Shares plunge 63.66%, wiping more than R430million off the value of its stock, Tongaat refinery in KZN. Photo Supplied.
Shares plunge 63.66%, wiping more than R430million off the value of its stock, Tongaat refinery in KZN. Photo Supplied.

Tongaat Hulett shares plunge 63.66% in torrid return to the JSE

By Sandile Mchunu Time of article published Feb 4, 2020

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DURBAN - Tongaat Hulett suffered a torrid return to the JSE yesterday as shares plunged 63.66 percent, wiping more than R430 million off its stock as the sugar maker sought redemption after nearly eight months in the cold.

The stock settled after tumbling 67percent in early trade before closing the day at R4.80.

Analysts attributed the sharp decline to the repricing of the stock hurt by last year’s accounting scandal.

Sasfin portfolio manager Andrew Padoa said investors were weighing their options on the exact price of the stock.

“Since Tongaat’s shares were suspended on the JSE last year, a lot of information detailing the challenges Tongaat is facing has been made public, including a restatement of previous financials,” Padoa said. “Investors are now repricing the stock as a result of the large debt levels, the asset write downs, both in land and sugar cane, as well as a possible rights offer.” The free fall comes after the JSE lifted the suspension of the agriculture and agri-processing company following an accounting scandal that led to the inflation of its assets and profits.

Tongaat asked the bourse to suspend its shares in June last year, arguing that its results for the year to end March 2018 could not be relied upon as they had been inflated by up to R4.5billion.

The group said the discrepancies would have a material impact on its half-year financials to end September 2018 and full year results to March 2019.

At the time Tongaat shares exchanged hands at R13.21.

Last week, the group released its results for the six months to end September, showing that a headline loss of R314m from the restated headline R354m last year.

The group also released the long-awaited PricewaterhouseCoopers investigation which found that 10 former executives, including its former chief executive Peter Staude, played a role in inflating assets and profits.

Tongaat’s shares have fallen 90percent in the last 52 weeks.

InvestSure co-founder Shane Curran said the decline could be linked to a string of updates after it was suspended from the JSE.

“Tongaat Hulett shares were suspended after suspected accounting fraud was uncovered in their business,” Curran said.

“The share price was suspended in June 2019, and while they were investigating, meaning no one could sell their shares and in the last seven months a steady string of updates have come, including restated financials that reduced equity by R12bn, where they originally expected a reduction of R4bn. Trading in the share was resumed this morning and all this news was priced in immediately, hence the massive losses.”

But chief executive Gavin Hudson has put a brave face on the future prospects of the company.

Hudson has said that he remained confident about the business as the group was moving strongly in the right direction.

“Tongaat is generating decent cash flow with strong margins and we are on track to meet our first-year target of improving cash flow by R1bn. We have also met and exceeded our first debt reduction target, which was agreed with our lenders. We are at an advanced stage of assessing assets, which may be suitable for disposal,” Hudson said.


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