Sugar exports, local price  adjustments boost Hippo  

SUGAR producer, Tongaat Hulett Limited, says local sales of sugar at its unit, Hippo Valley Estates were significantly impacted by low consumer disposable incomes which continue to lose value due to high inflation.
Aiden Mhere, the Hippo Valley’s chief executive, said sugar sales for the six months period to September 30, 2019, were 11,2 percent lower at 183 000 tonnes compared to 206 000 tonnes sold during the prior year same period.
“These were, however, offset by strong exports realisations and timely price adjustments.
“As a result, marketing focus remains on ensuring fulfilment of local market requirements whilst growing export sales in regional premium markets to generate additional foreign currency to fund foreign input costs,” he said.
Mhere noted that during the period under review, the company made timely adjustments of local sugar prices in line with inflation.
“These have been successful in minimising speculative trading and illegal exports to neighbouring countries, practices historically common in hyperinflationary environments,” he said.
He noted that despite infrastructural damage and other logistical challenges occasioned by Cyclone Idai which impacted exports through Beira, industry export volumes increased to 47 000 tonnes compared to 37 000 tonnes exported in the same period last year, representing 20 percent of total sales volumes.

During the period under review, sugar production marginally declined to 152 076 tonnes compared to 153 343 tonnes in 2018 with total cane deliveries to the mill amounting to 1 233 300 tonnes.

“The company’s own cane deliveries amounted to 763 386 tonnes which was a four percent increase from 733 036 tonnes in 2018 same period comparable, whilst private farmers collectively delivered 469 914 tonnes,” he said.

Mhere said industry cane quality for the period was two percent lower than prior season with a cane to sugar ratio of 8,11 compared to 2018’s 7,95) partially offsetting the benefits of higher yields achieved by the company.
He said the high incidence of Yellow Sugarcane Aphids (YSA) experienced in the region negatively impacted cane quality but robust crop management practices to contain the pest are being successfully implemented.
“However, other initiatives to restore cane yields to optimal levels are on-going with some 1 074 hectares having been ploughed out and replanted during the period,” said Mhere.
The company’s revenue and operating profit for the period increased to $748 million compared to $425 million in 2018 same period and $404 million above 2018’s $36 million respectively driven by timely price adjustments in the local market in line with inflation and higher net realizations from exports.
“Consequently, the company achieved a net profit for the period of $188 million,” said Mhere. He added that the company spent $8 million on capital expenditure of which $7 million was for root replanting.
As at September 30, 2019, the company had a net cash balance of $55 million compared to a net debt position of $86 million in the previous corresponding period.
Mhere said 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.

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