Judith Phiri, Business Reporter
LISTED sugar-producing company, Hippo Valley Estates Limited recorded export sales volumes increase by 68 percent to 67 527 tonnes in 2023 from 40 246 tonnes the previous year, as the displaced local market volume was redirected to the export markets.
The sugar industry last year had to implement aggressive but costly initiatives to defend market share against duty-free imports. In a trading update for the third quarter ended 31 December 2023, the company said it redirected most of its sales to the export markets in order to generate the much-needed working capital to sustain operations, while revenue also grew.
“Revenue realised at the end of the third quarter grew by 77 percent to ZWL$977.7 billion from ZWL$551.9 billion recorded during the same period last year on the back of price adjustments in response to hyperinflationary pressures. However, the increase in revenue was not sufficient to offset the increased costs of business, particularly in respect of manpower costs,” said Hippo Valley Estates.
It said the Zimbabwe Sugar Sales (ZSS) (Private) Limited remains the sole marketing desk for raw and brown sugar produced by the Zimbabwe sugar industry to safeguard distribution efficiencies in both the local and export markets. Hippo Valley Estates said its share of the total industry sugar sales volume of 295 382 tonnes for the nine months to 31 December 2023 was 52.54 percent.
“Total industry sugar sales into the domestic market for the same period amounted to 227 855 tonnes compared to 278 106 tonnes in 2022 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 which 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 multicurrency trading regime in Zimbabwe and the removal of import duties. However, the upward revision of the foreign currency retention ratio on local United States (US) dollars sales to 100 percent helped in cushioning the local market revenue drop.”
Hippo Valley Estates said the industry was looking forward to improved domestic sales volumes after the recent repeal of Statutory Instrument (SI) 80 of 2023, effective 1 January 2024, which previously allowed duty-free sugar imports into the country.
It said the benefit may not be realised immediately due to high stocks of imported sugar currently available in the market.
“Marketing initiatives remain focused on regaining the local market share and optimising returns from international premium markets. Whilst 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,” added the company.
In terms of total sugar produced, Hippo Valley Estates said it amounted to 194 684 tonnes, trailing the prior year by six percent at the back of a drop in yields and unfavourable weather conditions at the end of the third quarter, which marks the end of the crushing season.
It said the yield drop was a result of reduced plant cane harvested in the current period, while the availability of critical spares (mainly due to cashflow constraints on account of the impact of cheap imports of sugar) resulted in unscheduled mill stoppages among other things.
The company said: “The Company’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, the priority is to successfully complete the off-crop programme which is well underway to ensure an efficient and reliable milling campaign in the 2024/25 season.”
