Hippo Valley calms market

CLOUDINE MATOLA

Hippo Valley Estates Limited, a publicly traded sugar producer, has moved to reassure the local market that sugar supply will remain stable throughout the current season, despite mounting cost pressures and shrinking margins that have seen the company roll out a painful retrenchment programme.

The company said it holds adequate sugar stocks and is well-positioned to meet local market demand without the need for imports in the short term.

“As the new season commences, the Company holds adequate sugar stocks to meet local market requirements. Sugar availability is expected to remain stable throughout the season, supported by substantial opening stock levels and the encouraging plant start-up performance. As a result, the Company does not anticipate a recurrence of sugar import pressures in the short term,” the company said.

The assurance comes as Zimbabwe’s manufacturing and retail sectors have been jittery over periodic sugar shortages in the past two years, often linked to foreign currency constraints, erratic rainfall, and declining production.

However, while operational performance showed signs of recovery, Hippo Valley warned that elevated input costs—particularly for cane and labour—have continued to erode profitability and restrict gains from production efficiencies.

“Despite operational recovery, high costs of cane and manpower kept business costs elevated, eroding margins and limiting benefits from production gains,” the company said.

The group’s financials paint a picture of a business under significant strain.

Revenue plummeted 44% to US$191.6m  from US$340.5m in the prior comparative period.

The sharp decline was primarily attributed to distortions in the previous year’s reported revenue caused by inflationary adjustments and currency translation effects under the International Accounting Standard (IAS) 29.

Profit for the year also dropped 45% to US$13.4m, down from US$24.3m in the prior year.

This was largely due to the absence of a non-monetary gain that had been recorded the previous year, relating to adjustments from the hyperinflation restatement process.

Despite these challenges, the company made a notable turnaround in operating profit, which swung to US$7.9m from a staggering loss of US$57.8m in 2024.

This was attributed to the reversal of CPI and currency effects previously embedded in cost of sales, movements in the fair value of biological assets, and changes in administration expenses—all prior to translation into US dollars.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) also showed significant improvement, rising to US$13.7m from a negative US$19.5m the previous year.

Still, the persistent pressure on margins has forced the company to escalate cost-cutting measures, including workforce rationalisation under a broad restructuring programme dubbed Project Zambuko.

“In response to continued cost pressure, the Company launched Project Zambuko, a margin improvement initiative focused on cost containment and revenue optimisation. As part of this, and in line with applicable labour legislation, an employee rationalisation process is underway to align labour costs with operational requirements,” Hippo Valley said.

The first phase of the retrenchment programme was rolled out in February 2025.

The company said it is finalising labour law compliance procedures, with the next phase of retrenchments expected in the 2026 financial year.

The announcement underscores the balancing act facing large agro-processors in Zimbabwe’s inflation-prone and volatile economic environment—striving to guarantee consistent local supply while navigating a punishing cost landscape.

Hippo Valley’s stabilisation message may provide short-term relief for consumers and downstream industries that depend on steady sugar supply. However, its cost challenges and looming job cuts are a stark reminder of the fragile sustainability of local manufacturing in the face of rising input prices and limited pricing power.

As the industry looks ahead, the company’s continued focus on internal efficiencies and policy stability will be crucial in maintaining its market position without compromising supply or sacrificing its workforce further.