Source: Hippo Valley gears for growth | The Herald February 17, 2020
Fradreck Gorwe Business Reporter
Zimbabwe Stock Exchange listed sugar producing concern – Hippo Valley – is upbeat of enhancing sugar production and milling capacity by 2023 and 2024 on the back of many factors among them Project Kilimanjaro initiative.
The Project Kilimanjaro was launched by President Emmerson Mnangagwa in November last year.
The various driving factors outlined by the company, well-positions the sugar industry to compete favourably with major regional producers by 2023.
“The Company remains optimistic that notwithstanding the current challenges, the Zimbabwe sugar industry is well positioned to be one of the most competitive in the region by 2023 off the back of increased production and operating efficiencies,” said group chief executive officer Aiden Mhere in a trading update for the half year to September 30, 2019.
Hippo expressed optimism about enhanced performances despite liquidity pressures and uncertainties in the operating environment.
Milling capacity is expected to top 600 000 tonnes of sugar by 2023 on the back of lined up yield improvement initiatives and the incorporation of additional 4 000 hectares of virgin land into the sugar production matrix.
The initiatives will be anchored by the availability of irrigation water following the 2017 commissioning of the Tugwi Mukosi Dam.
Although poor rains and subsequent minimal inflows resulted in low dam levels, the sugar industry will “have irrigation water cover on excess of one season with expectations of improved rainfall activity in the February to April 2020 period”.
“With adequate water, the industry is accelerating efforts to maximise sugar production through yield improvement initiatives and the development of 4 000 hectares of virgin land to sugarcane by end of 2020 in partnership with Government and local banks (Project Kilimanjaro).
“Significant progress has been made to date following the official launch of the Project by President Mnangagwa on November 9, 2019. To date a total of 2 700 hectares of virgin land have already been bush cleared and ripped, 400 hectares planted to sugarcane, 6 of 12 storage dams built, two pump stations installed and canals constructed” he said.
On completion, Project Kilimanjaro will contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tonnes sugar by 2023/24.
The holding company, Tongaat Hullet, promulgated a strategy for growth of its Sub-Saharan operations, code named “Project Crystal”.
The project will create a platform for long term growth in all its operations including Hippo Valley.
Meanwhile, sugar production for the half year period to September 30, 2019 was marginally down by 1 percent to 152 076 tonnes from 153 343 tonnes in 2018.
Total cane deliveries increased to 1 233 300 tonnes from 1 204 957 in prior year comparative. The company’s own deliveries topped at 763 386 tonnes against private farmers’ 469 914 tonnes.
While the group’s cane deliveries were 4 percent up, private farmers’ deliveries had plummeted marginally from 471 920 tonnes in 2018.
Cane quality dropped by 2 percent on the back of Sugarcane Aphids (pests) that rocked the region in the period under review, driving the group into implementing robust crop management practices.
Local sugar sales for the period went down by 11,2 percent to 183 000 compared to the previous 206 000. This was a result of low disposable incomes. Pleasingly, however, industry export volumes boosted by 20 percent to 47 000 tonnes from 37 000 tonnes in the 2018 half-year trading period.
Timely price adjustments had successfully minimised speculative trading and illegal exports to neighbouring countries.
Immediate marketing focus is on “ensuring fulfilment of local market requirements while growing export sales in regional premium markets to generate additional foreign currency to fund foreign input costs”.
Sound financials were posted for the half year period. Profit for the period surged by a record 755 percent to $188 million from $22 million in 2018 comparative period. This was attributable to “timely price adjustments in the local market in line with inflation and higher net realisations from exports”.
Profit growth also resulted from a 76 percent boost in turnover to $748 million from $425 million in 2018.
Earnings before interest, tax, depreciation and amortisarion (EBITDA) soared 250 percent to $353 million compared to $101 million in 2018 comparative period.