Embattled sugar producer Tongaat Hulett is pleased with its progress in dealing with a debt pile far in excess of its market value, with a weaker rand and robust South Africa sugar sales helping the group return to profit in the six months to end-September.
By KARL GERNETZKY
Tongaat, which was valued at about R1.6bn on Friday morning, is battling to come back from a corporate scandal that prompted a collapse in the value of its shares and criminal charges against former executives.
Successful asset sales and an improved performance in South Africa sugar has kept the group’s turnaround on track, CEO Gavin Hudson said on Friday, despite volatile market conditions as a result of the Covid-19 pandemic.
Local market sales were buoyant, particularly over the lockdown period, the group said, with sales volumes increasing 24% to 246,130 tonnes in the six months to end-September. This was aided by wholesalers and retailers switching their private-label sugar to SA produced sugar.
Export sales volumes also surged by 103,802 tonnes to 147,628 tonnes, benefiting from the weaker exchange rate as well as improved pricing, particularly in refined sugar markets.
Group revenue grew 37% to R8.2bn to end-September, with headline earnings recording a sharp turnaround, rising to profit of R175m, from a loss of R315m previously.
Net debt fell 8.7% year on year to R10.9bn, while in SA, net debt decreased R636m to R10.37bn.
Post year end, the group received R5.26bn in proceeds from the sale of its starch and glucose business to Barloworld. The group has put R4.64bn of this to pay down debt, having targeted an R8.1bn reduction by September 2021.
Tongaat was once one of the country’s most recognisable blue chip stocks, but an ac An investigation by PwC into bookkeeping practices at Tongaat found that the company had, among other things, overstated sugar sales and the value of assets.
The company has launched a civil suit to recover bonuses and benefits of 10 executives it alleges played a role in the misleading financial statements, and has also filed criminal charges in SA and Zimbabwe counting scandal in 2019 left the group battling for survival.
Hudson said on Friday the Hawks had concluded their investigation, and the case was expected to be handed over to the National Prosecuting Authority in early 2021, who would then make decisions on prosecutions.
“More remains to be done, but we are happy with the progress to date,” Hudson said in a statement.
“We are rebuilding trust in Tongaat Hulett and that is testament to a great team and incredible hard work over the last two years,” he said.
In morning trade on Friday Tongaat’s share was up 2.13% to R12, having fallen 9.16% so far in 2020. The group’s share has fallen by almost 90% over the past three years.