Tongaat Hulett fell more than 4% on the JSE as auditing firm Deloitte began probing of the agriculture and agro-processing group’s 2018 financials.
DURBAN -  Tongaat Hulett fell more than 4 percent on the JSE as auditing firm PwC
 began its probing of the agriculture and agro-processing group’s 2018 financials amid mounting operational challenges.

Last week Tongaat Hulett said that its audited financial statements for the period needed to be restated, after a review found that reporting reflected in the 2018 financial statements is in the process of being determined and an estimated reduction in the amount reflected as the company’s equity as at April 1, 2018, is anticipated to be between R3.5 billion and R4.5bn.

Tongaat shares closed 4.12percent lower on the JSE yesterday at R15.81, compared to Tuesday’s close of R16.49.

In the past 12 months the stock has shed around 79.88percent compared to the same time a year ago.

Ron Klipin, a senior analyst at Cratos Asset Management, said Tongaat’s decline worsened, following the hasty retreat of then long-serving chief executive Peter Staude last October as a result of a major deterioration in operations.

“The group’s financials appear to be flawed as the valuation metrics are suspect, which are likely to impact on profits, thereby requiring a re-examination of 2018 results and a subsequent delay in 2019 results,” Klipin said.

Tongaat said it expected to release the results in October.

Klipin said that with a profit warning update, the share price began a significant decline. The peak in October 2018 at R86 a share, took a significant knock, following a cautionary in March to the effect that a strategic and financial review had revealed certain practices that required further examination.

The group also said that it had issued retrenchment letters to employees as part of a restructuring process which will affect about 5000 employees.

Hulett said permanent and temporary employees across its operations in six Southern African Development Community countries would be affected.

The group has been facing problems across all its divisions and it said local sugar markets and trading conditions have deteriorated, resulting in lower than anticipated cash flows in the company’s business and the sugar sector as a whole.

New chief executive Gavin Hudson has inherited a group with massive challenges after he took over from Staude.

The Food and Allied Workers’ Union said it was extremely concerned about the plight of farm workers amid the prospect of looming retrenchments in the sugar industry.

Klipin said Hudson, who commenced his duties in February, was landed with major challenges from an operational point of view coupled with a weakening in global sugar prices.