×
NewsDay

AMH is an independent media house free from political ties or outside influence. We have four newspapers: The Zimbabwe Independent, a business weekly published every Friday, The Standard, a weekly published every Sunday, and Southern and NewsDay, our daily newspapers. Each has an online edition.

  • Marketing
  • Digital Marketing Manager: tmutambara@alphamedia.co.zw
  • Tel: (04) 771722/3
  • Online Advertising
  • Digital@alphamedia.co.zw
  • Web Development
  • jmanyenyere@alphamedia.co.zw

Hippo Valley cane production to remain flat: IH

Agriculture
File pic: Hippo Valley

ANNUAL cane production at Hippo Valley —  one of the country’s biggest sugar cane growers, is projected to remain flat at 1 655 million tonnes, a research firm has said.

In its forecast of Hippo Valley’s 2023 first half, IH Securities said, given the 2022/23 season rainfall forecasts pointing towards normal to above average, irrigation water would increase and is expected to cover two planting seasons.

IH Securities pointed out that government announcement that it will not be extending the exemption of import duty on basic commodities will lead to a marginal recovery for sales into the domestic market going into the company’s last quarter.

“Sales volumes, year-on-year (y/y), are expected to trend sideways with the top line being supported by elevated prices of agricultural commodities. However, downside from prolonged wet spells include waterlogging potentially compromising the improvement in yields. On this backdrop, we expect annual cane production to remain flat at 1 655 000 tonnes,” IH said.

The research firm pointed out that for forecasts to remain relevant in the present inflationary environment, it has shifted to a US-dollar-based valuation of the business.

The research firm projects that Hippo Valley US-dollar revenues will reach US$135 million for the 2023 fiscal year.

Earnings before interest, taxes, depreciation, and amortisation margins are also seen starting to go forward initially slowing to 40%, while net income is expected to come in at US$31 million in the current earnings cycle.

“However, as margins correct to historical averages, we expect normalisation of profits thereafter,” IH said.

The operating environment in the first quarter of the company’s last financial year was characterised by increased deterioration of macros on the back of imported inflationary pressures and a rapidly deteriorating currency.

“Subsequent contractionary measures from the central bank to slow the rate of inflation also had the effect of inducing a liquidity crunch. While the rainfall season was not as pronounced as the previous year (2021), cane contribution from the company’s plantations grew 12% y/y, aided by improvements in yields from 101 tonnes/hectare to 107 tonnes/hectare,” IH said.

The research firm added that cane deliveries from private farmers underperformed the comparable season by 5% as spells of wet weather delayed harvest operations.

“Overall, tonnes milled grew 2% to 1 310 000 tonnes with Hippo Valley contributing 735 000 tonnes, while private farmers brought in 575 000 tonnes. In terms of sugar production, the marginal increases in tonnes milled were, unfortunately, diluted by poor quality of cane leading to a decline of 3% in sugar output to 157 000 tonnes,” IH revealed.

Domestic sugar sales for the industry were impacted by Statutory Instrument 198 which allowed duty free importation of basic commodities from neighbouring countries, with sugar on the list.

“Despite subdued demand in the domestic market, sugar exports by the industry performed well, aided by increased volume allocation on the United States Tariff Rate Quota from 13 087 tonnes to 17 751 tonnes,”  IH said.

“Sugar volumes into the Kenyan market grew 38% despite protectionist policies being implemented whilst volumes into Botswana (-23%) were impacted by delayed shipments and prioritisation of supply into the domestic market.”

Related Topics