Hippo Valley Estates reviewed abridged Interim Financial Results for the six months ended 30 September 2021

By Published On: December 9th, 2021Categories: Corporate announcement, Earnings

Hippo Valley Estates Limited (HIPO.zw) HY2022 Interim Report


  • Sugar production of 162 906 tonnes (2020: 147 960 tonnes) +10%
  • Total Industry sugar sales of 223 892 tonnes (2020: 225 058 tonnes) -1%
  • Hippo share of Industry sugar production and sales 52.9% (2020: 49.8%) +3%
  • Revenue of ZWL10.3 billion (2020: ZWL10.5 billion) -2%
  • Operating profit of ZWL2.9 billion (2020: ZWL2.6 billion) +12%
  • Adjusted EBITDA* of ZWL2.8 billion (2020: ZWL4.3 billion) -35%
  • Profit for the period of ZWL1.4 billion (2020: ZWL1.5 billion) -7%

*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

The economic environment in the country continues to be classified as hyperinflationary. However, annual inflation slowed down significantly to 52% by 30 September 2021 (March 2021: 241%). While the Zimbabwe dollar exchange rate was relatively stable over the period under review, the local currency has subsequently devalued against the United States dollar.

As the multi-currency regime continued, exchange rate dynamics in the economy influenced foreign currency liquidity and the proportion of foreign currency transactions in the formal market. Global agricultural commodity prices increased over the period under review resulting in high input costs for the agriculture sector.

Covid-19 Update

The third wave of the Covid-19 pandemic which began towards the end of the first quarter has since subsided albeit with the highest number of infections since the pandemic began. The Company and the rest of the sugar industry, classified as an essential service, were spared of any significant business disruption during the lockdown periods. The Company’s Business Continuity Plan and established Covid-19 preventive and reactive protocols continue to be in place in preparation for a possible fourth wave. Supply chain constraints have been mitigated by advance planning and procurement of critical spares and inputs resulting in adequate sugar being available to cover both local market requirements and export commitments. The Company and Triangle Limited (together referred to as Tongaat Hulett Zimbabwe), through both self-financed and government sponsored vaccination programs, had vaccinated some 14 796 employees (92% of the total workforce) and 10 568 members of the community as at 30 November 2021.


Cane deliveries from the Company’s plantations (miller-cum-planter) were 12% below the same period in prior year due to a combination of a 5% reduction in area harvested to date and a 7% drop in cane yields to date, occasioned by insistent cloud cover during the past rainfall season, which constrained cane growth during this period. Cane deliveries from private farmers were however 42% above the same period in prior year due to increased area harvested to date, benefiting from prior year carryover cane and an earlier start to the harvesting season which began on 20 April (2020: 5 May). Consequently, sugar production for the half year under review increased from the same period in prior year with a satisfactory factory performance, following a successful off crop maintenance program.

Marketing Performance

Zimbabwe Sugar Sales (Private) Limited (ZSS) is the single marketing desk for the Zimbabwe sugar industry at brown sugar level. The Company’s share of total industry sugar sales volume of 223 892 tonnes (2020: 225 058 tonnes) for the half year to 30 September 2021 was 52.9% (2020: 49.8%). The total industry sugar sales into the domestic market for the period under review at 194 334 tonnes (2020: 158 429 tonnes) were 23% above same period in prior year due to a combination of strong local demand and improved supply. Price realisations in both local and foreign currency on the local market remained firm in current purchasing power terms. While the local market foreign currency inflows were firm during the period under review, these have subsequently slowed down owing to exchange rate dynamics within the economy. Following the industry’s reduced COMESA quota allocation into Kenya for the year, the export sales volume for the half year reduced by 56% to 29 558 tonnes (2020: 66 629 tonnes). Volumes originally targeted for this market were redirected to satisfy strong local demand. Market development efforts are underway to establish other regional markets to supplement the existing stable Botswana market and reduce Kenya market concentration risk. The industry concluded the sale of 13 000 tonnes sugar under the Country’s annual export quota to the United States, at an average net price 9% above target.

Financial Results

The financial results of the Group have been inflation adjusted to comply with the requirements of International Accounting Standard 29 (IAS 29). Historical financial statements for the reporting period and the comparative numbers for the corresponding period 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 Directors 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 out turn of financial results.

Notwithstanding a 6% increase in sales volumes attributable to the Company driven by an improved production ratio, total inflation adjusted revenue for the period decreased by 2% to ZWL10.3 billion (2020: ZWL10.5 billion), weighed down by currency and inflation dynamics within the economy. Adjusted EBITDA decreased by 35% compared to the same period in prior year due to higher cane costs incurred on the increased volume of cane from third parties and increased production costs due to the reduced extent of the prior year benefit of forward purchasing of key inputs in a hyperinflationary environment. Operating profit however increased by 12% to ZWL2.9 billion (2020:ZWL2.6 billion), benefiting from a biological asset fair value gain of ZWL0.5 billion (2020: loss of 1.3 billion) on account of improved cane pricing assumptions.

Net cash inflow from operating activities increased by 60% to ZWL 0.8 billion (2020: ZWL 0.5 billion), largely due to reduced cash consumed in working capital. Capital expenditure totaled ZWL398 million (2020: ZWL110 million) of which ZWL160 million (2020: ZWL65 million) was for root replanting. As at 30 September 2021, the Company had a net cash balance (cash less borrowings) of ZWL0.9 billion (2020: ZWL1.1 billion). Adequate borrowing facilities in both local and foreign currency have been established to finance both operating and capital expenditure requirements.

The effective tax rate on the inflation adjusted accounts was 46.42% (2020: 32.74%), impacted by the net monetary loss of ZWL0.06 billion (2020: ZWL0.6 billion), that was treated as a permanent difference for income tax purposes.


In view of the Company’s positive financial performance for the six months ended 30 September 2021, the Board has declared an interim dividend of ZWL108 cents per share for the year ending 31 March 2022 payable in respect of all the ordinary shares of the Company. This dividend will be payable in full on or around 07 January 2022 to all Shareholders of the Company registered at the close of business on 24 December 2021.

Environmental, Social & Governance

A total of 5 (2020: 2) Lost Time Injuries were recorded during the half year under review, resulting in a Lost Time Injury Frequency Rate of 0.090 (2020: 0.037). However, no (2020: nil) fatalities were recorded during the half year period. 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.

Initiatives to improve the quality of life of surrounding communities continue to be pursued through collaboration with Government and local communities. During the period under review Tongaat Hulett Zimbabwe donated approximately US$ 138 000 in direct donations to community related causes. Additionally, 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 and on-going support towards community health, education and sporting activities.

As previously reported the Company continues to strengthen governance structures and polices at all levels of the business.

Projects and initiatives

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. Notwithstanding, Tongaat Hulett Zimbabwe is now mobilizing funding to complete part of the already cleared 2 700 hectares in the current financial year with priority being given to that portion of the land to be developed for the benefit of local communities. The 562 hectares planted to sugarcane in prior years is achieving the targeted yields and generating revenue adequate to meet working capital and loan obligations as they fall due.

The Company is providing financial and technical assistance to a number of new sugarcane out grower development projects. The framework whereby Tongaat Hulett Zimbabwe is co-managing certain underperforming out grower farms is ongoing and is expected to yield positive results in the ensuing harvesting season.

Land tenure

The Company awaits the finalization of the 99-year lease relating to Hippo Valley North (23 979 hectares). Freehold title on Hippo Valley South (16 433 hectares), largely a game park and wildlife conservation area, is being