Zimbabwe: ZWG Proving Difficult to Utilise - Hippo Valley

HIPPO Valley Estates Limited (HVEL) says most suppliers are demanding US$ for payment of raw materials, creating a situation where ZWG stocks continue to pile up in the coffers.

Presenting the group's performance for the period ended March 31 2025, the company said the reporting period remained constrained throughout the year, with persistent inflationary pressures and exchange rate volatility driven by unresolved structural challenges in the economy.

HVEL said the introduction of the ZWG currency initially brought about a modicum of stability but began weakening from late September 2024, ultimately closing the financial year at ZWG28.1: US$1.

"While the tight monetary policy supported a degree of exchange rate stability in the second half of the year, liquidity in the formal sector of the economy deteriorated. Dual currency trading created imbalances, with significant ZWG cash holdings proving difficult to utilise, as most suppliers required settlement in US$," the company said.

The sugar processor said, given the obtaining circumstances, the company was unable to generate sufficient quantities through normal trade.

"The reduction in the foreign currency retention threshold from 75% to 70% towards the year-end is expected to further reduce the company's US$ export inflows in the year ahead, constraining funding for essential raw material imports and capital expenditure," HVEL said.

During the period, operating profit improved significantly to US$7,9 million, reflecting the reversal of prior year CPI and currency effects embedded in cost of sales and the movement in the fair value of biological assets and administration expenses.

Profit for the year declined by 45% to US$13.4 million, mainly due to the inclusion of a non-monetary gain in the prior year relating to the hyperinflationary restatement process.

"The Company remains focused on advancing its strategic growth plans, with priorities centred on increasing sugar production, expanding the revenue portfolio, containing costs and generating positive cash flows.

"However, significant challenges persist in the form of water availability, electricity supply interruptions, and a complex operating environment," the company added.

Read the original article on New Zimbabwe.