Hippo Valley warns against cheap sugar imports
ZIMBABWE Stock Exchange (ZSE)-listed sugar producer Hippo Valley Estates is pushing for protectionist measures after warning that consumers risk having Vitamin A deficiency due to the influx of low quality cheap imports.
Rising inflation and a weakening dollar prompted the government to temporarily suspend duty on basic goods such as sugar. But some manufacturers are now raising the red flag, saying such measures may paralyse the domestic industry.
“Although local demand for sugar remains strong as industry recovers from the impacts of Covid-19, the sugar industry is engaging authorities to ensure an even competitive playing field against cheap imports of sugar originating from surplus producers who enjoy duty protection in their host countries,” reads the company’s financials for the year ending 31 March.
“This is also in an attempt to safeguard the health of the local population as some of the sugar imported is not Vitamin A-fortified, as required by law. The substantial off-crop maintenance programme has been successfully completed and the mills have started the new season well with focus being on increasing production and capitalising on efficiencies.”
The fortification of sugar with vitamins, for example vitamin A, is one of the safest, most efficacious and most cost-effective interventions to prevent and control vitamin A deficiency.
Going forward, the company sees economic headwinds buffeting the economy persisting.
“Operating and trading conditions are likely to remain challenging in the current milling season, with farmers and millers contending with high cost pressures on account of both
local and global inflationary dynamics, exchange rate volatilities, high cost of funding and supply chain bottlenecks, resulting in pricing of local products difficult in the short to medium terms,” the company says.
In historical terms, Hippo recorded a 76% increment in revenue to ZW$22.7 billion (2021:ZW$12.9 billion) driven by positive market and product mix.
Operating profit improved by 62% from ZW$6.2 billion to ZW$10 billion.
“Adjusted Earnings Before Interest Tax Depreciation and Armotisation receded by 15% from ZWL3.6 billion to ZWL3.1 billion, weighed down mainly by raw material costs and currency dynamics,” the company says.
“The increase in raw material costs was driven by global commodity price increments compounded by Russia’s invasion of Ukraine. The change in mix of cane supply emanating from increased deliveries from private farmers also contributed to increased operating costs, as private farmer associated costs are relatively high.”
Inflation-adjusted revenue increased by 4% to ZW$30.1 billion (2021: ZW$28.9 billion). Operating profit and profit for the period increased by 29% to ZW$6.3 billion (2021: ZW$4.8 billion) and by 38% to ZW$4.1 billion (2021: ZW$3 billion) respectively.