Staff Writer 
SUGAR producer Hippo Valley Estates (Hippo Valley) plans to increase its operational efficiency and boost cash generation as it seeks to ease pressure on borrowings.
The Zimbabwe Stock Exchange (ZSE)-listed group had net borrowings of US$10,9 million in the six months ended September 30, 2024 which was 16 percent above the comparable period prior year of US$ 9,4 million.
The group said, at the start of the financial year, the level of borrowings and overdue supplier obligations were “abnormally high” as a result of a challenging 2023/24 season where competition from duty-free imported sugar, the higher working capital requirements associated with the revised cane supply arrangements and increased manpower costs.
In addition, there was a need for a critical investment required in the off-crop maintenance program to improve plant reliability in the 2024/25 season.
“The group continued to rely on borrowing facilities to finance liquidity gaps on operating and capital expenditure requirements,” Hippo Valley chairman Canaan Dube said in a statement accompanying the company’s financials for the half year ended September 30, 2024.
“Focus in the second half of the year remains to translate increased operational performance into improved cash generation and resultantly maintain a sustainable level of borrowings with a target to reduce cash flow pressures at the start of the ensuing year.”
Dube also said with a cane purchase agreement (CPA) at US$71 per ton of cane supplied and with just over 90 percent of the private farmers opting for CPA over the cane milling agreement (an agreement under which payments occur after the sugar is sold), these facilities were stretched over the current and prior season’s peak working capital requirements.
During the reporting period, the company incurred a total capital expenditure of US$2,5 million, compared to US$2,6 million in 2023. Of this amount, US$0,9 million was allocated specifically for the replanting of cane roots and the retooling of essential operations.
The funds directed towards replanting cane roots are set to ensure the long-term viability of the group’s sugar production, as they help maintain the health and productivity of crops while list, the allocation for retooling signifies proactive approach to upgrading equipment and technologies, which is vital for optimizing operational performance and meeting market demands.
“This investment reflects our commitment to enhancing the efficiency and sustainability of our core business activities,” said Dube highlighting that by prioritizing efficient resource management and optimizing production processes, they intend to bolster their liquidity position.
Moreover, with the country currently experiencing an increase in rainfall, the company anticipates a sufficient supply of irrigation water, which is expected to significantly enhance production capabilities.
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