Hippo seeks to increase diversification benefits as sugar production dips

By Staff Reporter
Sugar producer, Hippo plans to improve input of its non-sugar business through seeking new sources of revenue.
Hippo Valley Estates is an extensive enterprise and has other interests in sugar packaging, game hunting, fishing, and livestock and citrus farming.
“Marketing focus is on maximising local market requirements with residual stocks being allocated to regional and international premium markets to generate additional foreign currency for the Company and the nation.
“In the medium to long-term, the Company is considering various diversification initiatives in order to increase the contribution of its non-sugar business,” said the company in a statement accompanying the results.
In the year ended 31 March 2021, the company’s inflation adjusted revenue rose 34% to ZWL$16.8 billion from ZWL$12.5 billion in the comparative period backed by a rise in export volumes.
Sugar production fell 4% to 204 384 tons from 212 004 tons in 2020.
Overall cane deliveries from the firm’s plantations and private farmers were impacted by irrigation power challenges and the dry spell experienced during the 2019/20 peak growing period of October 2019 to March 2020.
“The wet spell in December 2020 interrupted the harvesting programme resulting in a total of 555 hectares for both the company and private farmers being carried over for harvest in the 2021/22 production season,” it said.
“Whilst the drop in cane from traditional industry sources was compensated for by cane sourced from a third party, sugar production reduced by 4% at the back of lower than expected mill efficiencies and inclement weather conditions which impacted cane quality.”
Steps were taken, the company said, during the January to April 2021 off-crop period to rehabilitate the mill to ensure improved performance in the 2021/22 production year.
“Solar projects to augment electricity at critical water pumping installations are under consideration.”
After tax profit for the firm went down by 58% to ZWL$1.1 billion. Operating profit declined 28% to ZWL$3.8 billion owing to a fair value loss on biological assets of ZWL$1.1 billion.
“This was due to a drop in forecast cane price at current purchasing power from prior year,” it said.
But, excluding the non-cash impact of biological asset valuations and depreciation, adjusted EBITDA improved by 26% 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 stood at ZWL$1.2 billion from ZWL$0.6 billion in 2020 largely to an improved adjusted EBITDA partially offset largely by an increase in tax paid.
Capital expenditure totaled ZWL$365 million of which ZWL$225 million was for root replanting. 
It said the effective tax rate on the inflation adjusted accounts was 48.40% compared to 34.17% in 2020, impacted by the net monetary loss of ZWL$1.9 billion that was treated as a permanent difference for income tax purposes.
The board declared and paid an interim dividend of ZWL$121 cents per share.
On the Zimbabwe Stock Exchange, the National Tyre Services (NTS.zw) share is currently trading at ZWL$189.75. The stock has a 52 week high of ZWL$100.0000 and a low of ZWL$1.9500 

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