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Hippo suffers 11pc decrease in sugar production

03 Jul, 2020 - 00:07 0 Views
Hippo suffers 11pc decrease in sugar production Hippo Valley Estates

eBusiness Weekly

Enacy Mapakame
Hippo Valley Estates Limited’s sugar production for the year to March 31, 2020 fell 11 percent to 212 004 tonnes from 238 965 tonnes recorded in the prior year.

The figure represented 48 percent of total industry sugar production, which was also a decline from prior year’s 53 percent contribution.

Hippo attributed the decline to a decrease in both volume and quality of cane resulting in a cane to sugar ratio of 8:0.

A total of 1 696 000 tonnes of cane was crushed during the season of which 1 009 000 tonnes was company cane and the rest was delivered by private farmers.

In 2019, company cane was at 1 068 000 tonnes while private farmers delivered 794 000 tonnes.

During the year under review, sugar sales volumes went down 14 percent to 413 000 tonnes compared to 483 000 tonnes recorded in the comparable year as disposable incomes continued to be eroded by inflationary pressures.

Total industry sales fell 13 percent to 324 000 tonnes as a result of declining demand due to erosion of disposable incomes.

“Timely adjustments of local sugar prices in line with inflation have been successful in maintaining margins, minimising speculative trading and illegal exports to neighbouring countries, practices historically common in inflationary environments,” said chief executive officer Aiden Mhere in a statement accompanying the financials.

As a result of infrastructure damages caused by the Cyclone Idai last year and other logistical challenges, this impacted exports via Beira. As such, export volumes went down to 89 000 tonnes compared to 112 000 tonnes recorded in the comparable year that represented 22 percent of total sales volumes.

On financial performance, revenue rose 48 percent to $3,7 billion despite a dip in sales volumes.

“This was due mainly to industry successfully optimising the market mix in the local market and better realisation from export markets,” said Mhere.

An operating profit of $1,6 billion was achieved representing 77 percent increase on prior year. Earnings before interest, tax, depreciation and amortisation rose 200 percent to $1,2 billion from $0,4 billion.

Profit for the year rose 33 percent to $0,8 billion from $0,6 billion achieved in the comparable year. Basic and diluted earnings per share came in 37 percent to 393 cents.

Net operating cash flow after interest, tax and working capital changes increased to $378 million from $280 million in the prior year.

Capital expenditure totalled $47 million of which $40 million was spent on root replanting.

At year end, the company had cash at hand of $119 million compared to $151 million last year. However, a closing net cash position of $99 million was achieved indicating a significant reduction in debt.

Despite the Covid-19 pandemic, management remains upbeat the sugar industry is well positioned to be one of the most competitive in the region by 2023 off the back of increased production and efficiencies.

The country has experienced poor rainfall for two successive seasons which resulted in minimal inflows into the sugar industry’s water supply dams, representing a risk to the industry.

However, there is sufficient irrigation water for the period leading to the next rain season although the industry has implemented water conservation initiatives including reduced water application rates to levels that are no deterrent to normal crop growth.

Hippo declared an interim dividend of 36 cents a share.

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