Hippo Valley back in the black

HARARE - Zimbabwe's largest sugar producer Hippo Valley Estates (Hippo Valley) has bounced back to profitability due to improved sales volumes.

The local unit of South Africa’s Tongaat Hulett yesterday said its profit in the full year to March 2017 jumped to $7,7 million compared to a loss of $8,8 million in 2016.

“The results were achieved under challenging operating conditions characterised by reduced irrigation water, worsening liquidity and foreign currency shortages within the country,” Hippo Valley company secretary Bigboy Shava said.

In the period under review, the company’s sugar production increased by 12 percent to 229 000 tonnes compared to 204 000 tonnes.

Shava said local market sales saw better pricing and sales mix dynamics due to very low imports into the market and an increased off-take of sugar for refining by one of the major industrial customers.

“A total of 301 000 tonnes was sold in the local market, an increase of 4 percent, despite the liquidity challenges facing the economy. The interventions by government to protect the industry against unfair competition from imports continued to yield positive results while securing jobs in the industry,” he added.

The group’s revenue jumped 20 percent to $148,5 million in the 12 months to March while operating profit increased to $13,4 million from a loss of $6,5 million in the previous corresponding period.

Shava attributed the improved performance to significant increase in sugar production volumes by private farmers and improved cane quality.

“As a result of discussions, involving government, private farmers and the mills, to review the division of proceeds ration, an upwards adjustment to the milling potion was applied in the current year with commensurate recovery for millers,” Shava said, adding that the adjustment yielded $1,7 million.

Hippo Valley’s operating cash flow in the period under review was $37,9 million, which is a $22 million increase over the $15,9 million achieved in 2016.

The sugar producer said cash flows improved as a result of the higher revenue and operating profits, as well as lower root replanting costs and capital expenditure during the past drought year.

Shava further indicated that cash generated from operations totalled $38 million in the year to March, in line with the increased revenue and operating profit.

“After taking into account capex and root replanting costs which totalled $6,1 million, there was a total net cash inflow of $27,1 million, compared to a total net cash outflow of $3,9 million last year,” he said.

Hippo Valley did not declare a dividend despite posting commendable profits citing the need to preserve cash. 

“With the increased cash requirements for crop re-establishment through an accelerated plough-out and replanting programme already under way, coupled with the extended period of two years required for the crop under irrigation to fully recover from the recent droughts, and the high levels of borrowings expected for the greater part of the year, the directors have decided not to declare a dividend for the year ended march 31, 2007,” Hippo Valley said.

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