Hippo Valley Shifts Focus to Exports as High Power Costs and Low Local Demand Impact Operation

Tongaat Hulett's Zimbabwe-listed unit, Hippo Valley Estates, is increasingly prioritizing export markets after adequately supplying the domestic market, despite ongoing logistical, operational, and cost pressures weighing on its performance. Tongaat Hulett, the South African agro-processing group, remains under business rescue following accounting and financial difficulties. However, its Zimbabwean operations have continued to operate fully, albeit under challenging conditions marked by infrastructure constraints and rising input costs.

Hippo Valley CEO, Tendai Masawi, said on Monday that electricity costs remain a major pressure point for the sugar producer, even as power availability has improved. "While power availability has improved, the business saw an increase in the energy cost due to inconsistency in power supply with the plant experiencing peak hours of maximum demand charged at a higher rate of 23 US cents per kilowatt hour compared to off-peak hours, which are charged at 14 US cents per kilowatt hour," said Masawi. This was being worsened by "additional charges of reactive energy," with the company now "looking into ways of managing these troughs and peaks to maximize" on efficiencies.

Labour relations have also been an issue for the company, forcing it to implement strategies to address the current minimum wage levels. At the same time, Hippo Valley recorded a $2 million decline for its 2026 half-year period. Apart from electricity and labour issues, Hippo Valley said other risks and challenges to its operations include water security and infrastructure, power supply, cane costs, procurement costs for other goods and services, uncertainty, and logistical constraints.

"To mitigate these risks and maintain sustainable profits, management is proactively engaging with stakeholders, optimizing operational efficiencies, negotiating supplier terms, and exploring flexible logistics solutions," said Masawi. "These measures are essential to improve profit margins and cash flow, which are currently insufficient to support retooling, recapitalization, mechanization, and modernization of the business."

Nonetheless, Hippo Valley and Triangle Sugar Corporation, the other non-listed unit of Tongaat Hulett in Zimbabwe, have been feeding into the export market while also maintaining local supply. Hippo Valley accounts for 49% of Zimbabwe's sugar industry exports. The industry has grown its export volumes by 61% largely due to the carryover of export contracts, which could not be fully delivered following post-election civil unrest and associated logistical disruptions in Mozambique.

Tongaat Hulett is now pursuing further export market opportunities, especially this year. "There are more opportunities for more exports in the second half of the year. More effort will continue on sales, particularly exports, which are currently below management targets, and consider alternative disposal plans to promote raw sugar uptake," the company said.

For the half-year to the end of September, profits in Hippo Valley fell by 4%, although adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) had risen to $41 million, supported by a $10 million increase in revenue and the $2 million decrease in costs.

Analysts at IH Securities noted that sugar exports for producers such as Hippo Valley have been growing robustly, rising in the first quarter of 2025 by 364% to 15,711 tons "on account of weaker domestic demand" dynamics. Moreover, said the analysts, local producers such as Hippo Valley and Triangle charge up to $900 per metric ton while imported sugar has landing costs of about $800 per metric ton.