Hippo Valley Estates says lack of clarity on land tenure has stalled the expansion of its Project Kilimanjaro due to delays in settling funding options with local financial institutions.
On completion, Project Kilimanjaro is expected to contribute significantly to industry’s ability to fully utilise its installed capacity of 600 000 tonnes of sugar by 2024/25 while positioning Zimbabwe as one of the most competitive sugar producers in the region.
Zimbabwe is already pushing sugar sales up north of Africa and the international market.
According to Hippo, the sugar manufacturer still awaits the finalisation of the 99-year lease relating to Hippo Valley North (23 979 hectares). Freehold title on Hippo Valley South (16 433 hectares) is being maintained.
“As previously reported, expansion works on the 4 000 hectares cane development project (Project Kilimanjaro) remain suspended due to delays in concluding funding arrangements with financial institutions pending further clarity on land tenure, both of which are being progressed,” said Hippo chief executive officer Aidan Mhere in a trading update for the first quarter to June 30, 2021.
“As previously reported, Government has since assured the company that the administrative processes are nearing completion, paving way for the issuance of the 99 Year Lease,” said Mhere.
Project Kilimanjaro, which is being undertaken by Tongaat Hulett Zimbabwe in partnership with Government and local banks, has seen a total of 2 700 hectares of virgin land being bush cleared and ripped and 562 hectares planted to sugarcane in prior years. The recently launched partnership framework whereby Tongaat Hulett Zimbabwe is co-managing certain underperforming out grower farms is gathering momentum and is expected to yield positive results in the ensuing harvesting season.
Mhere added that Hippo is also providing financial and technical assistance to a number of new sugarcane out grower development projects as part of initiatives to partnering with Government in food security initiatives on an annual basis.
In the recently concluded cropping season, Tongaat Hulett Zimbabwe delivered 7 000 tonnes of maize grown on temporary fallow sugar cane fields to the Grain Marketing Board (GMB). This is in addition to 1 216 tonnes of seed maize THZ produced in partnership with seed processor Seed Co.
Mhere indicated that a total of 700 hectares are currently under winter wheat and sugar beans.
He said: “The Company remains committed to empowerment initiatives to support broad-based stakeholders within its community who among others include small scale sugarcane farmers, suppliers of goods and services with greater preference placed on indigenous companies located within the regions in which the Company operates, on-going support of community health, education and sporting facilities. Initiatives designed to support the Buy Zimbabwe agenda initiative will continue to be pursued in a mutually beneficial manner.”
Meanwhile, Hippo’s profit for the year to March 31, 2021 halved to $1,1 billion on fair value loss and a decline sugar production.
Figures from the group show that sugar production fell 4 percent on the back of lower than expected mill efficiencies and inclement weather conditions (incessant rains) which impacted cane quality.
The sugar processor however undertook initiatives during the January to April 2021 off-crop period to rehabilitate the mill to ensure improved performance in the 2021/22 production year.
During the financial year, revenue jumped 34 percent to $16,8 billion largely due to the increased export volumes.
Operating profit and profit for the year decreased by 28 percent to to $3,8 billion and by 58 percent to $1,1 billion respectively, weighed down by a fair value loss on biological assets of $1,1 billion.
“This was due to a drop in forecast cane price at current purchasing power from prior year,” said Mhere in a statement accompanying the FY21 results.
However, excluding the non-cash impact of biological asset valuations and depreciation, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 26 percent as the company benefited from prudent management of costs and the positive impact of forward purchasing of key inputs in a hyperinflationary environment.
Net cash inflow from operating activities doubled to $1,2 billion driven by the improved adjusted EBITDA partially offset largely by an increase in tax paid.
Capital expenditure increased by 129 percent to $365 million of which $225 million was for root replanting.
By end of the financial year, net cash balance was at $886, which was 118 percent above prior year comparable.