Hippo Valley Estates Trading Update FYE 31 March 2022 and Q1 ended 30 June 2022

By Published On: August 4th, 2022Categories: Corporate announcement, Earnings
Hippo Valley Estates Limited 2023 Interim Results For The First Quarter

Hippo Valley Estates Limited 2023 Interim Results For The First Quarter

Operating Environment

Annual inflation accelerated from 72.7% in March 2022 to 191.6% in June 2022 as the economic environment remains volatile and hyperinflationary. Despite the merging of auction rate with Willing Buyer Willing Seller (WBWS) as the country official rate, the Zimbabwe Dollar (ZWL) suffered a 157% depreciation during the quarter ended 30 June 2022. The heightened volatility of the exchange rate has made the operating environment more challenging. The Company continues, however to pursue value preservation strategies in the hyperinflationary environment. Unemployment remains high, with the bulk of the population managing on the back of informal businesses and agricultural projects. While efforts continue to be made to liberalise the currency regime, to ease liquidity challenges and address inflation, economic conditions remain challenging.

Covid-19 Update

Over the past 3 months, cases from the Omicron-driven 4th wave have continued to decline globally. This trend has been mirrored within the Company’s operations. Mid-way through 2021, the company, in a Public-Private Partnership, embraced vaccination as key in management of the COVID-19 pandemic. This program has been extremely successful and as at 15th May 2022, over 99% of the workforce had been vaccinated. This is ahead of the rest of Zimbabwe generally, where less than 50% of the population is vaccinated. The easing of lockdown restrictions and increased business hours in response to decline in COVID-19 cases is expected to continue aiding economic recovery efforts.

Operations

Cane and sugar production (tons)

1st Quarter June 2022 1st Quarter June 2021 % Change Full Year to 31 Mar. 2022 Full Year to 31 Mar. 2021 % Change
Tons cane harvested – Company 347,178 283,499 +22% 283,499 1 043 774 -14%
Tons cane harvested – Private farmers 235,264 270,024 -13% 270,024 592 722 +30%
Other third-party cane 1,310 -100% 1,310 55 439 -53%
Total tons cane milled – Company 582,442 554,833 +5% 554,833 1 691 935 +0%
Tons sugar produced – Company 64,203 66,664 -4% 66,664 204 384 +3%
Tons sugar produced – Industry Total 119,430 128,044 -7% 128,044 408,260 -4%

Production for the year ended 31 March 2022

Cane deliveries from the Company’s plantations (miller-cum-planter) decreased by 14% from prior year. This was mainly due to lower yields that emanated from a combination of yellow sugarcane aphid infestations and water logging of soils induced by incessant rains received between December 2020 and March 2021 that adversely impacted crop development. In addition to this, early start-up of the milling season in April 2021 resulted in crushing of younger cane occasioned by a strategic decision to reposition the milling season so as to maximise growing and milling efficiencies in future seasons. Private farmer deliveries improved by 30% due to an increase in area harvested largely attributable to new developed area under the Kilimanjaro project and ‘carry-over’ cane from the previous season. Overall, total cane milled was in line with prior year, as the drop in miller-cum-planter was offset by private-farmer deliveries. Sugar produced by the Company increased by 3% due to better cane quality and favourable mill efficiencies. The requisite off-crop maintenance work was satisfactorily carried out from December until start-up of crushing season in May 2022 thereby positioning the mill for improved performance in the 2022/23 production year.

Production for the quarter ended 30 June 2022

Cane deliveries from the Company’s plantations (miller-cum-planter) for the quarter ended 30 June 2022, were 22% above same period prior year driven by a combination of increased harvesting targets in line with total crop projections, a more efficient cane haulage system and improved mill uptime. However, cane deliveries from private farmers were below prior year on account of rains received in April 2022 which resulted in the delayed onset of harvesting. Whilst cane deliveries were higher than prior year on account of improved yields for cane harvested, sugar production to date is 4% lower than same period in prior year largely as a consequence of lower cane quality due to a prolonged wet spell that prevailed in the region. Cane quality is however expected to improve into the drier peak sucrose period.

Marketing Performance

Marketing performance for the year ended 31 March 2022

The Zimbabwe sugar industry has a single marketing desk at brown sugar level, administered by Zimbabwe Sugar Sales (Private) Limited (ZSS). The Company’s share of total industry sugar sales volume of 394 000 tons (2021: 440 000 tons) for the year ended 31 March 2022 was 53.2% (2021: 50.0%). Total industry sugar sales into the domestic market for the year at 356 000 tons (2021: 325 000 tons) were 10% higher than prior year, driven by strong domestic demand. Industry export sales however, decreased by 67% to 38 000 tons (2021: 115 000 tons) following redirection of supply to the local market in view