A Tongaat Hulett sugar cane field. Picture: WALDO SWIEGERS
A Tongaat Hulett sugar cane field. Picture: WALDO SWIEGERS

The embattled agri-processing and property company Tongaat Hulett, which is mulling a R4bn rights offer to slash its debt pile, has asked the JSE to postpone the lifting of the suspension of its shares to after its six-months trading update in January 2020.

The update for the six months to end-September will provide another glimpse into the company’s financial performance as its shares have been suspended since June.

The board believes that “greater visibility” about the company’s financial performance over the six-month period ended September 30 “is important given the extent and complexity of remedial actions, internal cost-cutting plans and other restructuring initiatives” undertaken by the board and management since March 31, Tongaat said on Wednesday.

The company said delaying the lifting of the shares suspension until the second half of January would give shareholders time to analyse the financials for the year to end-March that the company released on Tuesday.

Lulama Qongqo, an investment analyst at Mergence Investment Managers, said  that while delaying the lifting of the suspension could disadvantage current shareholders who wish to sell the stock, it is an opportunity for shareholders to get comprehensive information before making investment decisions.

Not ideal

Instead of selling the stock, shareholders could decide to hold on to the shares and engage the company to influence it to “continue working on its governance and ethics”.

Regarding the company’s decision to issue new shares for R4bn, Qongqo said a rights issue “is usually not ideal but after exhausting the leeway provided by lenders, they probably have no choice but to come to the market for cash”.

The rights issue is a dilemma for existing shareholders who do not know the value of the company because of the accounting irregularities in the firm. “It is very difficult for investors to double down on a poor investment decision where the probability of a successful turnaround is almost impossible to assess,” Qongqo said.

Stephen Meintjes of Momentum Securities said delaying the lifting of the suspension is a logical move. “The shareholder will have additional information. They will know what they are selling if they decide to offload the stock,” Meintjes said.

Detailed disclosures

In the full-year results, the company reported that its debt had doubled to R11.4bn in the past six years, prompting it to consider the R4bn capital raise.

“The 2019 financial statements include a variety of detailed disclosures in respect of restatement and other accounting-related matters and are necessarily more complex than is typically the case with annual financial statements,” Tongaat said.

Speaking at the release of the annual results on Tuesday, Tongaat chair Louis von Zeuner said only the JSE could decide on the lifting of the suspension.

Zeuner said the interim results could provide a further level of comfort to the market before the lifting of the suspension.

“This is also an awkward time of the year in terms of activity. We need to look very carefully in terms of our own recommendation to the JSE. We have provided the JSE with our views in which we have considered all the options and hopefully put at their disposal information that will help them in taking that decision. It is eventually their decision,” Zeuner said.

njobenis@businesslive.co.za

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