STRUGGLING Tongaat Hulett’s share price fell 7.8 percent yesterday, after it announced a headline loss of R254 million in the six months to September 2020 compared with the earnings of R59m in the same period in 2020.
The group said, however, its turnaround strategy was continuing, and processes for a R4 billion capital raise had begun, with partial underwriting for R2bn.
The weak results had been due to lower raw sugar production, land sales that were delayed by civil riots, hyperinflation in Zimbabwe, prior period restatements and a R158 million impact of civil unrest on profits.
On the positive side, sugar demand was strong across all geographies, there were market share gains, and improvements in ESG were implemented.
Initiatives to improve operations had begun and governance was strengthened, debt was cut, and cash flow improved.
A five-year capital programme had started. Total borrowings were R6.9bn, compared to R11.7bn last year. Net finance costs fell 50 percent on reduced debt and favourable exchange rate movements. Debt-refinancing agreements were concluded in South Africa and Mozambique.
Dividends and management fees of R140m were received from Zimbabwe.
The board said it remained committed to act on findings of the PwC forensic investigations relating to accounting irregularities announced by the group in 2019, pertaining to prior years.
Criminal case processes were under way and civil proceedings against the group’s previous leadership had been instituted.
Summonses had been issued and these matters were in court in Pietermaritzburg. It was anticipated that full trials would be scheduled for early 2023. The group was also supporting various regulators with their ongoing investigations.
During the interim period revenue increased 5 percent to R8.5bn. Operating profit fell 23 percent to R1.3bn. The hyper-inflationary monetary loss was R110m compared with a R71m loss in 2020.
The Mozambique sugar operations delivered strong growth in operating profit from robust local sales. The Zimbabwe operations benefited from buoyant local sales but were impacted by hyperinflation.
The South African sugar operations had a challenging six months compounded by breakdowns at raw sugar mills, unrest in KwaZulu-Natal in July, and the challenges in processing sugar-cane that arose from unrest-related arson.
Covid-19 related impacts, civil riots and a weak economy continued to weigh on the revenue and profits of the property business, the group said.
With the sugar season drawing to a close, full year sugar production for the group was expected to be between 8 percent and 10 percent below the prior year.
The riots caused extensive damage to third-party properties in and around Tongaat’s development precincts, including Cornubia and Bridge City. As a result, there were delays in concluding transactions under negotiation, as customers reassessed investment decisions, and several transactions that were in progress had been cancelled.
BUSINESS REPORT ONLINE