Hippo Valley Estates Limited releases its 2021 Annual Report

By Published On: August 30th, 2021Categories: Corporate announcement, Earnings

Chairman’s Statement and Chief Executive’s Review

Hippo Valley Estates Limited (HIPO.zw) 2021 Annual Report


  • Sugar production of 204 384 tons (2020: 212 004 tons) -4%
  • Total industry sugar sales of 440 000 tons (2020:413 000 tons) +7%
  • Hippo share of industry sugar sales 50.0% (2020: 48.0%) +2%
  • Revenue of ZWL16.8 billion (2020: ZWL12.5 billion) +34%
  • Operating profit of ZWL3.8 billion (2020: ZWL5.3 billion) -28%
  • Adjusted EBITDA* of ZWL5.3 billion (2020: ZWL4.2 billion) +26%
  • Profit for the year of ZWL1.1 billion (2020: ZWL2.6 billion) -58%

*Adjusted EBITDA is operating profit adjusted to exclude depreciation, amortisation, any impairment (or reversal thereof), and fair value adjustments relating to biological assets.

Operating Environment

There was a relative slowdown of inflation over the current year compared to prior year. This was attributable to the introduction of the foreign currency auction system which improved business confidence during the last half of the financial year, with year-on-year inflation decelerating to 241% in March 2021, compared to 676% in the prior year. The return to the multi-currency system on the local market in March 2020 led to increased foreign currency into the formal market, and improved the ability of industry to generate free funds to meet offshore obligations.

Covid-19 Update

The emergence of the Covid-19 pandemic and resultant movement restrictions led to significant disruptions to business activity in key economic sectors. However, there were minimal interruptions to the Company’s key operations as the Company, together with the rest of the sugar industry, was classified as an essential service. In addition, the Company has put in place a robust Business Continuity Plan and continues to implement established Covid-19 preventive and reactive protocols, whilst at the same time strengthening its already established internal health service delivery system to mitigate the negative impact of any future waves of the pandemic. The Company continues to prioritise the health and wellbeing of its employees, business partners, surrounding communities and other stakeholders. In order to complement Government efforts, the Company and Triangle Limited (together referred to as Tongaat Hulett Zimbabwe), launched a self-financed vaccination program aimed at protecting its workforce and community members.

As at 31 May 2021, over 3 800 employees and community members had been vaccinated. Operationally, the Company managed to successfully mitigate the Covid-19 induced logistical and procurement inefficiencies, resulting in the resumption of the sugar milling season in mid-April 2021 as scheduled.

Cane and sugar production (tons) for the year ended 31 March 2021

  • Tons cane harvested – Company: 1 043 774 vs 1 008 870 (+3%)
  • Tons cane harvested – Private farmers: 592 722 vs 687 472 (-14%)
  • Other third-party cane: 55 439 vs nil (+100%)
  • Total tons cane milled – Company: 1 691 935 vs 1 696 342 (0%)
  • Tons sugar produced – Company: 204 384 vs 212 004 (-4%)
  • Tons sugar produced – Industry Total: 408 260 vs 441 416 (-8%)

Overall cane deliveries from the Company’s plantations (miller-cum-planter) 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. Whilst the drop in cane from traditional industry sources was compensated for by cane sourced from a third party, sugar production reduced by 4% on the back of lower than expected mill efficiencies and inclement weather conditions (incessant rains) which impacted cane quality. Steps were taken during the January to April 2021 o-crop period to overhaul the mill to ensure improved performance in the 2021/22 production year, whilst solar projects to augment electricity supply at critical water pumping installations are under consideration.

Marketing Performance

The Zimbabwe sugar industry has a single marketing desk at brown sugar level, administered by Zimbabwe Sugar Sales (ZSS). The Company’s share of total industry sugar sales volume of 440 000 tons (2020: 413 000 tons) for the year under review was 50.0% (2020: 48.0%). Total industry sugar sales into the domestic market for the year of 325 000 tons (2020: 324 000 tons) were marginally above prior year, having recovered from low sales during the first quarter of the financial year on account of then existing economic distortions. Demand in the local market remained firm despite the Covid-19 induced low disposable incomes.

Industry export sales for the year recorded a 29% growth to 115 000 tons (2020: 89 000 tons) driven largely by a growth in the Kenya market despite a temporary suspension of sugar imports into that market in June 2020. Price realisations on both the local and export markets remained relatively constant in current purchasing power terms.

Financial Results

The financial results of the Group have been inflation adjusted to comply with the requirements of IAS 29. Historical financial statements for the financial year and comparative numbers for the corresponding prior year have been disclosed as supplementary information alongside the inflation adjusted financial results. This financial commentary is based on the inflation-adjusted numbers. In complying with the requirements of IAS 29, the Board applied, where appropriate, necessary judgements and assumptions with due care. However, users are cautioned that in hyperinflationary environments, certain inherent economic distortions may influence the outturn of financial results.

Total revenue for the year increased by 34% to ZWL16.8 billion (2020: ZWL12.5 billion), largely due to the increased export volumes. Operating profit and profit for the year decreased by 28% to ZWL3.8 billion (2020: ZWL5.3 billion) and by 58% to ZWL1.1 billion (ZWL2.6 billion) respectively, weighed down by a fair value loss on biological assets of ZWL1.1 billion (2020: gain of ZWL1.7 billion). This was due to a drop in forecast cane price at current purchasing power from prior year. However, excluding the non-cash impact of biological asset valuations, depreciation and amortisation, 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 was ZWL1.2 billion (2020: ZWL0.6 billion) driven by the improved adjusted EBITDA partially offset largely by an increase in tax paid. Capital expenditure totalled ZWL365 million (2020: ZWL159 million) of which ZWL225 million (2020: ZWL135 million) was invested in replanting cane roots. As at 31 March 2021, the Group had a net cash balance of ZWL886 million compared to a net cash balance of ZWL406 million in the previous corresponding year.

The effective tax rate on the inflation adjusted accounts was 48.40% (2020: 34.17%), impacted by the net monetary loss of ZWL1.9 billion (2020: ZWL1.5 billion), that was treated as a permanent difference for income tax purposes.


The Board declared and paid an interim dividend of ZWL121 cents per share during the year ended 31 March 2021. In view of the Company’s positive financial performance for the year ended 31 March 2021, the Board has declared a final dividend of ZWL124 cents per share for the year ended 31 March 2021 payable in respect of all the ordinary shares of the Company. This dividend will be payable in full on or around 15 July 2021 to all Shareholders of the Company registered at the close of business on 9 July 2021.

Environmental, Social & Governance

A total of 4 (2020: 5) Lost Time Injuries were recorded during the year, resulting in an improved Lost Time Injury Frequency Rate of 0.036 (2020: 0.048). Gratefully, no fatalities (2020: nil) were recorded during the year. Safety and sustainability improvement initiatives continue to be implemented on an on-going basis to ensure a safe working environment for all employees as well as the ultimate achievement of world class standards on environmental stewardship.

The Company continues to develop and implement mutually beneficial and collaborative initiatives with Government and local communities to improve the quality of life of its employees and the surrounding communities at large. Over the year under review, Tongaat Hulett Zimbabwe donated over US$2.9 million worth of essential goods and materials towards Covid-19 mitigation initiatives to local communities. The Company remains on the path of strengthening its governance structures at all levels of the business. Key milestones in this regard over the past year include, changes to Board structures in line with good corporate governance, appointment of new senior executives to key governance roles and strengthening of policies and procedures within the business aligning to best practice.

Projects and initiatives

Work on the 4 000 hectare cane development project (Project Kilimanjaro) being undertaken by Tongaat Hulett Zimbabwe in partnership with Government and local banks, has seen a total of 2 700 hectares of virgin land bush-cleared and ripped, and 562 hectares planted to sugarcane. As previously reported, project works were slowed down on account of delays in obtaining the requisite funding from financial institutions pending further clarity on land tenure, both of which are being progressed. To ensure productive use of the cleared land in the interim, 76 hectares and 750 hectares were put to maize and sorghum respectively, and an additional 902 hectares of maize was planted on Company fallow cane land as a break crop. This resulted in the benefit of maximising land use and further improving food security. The Company is committed to continue partnering with Government in food security initiatives on an annual basis.

Over and above the on-going inputs and extension support to private farmers, the Company has initiated various vertical and horizontal sugarcane growth programs over the past financial year. A partnership framework whereby Tongaat Hulett Zimbabwe is co-managing certain underperforming out-grower farms is progressing satisfactorily. The Company is also providing financial and technical assistance to a number of new sugarcane out-grower development projects with work on ‘Pezulu’ Project measuring 1 168 hectares having started. Other growth projects, with potential for an additional 11 000 hectares for the benefit of out-growers are under consideration over the next five years.

Land tenure and milling license

The Government has since assured the Company that it will be granted security of tenure by way of a 99 year lease on Hippo Valley North (23 979 hectares), whilst maintaining freehold title on Hippo Valley South (16 433 hect