Listed Sugar producer Hippo Valley Estates (Hippo) is pushing to grow exports into the more lucrative regional markets as developments in the global market continue to erode profit margins, CEO Sydney Mtsambiwa has said.
Mtsambiwa told businessdigest on the side-lines of the company’s 59th annual general meeting in Harare on Tuesday that prices in Europe continued to fall whilst the domestic and regional markets remained more competitive.
“The world market is a dumped market.It’s a surplus market so you cannot be competitive that’s why we have to try and get markets where you enjoy certain advantages,” he said.
“As a result, we talk of regional exports because we enjoy better premiums in the region than we would on the world market. We are competing against everybody so we have to sharpen up because our target is we must not have carry over stock, we must export everything that we cannot sell on the local market.”
Mtsambiwa also said the company was in the process of acquiring regulatory approval to produce an hydrous ethanol to be used for blending. He said the company wants to benefit from supplying 15% of the country’s current monthly fuel consumption of 50 million litres. Mtsambiwa said the company’s Sustainable Rural communities (Susco) project was progressing and on a growth path.
“The project is progressing very well and as reported in our annual report we now have upwards of 12 500 hectares under outgrows and this is expected to continue until the entire 15 000 is hectares is covered,” he said.
Hippo reported a 19% slump in after tax profit to US$7,3 million in the year under review despite an 8% revenue growth to US$146,8 million. Sugar cane production went down by 5% to 228 000 tonnes due to no deliveries from Green Fuel which had delivered 17 000 tonnes the previous year coupled with low dam levels for irrigation.
It said a total of 1 746 213 tonnes of cane was crushed, of which 1 000 909 was company cane at an average yield of 85,5 tonnes cane per hectare, during the year under review, down from 1 874 524 tonnes at a yield of 98,4 tonnes the previous year.
The company added private growers in the Hippo Valley Mill group delivered 486 329 tonnes, up 105% on prior year while Mkwasine private farmers delivered 258 975 tonnes, representing a 20% growth on the previous season
A marketing update in the company’s 2015 annual report for the period to March 31 notes that pressure from the reforms in the EU agricultural policy resulted in significantly lower export prices into the market which negatively impacted on sugar revenues.
Hippo said the domestic market sales in the year under review amounted to 309 000 tonnes, up by 109% from the previous year after government’s policy interventions which resulted in reduced sugar imports. The sugar firm said 179 000 tonnes of raw sugar was exported down from 279 000 the previous year prior season while 3 000 tonnes were exported into regional markets.
According to the company’s 2015 annual results, the private farmers replanted 1 447 hectares of land in line with the accelerated replanting project as envisaged at the launch of the Susco project in 2011. The replanting, according to the annual report, resulted in a cumulative total of 12 706 hectares being replanted to date, representing 80% of area under private growers.
“The total value of private farmer cane deliveries to the industry mills amounted to US$70 million in 2-14/15 season,” said Hippo in the annual report.
At the end of the reporting season, 857 indigenous farmers were active farming some 15 880 hectares rand employing 7 300 workers the company added.
New land development in the 2014/15 season has added 203 hectares of virgin land as part of a bigger project expected to result in a total 3 393 hectares of virgin land being developed in a few seasons according to Hippo.