The trading environment during the financial year was characterized by a hyperinflating currency, rolling power outages and a fluid policy environment which resulted in challenges to industrial activity and slowed economic growth. The ongoing Ukraine/Russia war resulted in significant increases of key agricultural input costs such as fuel and fertilisers. Whilst the rainfall season was not as pronounced as the previous year, significant rains were notably received at the beginning and end of the season. Cane contribution from the company’s plantations grew 13% y/y aided by improvements in yields from 92.23tn/ hectare to 97.98tn/ hectare. There was improved control of yellow sugarcane aphid infestations through aerial spraying within the period. Cane deliveries from private farmers improved from trailing 5% y/y as at 1H23 then closing the year at 2% negative variance. Private farmers contributed 42% of total cane supply in FY23 versus 45% in FY22. Yields in the category also saw a decrease from 73.75tn/ hectare to 71.85tn/ hectare. Aggregate tons harvested grew a modest 4% y/y to 1,767k tonnes. Production capacity at the company’s mills was temporarily affected by a major breakdown resulting in extension of the milling season. In terms of sugar production, the marginal increases in tonnes milled were unfortunately diluted by poor quality of cane leading to a decline of 1% in sugar output to 207k tonnes. The company’s share of total sugar production remained relatively flat as at FY23 registering at 52.29% versus 53.66% in FY22. Domestic sugar sales for the industry were impacted by SI 198 allowing duty free importation of basic commodities from neighbouring countries, sugar being one on the list. As per estimates from industry representatives, approximately 5% market share was lost as a result of the policy which was then revoked in November 2022. Total industry sugar sales volumes into the domestic market for the year consequently slowed 5% to 338k tonnes. Despite subdued demand in the domestic market, sugar exports by the industry performed well growing 13% y/y, aided by increased volume allocation on the United States Tariff Rate Quota from 13,087tn to 17,751tn. Margins for the company were affected by lower sugar production and the inability to fully recover higher production costs in its pricing structure given the pressure from cheaper imports. Manpower costs also increased in the period on finalisation of new wage negotiations. Adjusted EBITDA for Hippo narrowed from 10.5% to 7.5% in the year. Hippo did not declare a follow up final dividend to the interim dividend of USc 0.03 on account of the volatile environment.
