Debt-heavy sugar maker Tongaat reports R1.1 billion loss

Headline earnings per share (heps), the main profit measure in South Africa, declined by a massive 801% to 631 cents, from 90 cents headline profit per share in 2020, with revenue slumping 3% to R14.9 billion rand, leading to a 44% decrease in operating profit. The firm said it would not be declaring a dividend to its long-suffering investors. 

The KwaZulu-Natal based sugar company was slapped with a R7.5-million fine last year by the JSE for misrepresenting its financial statements between 2011 and 2018, a scandal that has cost more than 5,000 jobs and millions of rands for investors, in addition to huge reputational damage for the 128-year old firm.  

There was a bright spot in the results. The cane grower said it was able to conclude asset disposals of around R6.6 billion, leading to a 42% reduction of its overall debt load, allowing it to make progress in finalising a debt restructuring agreement with lenders that it owes  around R8 billion rand.

“The good progress made in honouring existing commitments to lenders under challenging circumstances has allowed Tongaat Hulett to secure an agreement with its lenders to refinance the existing South African debt facilities of R6 400 million, which will largely mature on 30 September 2021.,” the firm said. “An agreement was also secured with lenders to restructure debt facilities in Mozambique.”

A big part of Tongaat’s recovery plan also hinges on further sales of its substantial land holdings, although that may now be complicated by the violence and looting of scores of businesses in KZN, where most of its business is based. Sales of its Zimbabwe business may also be in the offing, although the company did not mention it explicitly in the results. 

“New property sales continue to be considered in relation to associated legacy obligations. While sales may remain depressed in the short term, the emerging demand is encouraging,” tongaat said. 

At market close the company’s share price was down nearly 3% to R7.28 pre share. The slump was in-line with the overall slump on the bourse, with competitor Hulamin down around 4% on the day. BM/DM