Hippo Valley feels the pinch of cheaper sugar imports

Spread This News

By Business Reporter

LISTED sugarcane miller, Hippo Valley Estates Limited (HVEL) has blamed the 18% local sales decline on the impact of the lowered barriers to cheaper sugar imports from the region.

Presenting a trading update for the third quarter period ended December 31 2023, the company revealed that local sales did not perform as expected.

Hippo Valley Estates share of the total industry sugar sales volume of 295 382 tons for the nine months to December 31 2023 was 52,54%  compared to 52,26% in 2022.

“Total industry sugar sales into the domestic market for the same period amounted to 227 855. and were 18% below the comparable period in the prior year.

“The decrease was largely on account of duty-free sugar imports from the region which came into the local market following the promulgation of Statutory Instrument 80 of 2023. Coming from softer currency economies, regional exporters to Zimbabwe capitalised on the multi-currency trading regime in Zimbabwe and the removal of import duties,” HVEL said.

The influx of cheaper imports was prompted by the government’s move to waive duty payments on basic commodities last year in a bid to ease exchange rate pressures which had seen local currency prices of basic commodities spiralling beyond the reach of many.

However, the duty waiver has since been revised in a move set to see local recovery of the commodity going forward.

“During the period, the industry implemented aggressive but costly initiatives to defend market share against duty-free import during the period under review, resulting in reduced net realisations,” HEVL said.

The top miller however said the upward revision of the foreign currency retention ratio locally with the US$ sales to 100% helped in cushioning the local market revenue drop.

“Export sales volumes increased by 68% to 67 572 tons up from 40 246 tons as the displaced local market volume was redirected to the export markets to generate the much-needed working capital to sustain operations.

“Revenue realised at the end of the third quarter grew by 77% to ZWL 977.7 billion from ZWL 551,9 billion recorded during the same period last year on the back of price adjustments in response to hyperinflationary pressures. The increase in revenue was not sufficient to offset the increased costs of business, particularly in respect of manpower costs,” the company said.

For the period under review, Hippo reported a difficult business environment owing to significant inflationary pressures, exchange rate volatility, and constrained Zimdollar and United States dollar liquidity.