Tambankulu Estate sugar fields, which are part of Tongaat-Hulett, located in Swaziland. Picture:SUPPLIED
Tambankulu Estate sugar fields, which are part of Tongaat-Hulett, located in Swaziland. Picture:SUPPLIED

Embattled sugar producer Tongaat Hulett, whose share will resume trading on the JSE on Monday after more than six months of suspension, is considering tapping shareholders as it seeks to reduce its SA debt by R8.1bn over the next 13 months.

The group, whose market capitalisation has lost about R12bn since the end of March 2018, says it is struggling to reduce its SA debt through earnings from that market, and needs to either accelerate disposals, raise capital or save additional cash.

The group had said in December that it may ask shareholders for R4bn.

Total borrowings stood at R12.99bn at the end of the company’s half year to end-September. The company warned of difficulties in distributing earnings from Zimbabwe and Mozambique, adding that SA’s earnings on their own are insufficient to service debt in the time frame agreed with lenders.

SA’s sugar operations generated an operating loss of R283m in the six months to end-September, more than double the previous period. The group reporting local sales remained subdued and that there had been a change in the sales mix towards lower-margin exports.

Group revenue decreased by 1.5% to R8.085bn, while operating profit surged to R1.278bn from the previous period’s R315m. The latter was largely due to Zimbabwe, where hyperinflationary accounting has been put into effect.

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.

Mozambique generated an operating profit of R122m, from a loss of R211m previously.

The group reported a headline loss of R318m, a 19% improvement from the previous comparative period.

Tongaat’s share price, which lost three-quarters of its value in 2019 before it was suspended in June, is expected to resume trading on Monday.

Tongaat had asked the JSE to suspend the shares because its financial results for the year to end-March 2018 could not be relied on.

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. It has subsequently resolved to pursue claims against former executives.

gernetzkyk@businesslive.co.za