Hippo Valley Estates says the local sugar industry is adequately stocked to satisfy demand locally and meet critical export market requirements, even after the earlier closure of the crushing season at the end of November.
According to the company, following the repeal of Statutory Instrument 80 of 2023 on January 31, 2024, import duties were reinstated on low-cost, non-fortified imported sugar brands that had resulted in the erosion of the local sugar industry market share by as much as 25 percent.
"Resultantly, the industry's customers have largely switched back to locally produced sugar, with the domestic market industry sales volumes recovering by 31,716 tonnes," Mr Tendai Masawi said in a trading update for the six months to September 30, 2024.
He said while the prioritisation of the local market remained key, export market sales volumes were largely affected by delays in obtaining shipment approvals from the US authorities, which have since been delivered and paid for post the reporting period.
"Unfortunately, unfortified sugar brands not compliant with regulations are still being illegally imported, and relevant authorities have been alerted," said Mr Masawi.
For the period under review, he said the group's agriculture and manufacturing, which are the main business operations, recorded a 12 percent and 8 percent growth in cane harvested from the company's plantations and sugar production, respectively.
Mr Masawi said the 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 that was affected by delays emanating from the late conclusion of cane supply agreements," he said.
During the period under review, the group recorded a marginal drop in sales volumes of 4 percent, but despite this, revenue increased by 24 percent to US$102,6 million from US$82,7 million in 2023 after a strong recovery of local market sales volumes.
Mr Masawi added that the growth was also due to higher price realisations and the deliberate prioritisation of the local market in place of the lower-priced exports, which saw a 69 percent volume decrease.
"The local market recovery was supported by the reimposition of duties on sugar imports and the 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 prioritisations," he said.
The group's operating profit for the period decreased by 56 percent to US$13,7 million from US$31,1 million in the same comparable period last year, resulting from pricing distortions in the movement of fair value of biological assets, which arose from exchange rate and inflation dynamics embedded in the opening balance prior to it being converted to US dollars.
Following the same effects on fair value distortions, profit for the period decreased by 29 percent to US$18,2 million compared to US$25,6 million.
Mr Masawi said a total of US$2,5 million was incurred on capital expenditure, with US$0,9 million spent on replanting cane roots and retooling priorities for the business' key operations.
Mr Masawi indicated that efforts to progress the implementation of Project Kilimanjaro, a 4 000-hectare new sugarcane development venture, continued, and a total of about 682 hectares of the 700 hectares in the Project Kilimanjaro Empowerment Block, where 41 new farmers have been allocated, is to be harvested by the end of November this year.
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The group also said engagements with the Government regarding the issuance of the balance of the 99-year leases, as well as amendments to the wording of current leases for bankability, transferability, and other necessary changes, were ongoing.
Mr Masawi said the total surveyed area for Hippo Valley was revised to 16,802 hectares from the original estimate of 23,979 hectares following a verification exercise.
Of the 16,802 hectares, leases covering approximately 15,960 hectares (95 percent) have been signed off by the responsible minister, with only 842 hectares remaining outstanding.
