The market is bracing for further shocks at sugar giant Tongaat Hulett, as its share price has now tumbled to barely a 10th of the R168 in late 2014.

The share price has fallen 47% since it was revealed last Friday that it had roped in auditing firm PwC to do a "comprehensive review" of "certain practices which will require further examination".

If PwC finds those practices to have been unsavoury, Tongaat said it might "require remedial action including … assessing the impact on previously reported financial information".

In other words, Tongaat’s financials may be restated — a devastating indictment of its board and former CEO Peter Staude, who quit last October.

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Investors are prone to paranoia these days, after uncharacteristic letdowns by blue-chip companies like MTN and EOH. So the market did not hesitate to make a comparison with Steinhoff, the retail giant embroiled in an accounting scandal that has made its own stock tumble 97% from its high.

Tongaat — like Steinhoff — is audited by Deloitte, and Steinhoff also appointed PwC to carry out a "review".

At this point, Tongaat has not appointed PwC to undertake a full forensic audit (the auditing firm was in fact appointed by law firm Bowmans, which Tongaat had approached for advice), but the ordeal has spooked the market.

Suspicions that parts of Tongaat’s sprawling property segment are rotten will be reinforced by the euphemistic reference to "certain practices". Last week the FM mentioned the possibility of land sales — banked after only deposits had been secured — being reversed. And it’s not only that property activity is grinding to a halt — some market watchers are worried that there is also a possibility that some past land sales will be reversed.

Analyst Chris Logan said in last week’s FM: "An illusion was created, by taking the profit on these sales through operating profit, that they were sustainable. [They] were not, and, of course, we now know that these land sales were also on credit and at risk of being reversed."

The seriousness of PwC’s appointment is underlined by an internal document leaked to the media this week, which showed newly appointed Tongaat CEO Gavin Hudson urging staff to give their full co-operation to PWC. Hudson told staff to "respond to all questions", and provide all data.

The obvious interpretation of events is that Hudson — a highly regarded former SABMiller executive — is less than enamoured with what he has found at Tongaat.

One could also assume Hudson would prefer to rebuild Tongaat from a clean slate, hence the determination to delve as deeply into legacy issues as possible.

One insider tells the FM: "Gavin is not happy with what he has found, and there may be more departures from the executive and senior management team. But the feeling is that if there is one guy who can get Tongaat back on track, it’s Gavin."

Insiders believe PwC’s review is likely to uncover skeletons that could rattle sentiment further — especially when it comes to the property sales side, where the market already doubts the veracity of the numbers.

But this is a nettle that has to be grasped before Tongaat can find traction for a turnaround.

Investors will still be fretting for the next few weeks over the possible risks that may emerge in the review, as well as the implications of Tongaat’s "repositioning".

The most serious matter is the possibility that the PwC review could delay the publication of Tongaat’s audited results to end March.

In the case of Steinhoff, Deloitte refused to sign off audited accounts until PwC’s forensic audit had been completed. This has led to a serious delay in producing financial results for the 2017 and 2018 financial years, of which the reporting date has been repeatedly pushed forward.

There are opposing opinions on this matter at Tongaat. Some insiders told the FM it’s doubtful there will be an overly long delay in publishing audited accounts; others reckoning that the risk is very real. One insider said there was excellent co-operation between the task teams of Deloitte and PwC: "Everyone is working around the clock. Clearly there is a need to co-operate, with the local audit profession under fire again. No-one wants to see Irba [the Independent Regulatory Board for Auditors] getting involved."

But the lack of audited financials would present a problem if Tongaat needs to host a rights issue to cull its R10bn debt, which some believe is necessary. Market enthusiasm to back such an exercise without access to the latest accounts would be scant.

Instead, it is understood that Hudson is working flat out with his lenders to ensure Tongaat has sufficient capital to keep operations ticking over. But if those lenders decide not to continue offering lines of capital to Tongaat, and the recourse to a rights issue isn’t there, Tongaat faces a stark choice of selling off assets. There are already rumours that the profitable starch business could be put up for sale, and that it is considering offloading sugar operations in Zimbabwe or Mozambique.