CHAIRMANS

REVIEW
UnauditedInterim
InterimResults
Resultsfor
forthe
sixsix
months
ended
30 30
September
2011
months
ended
September
2013
Unaudited
ted Interim
Results for the six months ended 30 September 2011
GROUP S
TATEMENT OF C
OMPREHENSIVE INC
OME
ST
COMPREHENSIVE
INCOME
GROUP S
TATEMENT OF CA
SH FL
O WS
ST
CASH
FLO

Unaudited Unaudited
6 months
6 months
ended
ended
30.09.13
30.09.12
(Note 5)
US$000
US$000
Revenue

51 982

90 700

Operating profit
Net finance charges

10 990
(4 090)

17 380
(3 174)

23 289
(6 794)

6 900

14 206

16 495

(3 661)

(4 138)

5 117

10 545

12 357

710

519

1 230

5 827

11 064

13 587

Note 1

Profit before tax

Income tax expense

Note 2

Profit after tax

(1 783)

Share of profit of associated companies

Profit for the period
Other comprehensive income, net of tax

(169)

Total comprehensive income

for the period

5 658

Number of shares in issue (000 of shares)

174 239

(163)
10 901

(53)
13 534

193 021

193 021

193 021

2.9

5.6

7.0

Eanrings per share (cents)

GROUP S
TATEMENT OF FINANCIAL POSITION
ST
Unaudited Unaudited
As at
As at
30.09.13
30.09.12
(Note 5)
US$000
US$000

Audited
As at
31.03.13
(Note 5)
US$000

ASSETS
Non-current assets

238 920

240 752

243 518

Property, plant and equipment

Long term biological assets
Investment in associated companies

200 228
35 303
3 389

198 247
39 342
3 163

202 428
37 917
3 173

Current assets

162 211

140 079

119 787

Short term biological assets

Deferred plant maintenance cost
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents

37
3
70
26

Total Assets

39
3
47
28

Unaudited Unaudited
6 months
6 months
ended
ended
30.09.13
30.09.12
(Note 5)
US$000
US$000

Audited
Ye a r
ended
31.03.13
(Note 5)
US$000

786
622
664
537
23 602

589
901
447
635
359
20 148

47
10
25
24

793
935
154
881
359
10 665

401 131

380 831

363 305

Cash flows from operating activities

Operating profit
Depreciation
Movements in post retirement provision
Profit on disposal of property, plant and equipment
Changes in biological assets
Changes in working capital
Deferred plant maintenance costs
Net finance charges paid
Tax paid

10 990
6 617
(1 371)
(68)
12 621
(44 132)
7 313
(4 090)
(300)

17 380
7 403
16
3 050
(25 599)
5 734
(3 174)
-

Cash (outflow)/inflow from operating activities

(12 420)

4 810

11 648

Cash flows from investing activities

Property, plant and equipment purchased
Proceeds from disposal of property, plant and equipment
Dividends received from associated companies

(5 420)
1 071
356

(8 889)
369

(17 585)
861

Net cash outflow from investing activities

(3 993)

(8 520)

(16 724)

45 716
(16 366)

27 043
(13 504)

22 113
(16 691)

Net cash inflow from financing activities

29 350

13 539

5 422

Net increase in cash and cash equivalents

12 937

9 829

346

Net cash balance at 31 March 2013

10 665

10 319

10 319

Net cash balance at 30 September 2013

23 602

20 148

10 665

Unuadited Unuadited
6 months
6 months
ended
ended
30.09.13
30.09.12
(Note 5)
US$000
US$000

Audited
Ye a r
ended
31.03.13
(Note 5)
US$000

Cash flow from financing activities

Proceeds from borrowings
Repayment of borrowings

Notes

1.

2.
EQUITY AND LIABILITIES
Capital and reserves
Shareholders interest

216 560

208 269

210 902

Issued share capital

Non-distributable reserves
Retained earnings

15 442
128 077
73 041

15 442
128 136
64 691

15 442
128 246
67 214

Non-current liabilities

74 229

74 792

75 423

Deferred tax
Provisions

64 473
9 756

63 721
11 071

64 296
11 127

110 342

97 770

76 980

31 461
978
77 903

41 100
56 670

28 427
48 553

401 131

380 831

363 305

Current liabilities
Trade and other payables
Current tax liability
Short term loans
Total Equity and Liabilities

Audited
Ye a r
ended
31.03.13
(Note 5)
US$000

3.

4.

5.

Net finance charges

Interest paid
Interest received

23 289
11 918
450
(3 729)
(12 186)
(1 300)
(6 794)
-

(4 093)
3

(3 232)
58

(6 854)
60

(4 090)

(3 174)

(6 794)

Income tax expense

Normal tax
Movement in deferred tax
Transfer to non-distributable reserve

(1 637)
(177)
31

(3 673)
12

(4 141)
3

Charged to Income Statement

(1 783)

(3 661)

(4 138)

Depreciation
Depreciation of property, plant and equipment

6 617

7 403

11 918

Capital Expenditure Commitments

Contracted and orders placed
Authorised by Directors but not contracted

1 940
814

3 299
109

6 909
2 214

2 754

3 408

9 123

Accounting policies and comparative figures

Hippo Valley Estates Limited has adopted all the new or revised accounting pronouncements as issued by the
IASB which were effective for Hippo Valley from 1 January 2013. The adoption of these standards had no
recognition and measurement impact on the financial results, other than for the adoption of the revised IAS 19
which requires that post-retirement benefit accounting actuarial gains and losses be recognised immediately
in other comprehensive income and no longer be amortised through profit or loss.

TATEMENT OF CHANGES IN EQUITY

GROUP S
ST
Issued
capital
US$000

Nondistributable
reserves
US$000

Retained
income
US$000

To t a l
US$000

Balance at 31 March 2012 (as previously

reported)
Change in accounting policy

15 442
-

128 299
-

53 386
241

197 127
241

Balance at 31 March 2012 (restated)

15 442

128 299

53 627

197 368

13 587

13 534

13 647
(60)

13 284
250

Restated comprehensive income

Comprehensive income for the period (as
previously reported)
Change in accounting policy

(53)

(363)
310

Balance at 31 March 2013 (restated)

Comprehensive income for the period

15 442
-

128 246
(169)

67 214
5 827

210 902
5 658

Balance at 30 September 2013

15 442

128 077

73 041

216 560

Comparative figures have been restated with the effect of the compulsory adoption of the revised IAS 19 on
profit or loss for the year ended 31 March 2013 (with the 6 months ended 30 September 2012 in brackets)
being a decrease in operating profit of US$81 000 (2012: US$16 000), a corresponding tax charge of US$
21 000 (2012: US$4 000) and net profit for the period of US$60 000 (2012: US$12 000). Other
comprehensive income increased by US$310 000 (2012: nil) after tax. The effect on the statement of
financial position at 31 March 2013 was a decrease in provisions for retirement benefits of US$661 000
(2012: US$309 000) and increases in equity and deferred tax of US$491 000 (2012: US$229 000) and
US$170 000 (2012: US$80 000) respectively.
6.

Currency of reporting
The financial statements are reported in United Sates Dollars (US$). This is the functional currency of the Group.

By order of the Board

Hippo Valley Estates Limited
Registration No. 371/1956
Registered Office;
Hippo Valley Estates
Chiredzi
B Shava
Company Secretary

DIRECTORS: M H Munro (Chairman), S D Mtsambiwa (Chief Executive Officer), P H Staude, S L Slabbert, L R Bruce, N Kudenga, J P Maposa, S G Nhari, J E Chibwe, F D A Musikavanhu

11 November 2013

CHAIRMANS REVIEW

CHAIRMANS
REVIEW
Unaudited
Results2013
for the six months end
Unaudited Interim Results for the six months
ended Interim
30 September
Revenue of US$52 million (2012: US$90,7 million) - 42.7%
Operating profit of US$11 million (2012: US$17,4 million) -36.8%
Profit for the period of US$5.8 million (2012: US$11,1 million) - 47.3%

COM
MENT
AR
Y
OMMENT
MENTAR
ARY
The Companys sugar production for the period to 30 September 2013 amounted to
178 946 tons compared to 160 910 tons for the same period last year, an increase
of 11,2%. Total cane deliveries to the mill amounted to 1 409 062 tons (2012:
1 349 467 tons), an increase of 4,4%.
The private farmers responded positively to the accelerated rehabilitation initiatives
embarked upon in 2011, collectively delivering 650 945 tons of cane over the six
month period to 30 September 2013 (2012: 581 460 tons), an increase of 12,0%
inclusive of cane deliveries from Green Fuel amounting to 134 386 tons (2012:
178 689 tons). The Companys cane deliveries over the period amounted to 758
117 tons (2012: 768 007 tons), a decrease of 1,3%.
Revenue for the six month period to 30 September 2013 amounted to US$52
million (2012: US$90,7 million), a decrease of 43%. Operating profit and profit
for the period totalled US$11 million (2012: US$17,4 million) and US$5,8 million
(2012: US$11,1 million) respectively. The business experienced severe pressure
from significantly lower international sugar prices and from a surge in sugar imports
into the domestic market which significantly reduced domestic sales volume. With
the changing dynamics in the European Union, the price levels that the business is
achieving for sales into the EU this season are averaging some 6 US cents per pound
lower than the levels in the last two years. Cane valuations have been impacted by
lower prices and the effect of curtailed root replanting as a consequence of the
current water dynamics.
The industrys domestic and export sales volumes for the period to 30 September
2013 totalled 192 542 tons (2012: 247 741 tons), a 22,3% decrease. The
Companys share amounted to 84 990 tons (2012: 117 532 tons), a 27,7%
reduction as a result of lower local market sales and a timing difference on export
shipments.
The trading environment has added impetus to the drive to reduce costs of sugar
production, with substantial reductions being achieved in the current season.
Operating cash flow, before working capital, for the six months to 30 September
2013 amounted to US$28,9 million (2012: US$27,8 million). The US$36,8
million absorption of cash in working capital (2012: US$19,9 million) whilst
consistent with the seasonal peak cash demand, was exacerbated by a large sugar
stock build up.

total sugar production for the current season is expected to be between 226 000
and 235 000 tons (2012/13 season: 228 000 tons).
With the low dam levels and the corresponding mitigating actions related to irrigation
to protect the substantial current investment in sugar cane roots, cane expansion and
root replanting for both private farmers and Company estates have been curtailed, to
be resumed once the dam levels recover. For the first time in many years, the rainfall
forecast in the catchment area of the dams is for La Nina (wetter weather pattern)
compared to the dry El Nino of the past number of years. Should the water inflow in
the coming summer be similar to the lower inflow periods during the last 8 years,
then it would necessitate a reduction of irrigation to some 50% of normal levels,
which would substantially reduce cane yields and sugar production.
A period of unsustainably low international prices has been experienced following
two seasons of exceptionally good weather conditions for sugar cane growing globally
and low Government controlled ethanol prices in Brazil. The changes in the EU are
on-going, with some fundamentals remaining in place, including duty free access for
Zimbabwe. At present, this benefit is being eroded by the EU allowing additional
imports at reduced duty and the low world price. The business is focusing a great deal
of attention in multiple areas on achieving the best possible outcome in terms of
sugar prices, the mix of sugar flow destinations and combating unfair import
competition. The sugar industry in Zimbabwe is in a receptive engagement with
Government to restrict imports. Local market sales are being lost to imports as a
result of the current low world price, leading to increased export volumes at lower
prices. Generally, the most vulnerable to these dynamics are rural communities and
emerging farmers.
The Sugar Industry, which directly employs about 24 000 people of which 5 600
workers are employed by the indigenous private farmers, is in an important recovery,
growth and expansion phase. A central part of this recovery is the substantial
development of indigenous private farmers. As at the end of 2012/13 season,
some 670 active private farmers on 11 200 hectares delivered 853 000 tons of
cane to the Tongaat Hulett sugar mills and generated US$56 million in revenue.
There is sufficient milling capacity to double the current number of indigenous private
farmers and their labour force and increase their cane production and deliveries to the
mills correspondingly with Tongaat Hulett as a key development partner.
As part of its on-going objective to economically empower communities around its
operations in Zimbabwe, the Company has embarked on a socio-economic upliftment
drive to create value for relevant entrepreneurs, by developing sustainable new business
enterprises and outsourced services within its value chain, with particular focus on
employment creation for the youth.

The Companys net debt increased to US$54,3 million at 30 September 2013

compared to US$36,5 million at 30 September 2012. The net interest charge for
the period to 30 September 2013 amounted to US$4,1 million (2012: US$3,2
million).

OUTL
O OK
OUTLO
Industry production estimates for the 2013/14 season are between 460 000 and
478 000 tons sugar (2012/13 season: 475 000 tons). The Companys share of

M H Munro
Chairman
11 November 2013

DIRECTORS: M H Munro (Chairman), S D Mtsambiwa (Chief Executive Officer), P H Staude, S L Slabbert, L R Bruce, N Kudenga, J P Maposa, S G Nhari, J E Chibwe, F D A Musikavanhu

S D Mtsambiwa
Chief Executive Officer