Hippo Valley Estates Limited (HIPO.zw) Q32022 Interim Report
The Zimbabwean economic environment remains hyper-inflationary, despite the relative slowdown in annual inflation from 194% at the beginning of the financial year in April 2021 to 61% in December 2021. During the third quarter, the Zimbabwe dollar depreciated by 24% against the United States dollar on the auction market. While foreign currency availability at the official exchange rate remains constrained, industry is taking advantage of the multi-currency regime to generate foreign currency on the local market to supplement offshore receipts. Global agricultural commodity prices remained high over the major production period, constraining viability in the agriculture sector.
The fourth wave of the Covid-19 pandemic which began towards the end of the third quarter resulted in the highest number of infections at both national and Company level since the pandemic began. However, the Company and the rest of the sugar industry, classified as an essential service, continued to operate with no significant business disruption. The Company continues to improve its Business Continuity Plan and Covid-19 preventive and reactive protocols, learning from past experiences and improved global knowledge on the disease. While supply chains have been impacted, these are being mitigated through advance planning and procurement of critical spares and inputs. As at 31 December 2021, Hippo Valley Estates Limited and Triangle Limited (together referred to as Tongaat Hulett Zimbabwe), had vaccinated 15 067 employees (94% of the total workforce) and 11 303 members of the community.
Cane and sugar production (tonnes) for the 9 months ended 31 December 2021
The 2021/22 sugar milling season closed in mid-December with no cane carried over to the next season. Cane deliveries from the Company’s plantations (miller-cum-planter) were 14% below the same period in prior year due to a combination of a 3% reduction in area that was available for harvest and a 11% drop in cane yields, due to insistent cloud cover during the past rainfall season, which constrained cane growth during the peak growing period. Cane deliveries from private farmers were however 30% above the same period in prior year due to a 21% growth in yields and a 9% increase in area harvested, benefiting from prior year carryover cane. While private farmer yields were approximately 20% below those on the Company’s plantations, the positive trajectory from prior years is commendable. While total cane milled remained stable, sugar production for the season under review increased by 2% from prior season due to an improved factory performance, following a successful prior o crop maintenance program.
Zimbabwe Sugar Sales (Private) Limited (ZSS) is the marketing desk for the Zimbabwe sugar industry at brown sugar level. Hippo Valley’s share of total industry sugar sales volume of 317 155 tonnes (2020: 356 367 tonnes) for the 9 months to 31 December 2021 was 53.59% (2020: 49.95%). The total industry sugar sales into the domestic market for the same period, at 285 548 tonnes (2020: 258 746 tonnes), were 10% above same period in prior year on the back of strong local demand and improved supply. Price realisations on the local market, in both local and foreign currency, remained rm in current purchasing power terms. While local market foreign currency inflows were rm at the beginning of the period under review, they have subsequently slowed down owing to exchange rate dynamics within the market. Following the industry’s reduced COMESA quota allocation for the year into Kenya, export sales volume reduced by 68% to 31 607 tonnes (2020: 97 620 tonnes). The volumes originally targeted at the Kenyan market were redirected to the local market to satisfy the strong local demand. Efforts are underway to develop other regional markets to reduce Kenya market concentration risk. The Country’s annual export quota to the United States of America remains secure and fully satisfied.
Environmental, Social & Governance
A total of 4 (2020: 2) Lost Time Injuries were recorded during the 9 months under review, resulting in a Lost Time Injury Frequency Rate of 0.055 (2020: 0.037).
Regrettably, 1 (2020: nil) fatal incident was recorded during the period at the Company’s wildlife operations. As a result of this unfortunate incident, heightened safety and sustainability initiatives continue to be implemented throughout the operations. On a positive note, the organization’s Safety and Environmental Sustainability Management Systems achieved certification to the International ISO 4501 and ISO 14001 Standards.
Initiatives to improve the quality of life of surrounding communities continue to be pursued through collaboration with the Government and local communities.During the period under review Tongaat Hulett Zimbabwe donated approximately US$211 550 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.
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), is being maintained. As previously reported, Government has at multiple points assured the Company that the issuance of the 99 Year Lease is imminent.
Projects and initiatives
As previously reported, the resumption of Project Kilimanjaro, a 4 000 hectares new cane project being developed in partnership with sister company Triangle Ltd, awaits clarity on land tenure which is necessary to concluding funding arrangements with financial institutions. 700ha of the Kilimanjaro Project has been set aside and allocated to new farmers by Government as part of the on-going empowerment initiatives by Triangle Limited and Hippo Valley Estates Limited.
Farmers have already benefited from the proceeds of the 562 hectares planted to sugarcane in prior years at the back of impressive yields achieved in the past season. Completion