Hippo Valley profits tumble

statement accompanying the financial results for the half year Hippo Valley said it experienced margin pressures following an 18 percent increase in wages.
Increases in agricultural expenditure, cane supply costs due to investment in future cane supplies and weaker Euro-dollar exchange rate negatively affected exports, hence profit.
Operating profit took a knock coming in at US$17,4 million from US$21,2 million over the comparative period last year. Hippo’s operating cash flow for the half-year totalled US$27,8 million and the US$19,9 cash absorption in working capital was consistent with high point of the sugar season.
The firm said domestic and export sales volumes in the first half of the year totalled 247 741 tonnes against 215 117 tonnes over the comparative half year period last year. Hippo Valley’s sugar output to September 30 2012 rose by 35,6 percent to 160 910 tonnes and the firm said it will meet its target to produce 300 000 annually in three years.
The company’s cane deliveries totalled 768 000, an increase of 9,1 percent over the prior year while private grower deliveries jumped 55,5 percent to 402 771 tonnes in the half year. Hippo Valley said ethanol fuel manufacturers Green Fuel delivered 178 869 tonnes.
“The continued recovery of the Zimbabwe sugar industry is underpinned by the accelerated private grower sugar cane rehabilitation programme initiated in 2010/11 under the Sustainable Rural Farming Communities project,” said Hippo.
Hippo said it continues to invest in the business to replace agricultural equipment, replant and re-establish cane crops and has thus decided against a dividend in the interim.
The firm said sugar production in Zimbabwe has increased from 259 000 tonnes in 2009/10 to about 490 000 tonnes this year and Hippo expects to contribute 242 000t.
In the current season Hippo said 611 indigenous private growers would supply 772 000t and generate US$50 million. With the assistance of Tongaat Hulett, a significant shareholder in major raw sugar producers Hippo Valley and Triangle private cane farmers can develop substantially.
“Based on Tongaat Hulett’s view of the existing mills, a further 661 growers farming 12 742 hectares could supply 1,4 million tonnes of cane per annum.
“Based on current market dynamics, these indigenous farmer developments could generate annual revenue of US$150 million and employ 12 000 people,” said Hippo Valley.
Johannesburg listed Tongaat Hullet is the single largest controlling shareholder in Hippo Valley with a 50,35 percent stake held through its subsidiary Triangle Limited.