Sugar sector focuses on local market
THE local sugar sector is focusing on regaining the local market share and optimising returns from international premium markets, Hippo Valley Estates Limited chairman Mr Canaan Dube said.
Mr Dube said while the local market remains pivotal to the industry, management is also prioritising the development of new markets, necessary for the generation of additional foreign currency to sustain the industry’s requirements for critical imports.
In financials for the quarter to December 31, 2023, Mr Dube noted that the firm’s strategic focus remains on improving yields and ensuring plant reliability, maximising capacity utilisation and achieving sustainable operating cost efficiencies in the medium to long term.
In the short term, he said the priority is to complete the off crop programme which is well underway to ensure an efficient and reliable milling campaign in the 2024/25 season, improving quality and safety performance, reconfiguring the route to market and implementing innovative work streams to contain the cost of goods and services.
“The company will also leverage on available borrowing facilities up to the end of the financial year to cushion its working capital in light of off-crop requirements,” said Mr Dube.
The industry is looking forward to improved domestic sales volumes after the recent repeal of Statutory Instrument 80 of 2023 effective 1 January 2024 which previously allowed duty-free sugar imports into the country, although the benefit may not be realised immediately due to high-cost stocks of imported sugar currently available in the market.
Mr Dube said Hippo’s share of the total industry sugar sales volume of 295,382 metric tonnes for the nine months to December 31, 2023, was 52,54 percent.
Total industry sugar sales into the domestic market for the same period amounted to 227,855 metric tonnes and were 18 percent below the comparable period in the prior year.
“The decrease was largely on account of duty-free sugar imports from the region that came into the local market following the promulgation of Statutory Instrument 80 of 2023.
“Coming from softer currency economies, regional exporters to Zimbabwe capitalised on the multi-currency trading regime in Zimbabwe and the removal of import duties,” said Mr Dube.
However, Mr Dube said the industry implemented aggressive but costly initiatives to defend market share against duty-free imports during the period under review, resulting in reduced net realisation.
The upward revision of the foreign currency retention ratio on local USD sales to 100 percent helped in cushioning the local market revenue drop.
Export sales volumes increased by 68 percent to 67 527 tonnes (2022: 40 246 tonnes) as the displaced local market volume was redirected to the export markets in order to generate the much needed working capital to sustain operations.
Revenue realised at the end of the third quarter grew by 77 percent to $977,7 billion from $551,9 billion recorded during the same period last year on the back of price adjustments in response to hyper-inflationary pressures.
However, the increase in revenue was not sufficient to offset the increased costs of business, particularly in respect of manpower costs.-chronicle
