Hippo Valley H1 profit falls 31 percent despite revenue growth

Hippo Valley H1 profit falls 31 percent despite revenue growth

HARARE, November 24 (The Source) – Hippo Valley Estates, the local unit of South African sugar processor Tongaat Hulett, on Thursday reported a 30.8 percent decline in profit after tax to $1.4 million in the six months to September 30 on lower export prices and a higher level of outgrower cane payments.

This is despite 18 percent revenue growth to $82.9 million from $70.2 million reported in the same period last year. The growth in revenue was underpinned by increase in sales volumes.

“Total sales volumes for the period to 30 September 2016 amounted to 257 356 tons (2015: 247 085 tons), an increase of 4%, with the Company’s share amounting to 139 413 tons (2015: 124 211 tons)”, Chief executive Sydney Mtsambiwa said.

Operating profit was down 31.55 percent to US$3.9 million in the six months to September 30 from $5.7 million reported in the same period last year.

The company’s operating cash flow before working capital for the six months to September 30 declined to $23.1 million from $30.9 million in the same period previous year.

Mtsambiwa said net debt was down 63.69 percent to $12.2 million relative to $33.6 million in the comparable period last year. As such, net interest charge decreased to US$2.3 million from $3.4 million reported in the same period last year on the back of reduced level of borrowings and prevailing interest rates.

Despite a late start of the milling season, sugar production for the six months to September 30 recorded a marginal 1 percent decrease to 155 522 tons compared to 157 877 tons for the same period last year.

“This was a satisfactory outcome considering the late start of the milling season and the resultant lower cane deliveries to the mill over the six month period to 30 September 2016 amounting to 1 165 432 tons compared to 1 303 899 tons delivered in the same period last year, a decrease of 11 percent”, Mtsambiwa said.

This impressive production outcome was attributable to improved cane quality and the resultant favourable cane to sugar ratio.

Volume of cane delivered at the mill remained subdued due to lower cane yields resulting from poor growing conditions precipitated by low rainfall and restricted irrigation as a result of low dam levels.

As such, the Hippo Valley’s cane deliveries decreased by 12 percent to 663,949 tons from 754,254 tons delivered in the same period last year, while deliveries from the private farmers were down 9 percent to 501,483 tons of cane from 549,645 tons in the same period previous year.

Mtsambiwa also noted that, although irrigation water continued to be restricted due to El Nino induced drought and the resultant low dam levels, government interventions to protect local industry from illegal imports, in particular the introduction of SI 64 of 2016,assisted in mitigating these negative factors.

On the positive note,the imminent completion of the Tokwe-Mukorsi dam will diversify the water catchment area and provide increased stability in future water supply.