Hippo Valley in subdued performance
LIVINGSTONE MARUFU
Listed sugar producer, Hippo Valley Estates Limited recorded a subdued performance during the six months ended September 30 2021 after a drop in can yields and deliveries resulting in the drop in topline and bottom line.
In a combined statement by Hippo chairman Canaan Dube and CEO Aiden Mhere, the company said total inflation adjusted revenue for the period decreased by 2% to ZWL$10.3bn against ZWL$10.5bn weighed down by currency and inflation dynamics within the economy.
The company’s profit for the period went down 7% to ZWL$1.4bn during the first half of 2021 from ZWL$1.5bn recorded during the same period last year.
“Cane deliveries from the company’s plantations (millercum-planter) were 12% below the same period in prior year due to a combination of a 5% reduction in area harvested to date and a 7% drop in cane yields to date, occasioned by insistent cloud cover during the past rainfall season, which constrained cane growth during this period,” Hippo said.
The company said the deliveries from private farmers were however 42% above the same period in prior year due to increased area harvested to date, benefiting from prior year carryover cane and an earlier start to the harvesting season which began on April 20 against May 5 in 2021.
Consequently, sugar production for the half year under review increased from the same period in prior year with a satisfactory factory performance, following a successful off crop maintenance programme.
The company’s share of total industry sugar sales volume of 223 892 tonnes against 225 058 tonnes during the prior period for the half year to September 30 2021 meant that it held 52.9% of the total sugar sales against 49.8% in the same period last year.
The total industry sugar sales into the domestic market for the period under review at 194 334 tonnes were 23% above the same period in prior year due to a combination of strong local demand and improved supply.
Hippo said the local market foreign currency inflows were firm during the period under review, however, this has slowed down owing to exchange rate dynamics within the economy.
Following the industry’s reduced COMESA quota allocation into Kenya for the year, the export sales volume for the half year reduced by 56% to 29 558 tonnes. Volumes originally targeted for this market were redirected to satisfy strong local demand, the company said.
Market development efforts are underway to establish other regional markets to supplement the existing stable Botswana market and reduce Kenya market concentration risk, it said.
The industry concluded the sale of 13 000 tonnes of sugar under the country’s annual export quota to the United States, at an average net price 9% above target.
Inflation-adjusted EBITDA decreased by 35% compared to the same period in prior year due to higher cane costs incurred on the increased volume of cane from third parties and increased production costs due to the reduced extent of the prior year benefit of forward purchasing of key inputs in a hyperinflationary environment.
Adequate borrowing facilities in both local and foreign currency have been established to finance both operating and capital expenditure requirements, Hippo said.
