Hippo Valley revenue up 24pc after duty reinstatement
LISTED agro-industrial concern, Hippo Valley Estates Limited, has reported that the re-imposition of import duty on sugar has led to sector growth, with the company recording a 24 percent revenue increase during the half-year period ending 30 September 2024.
In a statement accompanying the company’s financial report for the period under review, Hippo Valley chairperson Mr Canaan Dube revealed that the repeal of Statutory Instrument (SI) 80 of 2023 on 31 January 2024 helped the sector recover.
The SI was initially introduced in May last year when the Government suspended duty on basic commodities, including cooking oil, sugar, and maize meal, to cushion Zimbabweans from price shocks caused by geopolitical developments in Europe and local speculative behaviour, which led to price increases and artificial shortages.
Earlier this year, the Government also repealed the duty-free status, requiring the public to pay duty on imports of a small range of essential goods, most of which are also produced or at least packed in Zimbabwe.
Before this, the sugar sector had been eroded by 25 percent due to imported sugar products.
“Following the repeal of Statutory Instrument 80 of 2023 on 31 January 2024, import duties were reinstated on low-cost, non-fortified imported sugar brands, which had resulted in an erosion of the local sugar industry’s market share by as much as 25 percent.
“As a result, the industry’s customers have largely switched back to locally produced sugar, with domestic market industry sales volumes recovering by 31,716 tonnes. This led to a 24 percent increase in revenue to US$102,6 million (2023: US$82,7 million) after a strong recovery of local market sales volumes, where higher price realisations are generated, and the deliberate prioritisation of the local market over lower-priced exports, which saw a 69 percent volume decrease,” said Mr Dube
Meanwhile, the group’s profit after tax dropped by nearly 29 percent to US$18,18 million during the period under review, compared to US$25,61 million in 2023. Hippo Valley explained that this was due to price distortions caused by the exchange rate and inflation dynamics in its adoption of the US dollar as a reporting currency.
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“The local market recovery was supported by the re-imposition of duties on sugar imports and heightened awareness initiatives that promoted the Huletts sugar brand. Critical export sales volumes are still expected to be fulfilled with no impact on the planned local market priorities.
“Operating profit decreased by 56 percent to US$13,7 million (2023: US$31,1 million) due to pricing distortions in the movement of the fair value of biological assets, which arose from the exchange rate and inflation dynamics embedded in the opening balance prior to it being converted to US dollars,” said Mr Dube
He also noted that operating cash flows after interest, tax, and working capital changes increased by US$4,4 million to US$16,8 million during the period under review.
The positive impact came from improved working capital after Hippo Valley successfully regained its local market share following the repeal of Statutory Instrument 80 of 2023.
Mr Dube reported that the agriculture and manufacturing business operations recorded 12 percent and 8 percent growth in cane harvested from the company’s plantations and sugar production, respectively.
“This improvement in sugar production was largely driven by a combination of higher yields, a more consistent rate of delivery of sugar cane, and improved mill uptime after a successful off-crop (annual) maintenance programme, which ensured more plant reliability. Private farmer performance increased following early cane deliveries, unlike the prior year, which was affected by delays from the late conclusion of cane supply agreements.”
He said that there were adequate sugar stocks to satisfy local demand and meet critical export market requirements. — -chroncile
