Tongaat Hulett falls 20% to 25-year low
Speculation is mounting that the sugar producer will soon announce a rights issue, or assets sale, as it meets with lenders this week
Tongaat Hulett’s share price plunged as much as 21% on Tuesday, its worst level since 1993, as speculation continues in the market as to how the sugar producer will deal with its liquidity crisis. Tongaat’s market value plunged by nearly a fifth on Friday after the sugar producer said headline earnings in the year to end-March will probably fall by at least 250%. It is expected to meet with lenders this week, having said that due to its high debt levels and interest costs, “any reduction in operating profit has a larger impact on earnings”.
The market is likely pricing in a possible rights issue, or an asset sale, although the former was more likely, said Gryphon Asset Management portfolio manager Casparus Treurnicht. Regardless of how Tongaat plans to recapitalise its business, it is going to be bad news for shareholders, said Treurnicht. The company is also facing domestic headwinds, such as the recent increase in the sugar tax. Last week, finance minister Tito Mboweni rais...