Darnall Mill, one of Tongaat Hulett’s four mills in KwaZulu-Natal. Picture: TONGAAT
Darnall Mill, one of Tongaat Hulett’s four mills in KwaZulu-Natal. Picture: TONGAAT

Trade in Tongaat Hulett’s shares on the JSE could resume in the first week of February as the embattled sugar producer looks to recover from one of the biggest corporate scandals in SA.

The company, which has been hit by poor governance, market underperformance and financial misrepresentation, is in talks with the JSE regarding the suspension it requested in June 2019, it said. Tongaat said it would make an announcement once the JSE had decided on the matter. 

Tongaat had asked the JSE to suspend the shares because its financial results for the year to March 2018 could not be relied on, the company said, but it only came into effect after the shares had already lost three-quarters of their value in the first six months of 2019.       

Tongaat said at the time that the suspension was a temporary measure until the completion of a forensic investigation into the financial irregularities in the company. Earlier in 2019, law firm Bowmans roped in auditing group PwC to conduct the forensic review to uncover whether the misleading financial information was deliberate.

At the time, Tongaat said the 2018 financial statements might be inflated by between R3.5bn and R4.5bn. After the restatement of the statements, Tongaat’s equity reduced by almost R11.9bn.

The company, which has plans to undertake a R4bn rights offer to slash its debt, said in a trading statement on Wednesday that it expected its loss for the six months to end-September to narrow to between R303m and R327m, from a loss of R392m previously.

The group’s Mozambican operations experienced a notable turnaround, it said, benefiting from higher local sales due to pricing and promotions, as well as cost containment. “This, together with the positive impact of the Xinavane refinery coming on stream in the six months under review, returned the operations to profitability after a loss in the comparative period,” Tongaat said.

Tongaat invested R550m in the white-sugar refinery, which officially opened in November 2018.

The imposition of hyperinflationary accounting in Zimbabwe resulted in rand-denominated operating profit in that country rising three-fold, it said, though it also faced higher finance costs and taxation. Tongaat said details of hyperinflation on the firm’s operations would be unveiled at Friday’s results presentation.

The group said its SA sugar production improved 10% year on year, and it continued to reduce costs. Lower sales volumes, and a change in the sales mix towards lower-margin exports, had increased SA’s operating loss for the period, it said.

Tongaat CEO Gavin Hudson on Friday told shareholders at the company’s annual general meeting (AGM) that management was taking steps to improve performance. “We have made good progress across many of these initiatives we have embarked on.”

Hudson said the company’s turnaround strategy, initiated at the beginning of 2019, was on course. “We are in line to meet our stated objectives in terms of cash flow improvements. We have also been working hard to improve our overall processes, our reporting and governance. We have made a lot of progress but it would be naive to think we are done. There is a lot of work still outstanding,” he said.

He said the company, which intends to take action against executives implicated in the financial irregularities, had seen strong cash flow in the sugar business.

gernetzkyk@businesslive.co.za

njobenis@businesslive.co.za

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