EDITORIAL: Welcome back, Tongaat
Gavin Hudson, who took over as CEO of Tongaat Hulett last year, has done a commendable job fixing up the beleaguered sugar company after an accounting crisis and a brush with fraud
It may not be immediately evident, but Gavin Hudson, who took over as CEO of Tongaat Hulett last year, has done a commendable job fixing up the beleaguered sugar company after an accounting crisis and a brush with fraud.
Hudson is disciplined, cost-conscious and has credibility when he talks about introducing accountability to the company’s culture. It’s showing in the numbers too: last week Tongaat announced that for the six months to September, revenue fell marginally, but operating profit climbed 305% to R1.27bn.
And yet, on the first day Tongaat’s shares have been allowed to trade on the JSE since June last year, after an eight-month suspension, the stock plunged 63%. The day after, it fell a further 6.67%.
This isn’t a reflection of how Hudson has done; rather, it’s what happens when you trap investors in your company, not allowing them to trade out of their positions. Steinhoff, with a much larger fraud, understood this — and its stock continued to trade without suspension.
If the rationale for suspending Tongaat’s share last Tuesday was to protect value, it clearly didn’t work.
At least now Tongaat knows what the lie of the land really is, and how the market perceives its value. And other companies tempted to suspend their shares will look at this as a cautionary tale, and perhaps think twice.