- Industry local sales of sugar declined by 13.7%
- Export sales recorded a 43% growth
- Hippo Valley’s share of total industry sugar sales was 49.8%
Harare – The Zimbabwean sugar industry recorded a depressed performance in sales volume terms during the six months ended 30 September 2020, listed sugar producer and processor, Hippo Valley Estates highlighted in its financial statements for the half year period.
According to the Company CEO, Aiden Mhere, industry local sales of sugar declined by 13.7% during the period to 158 000 tons (2019: 183 000 tons) due to measures taken by the industry in the early part of the financial year to minimize speculative trade and illegal exports to neighbouring countries.
“Such practices are common in hyperinflationary environments as some traders capitalise on pricing distortions on account of exchange rate differentials,” Mr Mhere said adding that “Consumer spending power also came under pressure as salary and wage adjustments in the country generally lagged behind inflation”.
Industry export sales however, recorded a 43% growth to 67 000 tons (2019: 47 000 tons) for the six months despite a temporary suspension of sugar imports by Kenya in June 2020.
In a previous update, Hippo Valley signalled intention to export sugar to the United States and Kenya as part of the firm’s export strategy. With the export market being lucrative in terms of foreign currency generation, there are worries that the local market will be starved where the local currency has since failed to attract confidence.
During the period under review, Hippo Valley’s share of total industry sugar sales volume of 225 000 tons (2019: 228 000 tons) was 49.8% compared to a share of 50.2% same period in 2019.
The Company’s sugar production for the period of 147 960 tons was marginally lower (-3%) compared to 152 076 tons in 2019 in line with the reduced total cane deliveries to the mill amounting 1 204 140 tons (2019: 1 233 300 tons).
“The Company’s own cane deliveries amounted to 744 672 tons (2019: 763 386 tons), a decrease of 2%, while private farmers collectively delivered 427 831 tons (2019: 469 914 tons), a decrease of 9%.
“Deliveries from Green Fuel amounted to 31 637 tons (2019: Nil). Industry cane quality for the period was lower than the prior season resulting in a cane to sugar ratio of 8.14 (2019: 8.11)”, Mr Mhere said.
He added that initiatives to restore cane yields to optimal levels are on-going, with about 1 370 hectares scheduled to be replanted by 31 March 2021.
Meanwhile, Hippo’s total revenue for the period increased by 21% to ZWL6.9 billion in inflation adjusted terms from ZWL5.7 billion in 2019 largely due to better realisations from export markets.
However, operating profit and profit for the period decreased by 16% to ZWL2.6 billion from ZWL3.1 billion in 2019 and by 29% to ZWL996 million from ZWL1.4 billion respectively, weighed down by a fair value loss on cane biological assets of ZWL886 million compared to a gain of ZWL604 million in 2019.
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