Hippo Valley flags macroeconomic hurdles
ROBIN PHIRI
Hippo Valley Estate Limited has raised concerns over macroeconomic challenges, noting that several businesses supporting the sugar industry have struggled to fully deliver essential services.
In a trading update, Hippo Valley Chief Executive Officer Tendai Masawi highlighted multiple hurdles affecting operations, including rail logistics for sugar transportation, power supply, and the provision of critical spare parts and agricultural inputs.
“Despite these complexities, the Company maintained its focus on operational efficiencies, cost reduction initiatives and revenue enhancement strategies through Project Zambuko, all in an effort to improve the bottom line and generate positive cashflows,” Masawi said.
To ease the burden of doing business, Hippo Valley indicated that it is exploring funding options, including the use of mixed currencies, ZiG and USD.
“The tight liquidity conditions that prevailed during the quarter and the currency mix dilemma when trading using the ZWG currency, resulted in episodes of excess ZWG cash balances for the Company and USD working capital challenges, with most suppliers of goods and services, particularly the informal sector, continuing to favour the USD currency due to perceived stability,” he added.
Despite these challenges, the business recorded a fruitful first quarter, with a 15% increase in cane supply from the Company’s plantations (miller cum planter). This was attributed to higher milling and crushing rates, even though the crushing season was shortened to 25 weeks from 33 weeks the previous year.
“This improvement was achieved through retooling the agricultural business unit with cane haulage equipment,” Masawi stated. The efficient cane delivery system also helped boost the average delivery rate above prior-year levels.
The company’s revenue rose 16% in the first quarter, driven by an 18% increase in sales volumes. Regaining local market share, previously lost to imports, was a key contributor to this growth.
Additionally, the company started the year with a significant 67% increase in sugar stockpiles, thanks to a successful production season the previous year, despite continuing to battle high production costs, particularly relating to cane purchases, which are currently procured at uncompetitive prices.
The business remains optimistic that the local currency’s stability experienced in the first quarter will continue and that access to foreign currency through proper banking channels will improve, enabling the company to secure critical inputs.
