Hippo Valley Estates releases its 2023 Annual Report

By Published On: September 20th, 2023Categories: Corporate announcement, Earnings


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

Cautionary – reliance on hyperinflation adjusted financial statements

The consolidated financial results of Hippo Valley Estates Limited (the Company) have been prepared in accordance with the requirements of International Accounting Standard 29 – Financial Reporting in Hyperinflationary Economies (IAS 29). As such, the commentary on financial performance is based on inflation adjusted financial results, with historical figures presented as supplementary information alongside the inflation adjusted financial results to enhance comprehension and analysis. In complying with IAS 29, the Directors applied, where appropriate, necessary judgements and assumptions with due care. However, users are cautioned that in hyperinflationary environments inherent economic distortions may have an impact on these financial results. As such, the Directors would like to advise users to exercise caution in the use of these abridged inflation adjusted financial statements in relation to the reporting currency and conversion to comparative currencies.

Operating Environment

The difficult trading environment persisted during the year under review, characterized by severe hyperinflation, rapid depreciation of the local currency, rolling power outages and various regulatory pronouncements. These factors hampered industrial activity and slowed economic growth. The local currency depreciated by 553% from prior year, most of it coming through in the second half of the year. The Company was not spared from the effects of the above, which contributed to the muted growth in financial performance. The impact of the Ukraine/Russia war resulted in significant increases in respect of key agricultural input costs such as fuel and fertilisers. Profit margins were further eroded by the Company’s inability to fully recover higher production costs in its pricing structure in an effort to balance affordability for consumers whilst also having to contend with competitive pressures from sugar imports in the six months period to November 2022. However, management continue to monitor these developments closely in order to respond appropriately to mitigate against value loss.


Cane and sugar production (tons) for the year ended 31 March 2023

Cane deliveries from the Company’s own plantations (miller-cum-planter) were 13% above the prior year. The growth was driven by a 6% improvement in yields to 97.98 tons cane per hectare (tch) (2022: 92.23tch) in response to improved control of yellow sugarcane aphid infestations through aerial spraying, as well as an increased area of cane harvested compared to the prior year. Private farmer cane deliveries contributed 42% of the total cane supply, and were 2% below prior year having achieved yields of 71.85tch (2022: 73.75tch). In November 2022, one of the Company’s two production lines suffered a major breakdown that resulted in it being inoperative for the balance of the season. Consequently, the milling season was extended to 29 December 2022 to accommodate the reduced production capacity, while 27,001 tons of cane had to be diverted to the Triangle sugar mill for crushing. Repair work was satisfactorily carried out on that line which has since been reopened for the 2023/24 milling season.

Sugar produced by the Company decreased by 1,809 tons (1%) notwithstanding that an additional 48,189 tons (3%) of cane was delivered to the mill for crushing. Ordinarily, this additional volume of cane would have increased sugar production by approximately 6,000 tons. The decrease was occasioned by lower cane quality attributable to prolonged wet weather and significant rainfall received at both the onset and end of the season. Rainfall hinders both the harvesting and hauling of cane to the mills resulting in the cane remaining in the fields for extended periods and leading to reduced sugar content, while posing difficulties in achieving efficient milling recoveries. The off-crop maintenance programme which encompasses annual maintenance, including repositioning the mill for improved efficiencies, was successfully completed and the mill commenced crushing for the 2023/24 season in April 2023 as planned.

Marketing Performance

Local market share was compromised as a total of seventeen (17) brands were imported into the country during the Statutory Instrument 98’s six month tenure which ended in November 2022. The sugar industry estimated the total impact of these imports to have been 5% of the annual local sugar sales volume. World sugar markets are residual markets for excess sugar supply and are affected by support policies and/or subsidies implemented by governments of sugar producing countries. Consequently, world sugar markets often trade below global costs of production, meaning that imported sugar has an unfair price advantage over sugar produced locally in Zimbabwe where production costs are relatively higher. In addition, some of sugar imported did not comply with the Labelling and Vitamin A fortification regulations, which would have formed part of the costs of locally produced sugar.

For the year ended 31 March 2023, the Company’s share of total industry sugar sales volume of 381,820 tons (2022: 394,000 tons) was 52.25% (2022: 53.2%). Total industry sugar sales volume into the domestic market for the year, at 338,059 tons (2022: 356,253 tons) was 5% below prior year as a result of competition from low-cost imports. Industry export sales however, increased by 15% to 43,760 tons (2022: 38,000 tons) following an improvement of export volumes to the USA to 17,751 tons in 2023 compared to 13,087 tons in 2022.

While price realisations on the local market increased year-on-year, the improvement was constrained by the major ‘Sunsweet’ table sugar market where prices in real terms were marginally below those of the prior year. Average export prices were lower than previous year. The industry however continues to review local prices, cognisant of affordability by consumers, to changes in cost structures, and to negotiate better prices for exports.

Financial Results

Inflation-adjusted revenue rose by 37% to ZWL139.3 billion (2022: ZWL101.9 billion) on the back of price adjustments in response to increasing cost pressures, amplified by currency dynamics embedded in CPI indices. Resultantly, operating profit and profit for the year grew by 22% to ZWL25.9 billion (2022: ZWL21.2 billion) and by 24% to ZWL17.2 billion (2022: ZWL13.9 billion) respectively, with the majority of the growth attributable to changes in the value of biological assets. The Company registered a marginal decrease of 2% on Adjusted EBITDA to ZWL10.4 billion (2022: ZWL10.6 billion). Profit margins are measured using Adjusted EBITDA (to exclude any distortions from non-cash changes in the value of biological assets) and have declined from 10.4% in the prior year to 7.5% in 2023. This squeeze on margins arose from lower sugar production, significant increases in fertiliser and fuel costs, and the impact on manpower costs post the finalisation of the wage negotiations. Ultimately, the increase in price realisations achieved was not sufficient to offset these inflationary pressures on costs.

Net cash outflow from operating activities was ZWL3.4 billion (2022: ZWL3.3 billion) on account of decreased EBITDA and increased working capital requirements. A total amount of ZWL3.4 billion was spent on capital expenditure (2022: ZWL2.9 billion) out of which ZWL1.8 billion (2022: ZWL1.1 billion) was for root replanting. As at 31 March 2023, the Company had a net borrowing position of ZWL4.4 billion compared to a net borrowing of ZWL1.1 billion in prior year, with more cash being consumed due to increased level of investing activities and foreign currency translation dynamics.


The Board declared and paid an interim dividend of US0.3 cents per share during the year ended 31 March 2023. In light of the heightened volatilities currently weighing down the economic and operating environments as well as the increased level of borrowings, the Directors have not declared a final dividend for the year ended 31 March 2023.

Environmental, Social & Governance

A total of 2 (2022: 7) Lost Time Injuries were recorded during the year, and a Lost Time Injury Frequency Rate of 0,018 (2022: 0,063). Regrettably, the Company recorded 1 fatality (2022: 1) following a third-party cane haulage perry loader that accidentally ran over a contractor employee at the end of an in-field loading task. The Company continues to raise awareness and training employees and other stakeholders to uphold the highest safety standards so as to attain zero harm at the workplace.

On 5 May 2023, WHO declared that COVID-19 is now an established and ongoing health issue which no longer constitutes a Public Health Emergency of International Concern (PHEIC). This saw the removal of all COVID restrictions within the Company. Almost all the staff compliment however have been vaccinated (1st vaccination 99%; 2nd vaccination 99%; 3rd vaccination 76%).

A cholera outbreak was reported in parts of Africa, with 14 countries currently affected. Zimbabwe, as of March 2023, had reported 237 cases and 6 cholera deaths with 2 confirmed cases in the Chiredzi community. Poor sanitation and unreliable water supplies coupled with increased people movements are key driving factors for the outbreak. The Company is working on increasing amount of potable water to the Chiredzi community in consultation with Chiredzi council authorities to address the health risk.

As Hippo Valley Estates, we believe we have a duty to act responsibly in how we impact the environment and to protect communities whose livelihoods depend on agriculture. We therefore make use of clean energy sources, a good waste management system, and an active monitoring system of emissions from manufacturing to ensure it is at acceptable levels. We have a long-term strategy to walk towards a Net Zero position in the future. In line with this, such initiatives as fighting deforestation by planting new trees were rolled out in the period under review. This program involved employees, “one tree per employee” and will continue in the next financial year. The Company also successfully retained its certification in respect of the Environmental Management Systems (ISO 14001:2015).

Cane Supply Growth Initiatives

Hippo Valley Estates in partnership with Triangle Estates (also jointly known as Tongaat Hulett Zimbabwe, THZ) continues to work with Government and various financial institutions to progress the implementation of Project Kilimanjaro, a 4,000ha sugarcane development. An additional 138ha was planted to cane completing the 700ha Kilimanjaro Empowerment Block. The Government in liaison with THZ, has set up the Project Kilimanjaro Joint Steering Committee to oversee the development of the balance of the 3,300 ha, for the benefit of new farmers being identified by Government.

Following recommendations from the Ministry of Industry and Commerce, a Tribunal constituting of three Arbitrators was set up to determine commercial issues relating to the Sugar Milling Agreement for the 2023/24 milling season. The arbitration was concluded on 13 April 2023 and parties are now engaging on modalities to implement the award whose discussions are now at the tail end.

In addition to Project Kilimanjaro, the Company continues to support private farmers through various initiatives to improve productivity on existing sugarcane farmland (i.e. vertical sugarcane growth programs). One such program developed is a partnership framework whereby the Company is co-managing certain underperforming out-grower farms. To date, 64 farmers have volunteered to partner with the Company in the co-management arrangement with 680ha having been ploughed out and replanted with new roots.

Land tenure

Engagements with the Minister of Lands, Agriculture, Fisheries, Water and Rural Development (Ministry) regarding issuance of 99-Year Leases are ongoing. A total of 5 leases (amounting to 3,804ha) with respect to Hippo Valley North have so far been issued, with the balance of 3 lease blocks (amounting 20,175ha) still to be issued. Encouraging assurances have been received from the Ministry that the remaining leases will be issued in due course, and that recommended changes to the wording of the lease documents are being finalized by the Attorney General’s Office.


During the year, Mr Ngoni Kudenga, a long serving dedicated Independent Non-Executive Director retired from the Board. Messrs Robin Goetzsche and Gavin Hudson also resigned from the Board. The Board is grateful for their valuable contribution during their tenure and wish them well in their future endeavours.

The Board appointed two Non-Executive Directors, Messrs Daniel Marokane and Tafadzwa Chigumbu. The Board will seek ratification of these appointments at the forthcoming Annual General Meeting.


The major dams are holding sufficient water to support optimal irrigation regimes for the coming season. Yields in the 2023/24 season will reduce marginally, normalising after the reversal of the once-off benefit related to carry-over cane, and will continue to benefit from improved crop husbandry practices. Milling efficiencies are anticipated to recover on the back of improved cane quality, and after the satisfactory completion of the requisite annual maintenance programme.

The operating environment is anticipated to remain volatile and hyperinflationary in the short to medium term. With the recently introduced Statutory Instrument 80 of 2023 allowing duty free importation of several commodities including sugar, the sugar industry faces huge pressure to compete against imports coming from competitors operating in stable and subsidized environments. Additionally, the ongoing rolling power outages are set to compound recovery challenges across the economy. The Company continues to monitor and navigate through the complexities and pursue appropriate value preservation measures.

Following the arbitration process which was concluded at the beginning of the 2023/24 milling season, both millers and the private farmers are in the process of finalising the implementation of the outcome. The implementation thereof will result in there being two cane supply arrangements with private farmers, namely a sugar milling agreement and a cane purchase agreement. The sugar milling agreement aligns with the arrangements in the previous season and results in the Company and the private farmers sharing in the total revenue realised from the sale of sugar with both parties sharing in the risks and rewards of sugar prices. The cane purchase agreement results in the Company purchasing cane from private farmers for a fixed price with the company alone exposed to the risks and rewards of sugar prices. The cane purchase agreement is also likely to require additional borrowing facilities to support the upfront cash outflow.

This resulted in delayed deliveries of cane by the private farmers which is envisaged to be recovered within the first quarter.

The wage arbitration remains in progress, however the Company has meanwhile ensured it’s employees are cushioned against the inflationary environment and the resultant pressures on disposable income.

The requisite mill and transport annual maintenance work was carried out to satisfaction and the mill is positioned for better operating efficiencies in the ensuing season.

By Order of the Board

C F Dube

A Mhere
Chief Executive Officer

27 June 2023

Related Download

Hippo Valley Estates – 2023 Annual Report.pdf

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