Hippo Valley back in the black

Source: Hippo Valley back in the black – DailyNews Live

BUSINESS WRITER      9 June 2017

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.