CHIREDZI – Hippo Valley Estates Limited has sounded the alarm on Zimbabwe’s currency mix dilemma, warning that the country’s exchange rate volatility poses an existential threat to the sugar producer’s business.
Hippo Valley, a leading sugar producer in Zimbabwe, has released its trading update for the third quarter ended December 31, 2024.
The report highlights the company’s struggles amidst a challenging operating environment, characterised by inflationary pressures, exchange rate volatility, and a currency mix dilemma.
According to the report, the local currency, ZWG, depreciated by 45% against the US dollar during the quarter, with the official exchange rate closing at US$1: ZWG27.09 on December 31, 2024.
This volatility has placed immense pressure on the company’s profit margins, narrowing its capacity to retool the business and fueling foreign currency pressures.
The company’s revenue increased by 16% from the prior year’s same period, driven by a strong recovery of local market sales volumes. However, the increase in the cost of doing business, largely related to cane purchases and manpower costs, squeezed profit margins.
The company said it has implemented sustainable cost containment plans and refined its operational strategies to mitigate these challenges.
Hippo Valley Estates Limited has also faced challenges related to the currency mix dilemma, which has affected its ability to generate enough US dollars from normal sales.
The company has had to rely on imports for critical goods and services, cane supply, and manpower costs, which are largely priced in US dollars.
“The business environment remains challenging at the back of inflationary pressures, exchange rate volatility (with the local currency (ZWG) devalued by 45% at the end of the last quarter), tightening money supply and currency mix dilemma between the ZWG and USD,” the company stated.
In response to these challenges, the company has embarked on a number of strategies, including project “Zambuko,” which aims to improve the company’s capacity to generate positive cash flows.
The project has involved an employee retrenchment process, which is expected to be completed in three phases by August 2025.
The company has also achieved recertification in respect of its Occupational Safety and Health Management System (ISO 45001-2018) and Environmental Management Systems (ISO 14001:2015).
The company has also invested in clean renewable energy sources, reafforestation, and sustainable waste management systems.
Despite the challenges, the company remains optimistic about its future prospects, citing adequate sugar stocks to satisfy local market demand and critical export markets.
The company has also filed an appeal with the Supreme Court regarding the recent adjustment to the Division of Proceeds (DOP) arrangement under the cane milling agreements.
