…says there are high stocks of imported sugar in the market
By ETimes
HARARE – Hippo Valley Estates produced 194 684 tonnes of sugar for the third quarter ended 31 December 2023, down 6% from the comparative period owing to a drop in yields and unfavourable weather conditions.
The period marks the end of the crushing season.
“The yield drop was a result of reduced plant cane harvested in the current period,” the company said in a trading update.
“Availability of critical spares mainly due to cashflow constraints on account of the impact of cheap imports of sugar resulted in unscheduled mill stoppages and lost time available a measure of plant reliability – increased to 17.8% from 14.6% recorded same period prior year, that affected production performance leading to carryover cane amounting to 652 hectares.”
On the other hand, enhanced recovery efficiencies were the outcome of higher cane quality, as indicated by estimated recoverable crystals in sugar-cane (ERC) and the cane-to-sugar ratio of 12.10% and 8.27, respectively, compared to previous year realisations of 11.64% and 8.39.
Hippo Valley Estates held a 52.54% share of the industry’s total sugar sales volume for the nine months ending December 31, 2023, which came to 295 382 tonnes.
In the prior period, Hippo’s share of total industry sales volumes stood at 52.26%.
Over the same period, the industry sold 227 855 tonnes of sugar into the domestic market, which was 18% less than the same period in the previous year.
“The decrease was largely on account of duty-free sugar imports from the region which came into the local market following the promulgation of Statutory Instrument 80 of 2023.
“Coming from softer currency economies, regional exporters to Zimbabwe capitalised on the multicurrency trading regime in Zimbabwe and the removal of import duties.
“The industry implemented aggressive but costly initiatives to defend market share against duty-free imports during the period under review, resulting in reduced net realisations,” the company said.
According to the company, the local market income decline was, however, somewhat mitigated by raising the foreign currency retention ratio on local USD sales to 100%.
In order to create the much-needed operating cash to maintain operations, the displaced local market volume was transferred to the export markets, resulting in a 68% rise in export sales volumes to 67 527 tonnes.
As for financials, revenue went up 77% to $977.7 billion from $551.9 billion due to price adjustments in response to hyperinflationary pressures.
“However, the increase in revenue was not sufficient to offset the increased costs of business, particularly in respect of manpower costs,” the company said.
Medium- to long-term sustainable operational cost savings, capacity utilisation optimisation, yield improvement, and plant dependability continue to be the company’s primary strategic priorities.
“In the short term, the priority is to successfully complete the off-crop program which is well underway to ensure an efficient and reliable milling campaign in the 2024/25 season, improving quality and safety performance, reconfiguring the route to market and implementing innovative work streams to contain the cost of goods and services.
“The company will also leverage on available borrowing facilities up to the end of the financial year to cushion its working capital in light of off-crop requirements,” the company said.
Hippo welcomed the government’s decision to reimpose duty on sugar.
“The industry is looking forward to improved domestic sales volumes after the recent repeal of Statutory Instrument 80 of 2023, effective 1 January 2024, which previously allowed duty-free sugar imports into the country, although the benefit may not be realised immediately due to high stocks of imported sugar currently available in the market,” reads the trading update.
Regaining domestic market share and maximising profits from premium overseas markets continue to be the key goals of marketing campaigns, according to the company.
“Whilst the local market remains pivotal to the industry, management is also prioritising the development of new markets, necessary for the generation of additional foreign currency to sustain the industry’s requirements for critical imports.”