro will contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tons sugar by 2024/25, positioning the country to be one of the most competitive sugar producers in the region and globally.

In its financial results for the six months to September 30, 2020, revenue for Hippo Valley rose 21% to ZWL$6.9bn from ZWL$5.7bn recorded in the prior comparative period driven by export earnings.

Operating profit and profit for the period, however, declined 16% to ZWL$2.6bn and 29% to ZWL$996m respectively. This was attributed to fair value loss on cane biological assets of ZWL$886m compared to a gain of ZWL$604m in the same period last year.

Excluding the non-cash impact of biological asset valuations and depreciation, adjusted earnings before interest, taxes, depreciation and amortisation improved 37% as the company benefited from prudent management of costs and the positive impact of forward purchasing of key inputs in a hyperinflationary environment.

Net operating cash flow after interest, tax and working capital changes was ZWL$244m driven by increased cash consumed in working capital as the company tied up cash in critical stocks and prepayments to hedge against hyperinflation.

Capital expenditure totalled ZWL$70m of which ZWL$43m was for root replanting.

During the period under review, the company had a net cash balance of ZWL$576m compared to a net cash balance of ZWL$270m in the previous corresponding period.

The effective tax rate on the inflation adjusted accounts was 41.45% impacted by the net monetary loss of ZWL$1.1bn that was treated as a permanent difference for income tax purposes.

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