SUGARCANE miller, Hippo Valley Estates Limited (Hippo) took a near 45% knock to profit after tax to US$13,44 million in its financial results for the year ended March 31, 2025 due to a non-monetary gain.
The drop is from a prior year comparative of US$24,26 million.
During the period under review, Hippo recorded no net monetary gain compared to a net monetary gain of US$120,02 million in the prior year.
In a statement attached to its annual financial results for the period ended March 31, 2025, Hippo said the operating environment remained constrained, with persistent inflationary pressures and exchange rate volatility.
Revenue was recorded at US$191,59 million for the period under review, from a prior year comparative of US$340,47 million.
“While overall industry sales volumes declined by only 3%, revenue decreased by 44%. This variance was primarily due to a distortion in the prior year’s reported revenue, caused by inflationary adjustments and currency effects under IAS 29,” Hippo chairman Canaan Dube and chief executive officer Tendai Masawi said in a joint statement.
“These adjustments were translated into US$ following the change in functional currency, inflating the comparative base.
“In the current year, the company deliberately prioritised the local market over lower-priced export markets, supporting stronger average price realisations.”
- Sugar cane farmers fight for sweet deal
- Demystifying the Zim sugarcane myth
- Tongaat Hulett in talks with 8 potential investors: Hippo Valley
- IH Securities predicts 6% Hippo Valley revenue drop
Keep Reading
Local industry sugar sales rose 19% to 337,22 tonnes during the period under review from the prior year, while exports were down a massive 60% to 43,3 tonnes from the 2024 comparative.
Hippo’s market share of local sugar sales is 86% and 49,8% for exports.
Hectarage under sugarcane was down 2% owing to last year’s drought, yet sugarcane yield per hectare was up 7%, sugarcane production in tonnes up 18%, and sugar production in tonnes up 13%.
“Profit for the year declined by 45% to US$13,4 million (2024: US$24,3 million), mainly due to the inclusion of a non-monetary gain in the prior year relating to the hyperinflationary restatement process,” the joint statement read.
Despite strong operational recovery, the cost of doing business remains elevated, which continues to erode margins and limit production gains, primarily due to the high costs of both cane and manpower.
“Efforts were also made to reduce the cost of production, through project ‘Zambuko’. However, improvement on cost of sales was still limited by the increase in other production costs which moved in tandem with local inflationary pressures and other global price influences on key inputs,” the joint statement read.
“Additionally, the sugar industry was negatively affected by changes in the value-added tax (VAT) category (an indirect consumption tax levied on the value added at each stage in the value chain), when sugar was moved from a zero-rated supply to an exempt supply impacting the business to the tune of US$7 million of unclaimable VAT in the current year.
“Intermediary money transaction tax for US$-denominated transactions grew to 2% from 1% same period prior year furthering up the cost of doing business.”
Concerning its outlook, Hippo 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.
As of March, Hippo had US$2,55 to every dollar of short-term debt should it become due, showing the firm had liquidity for its growth plans.
Total assets saw a marginal increase to US$173,02 million for the period under review, from a prior year comparative of US$169,14 million.
“However, significant challenges persist in the form of water availability, electricity supply interruptions, and a complex operating environment,” the joint statement read.
The firm, however, has enough sugar stocks to meet local demand.
