Tongaat Hulett, one of SA’s biggest sugar producers, whose reputation was tainted by misrepresentations of its financial results between 2011 and 2018, has failed to fully honour its debt commitment for the March quarter, prompting renegotiations with lenders.
The news sent its shares tumbling 23% to R8 by the close of trade on Thursday, in its biggest one-day drop since the stock resumed trading on the JSE in February 2020 after a seven-month suspension.
Tongaat, whose shares are down 18% since the beginning of 2021, has been able to settle about R6bn of the R8.1bn debt owed to its lenders in the March quarter.
“The parties are in advanced negotiations to amend the cumulative amount of the signed debt reduction transaction agreements from R8.1bn to R6.4bn, which will allow [Tongaat] to meet the milestone,” Tongaat said in a statement. Debt reduction transactions include asset disposals the proceeds of which can be used to repay debt.
The company, which also has operations in Zimbabwe and Mozambique, is in the throes of a turnaround strategy that involves cutting debt through selling assets.
CEO Gavin Hudson has been trying to steady the ship since taking over from Peter Staude in February 2019. Staude and other former executives are accused of being complicit in the mismanagement of the company, after PwC’s report which sought to uncover the root causes of problems besetting the company.
The JSE fined Tongaat about R7.5m after establishing that its financial results in the eight years to 2018 were incorrect, false and misleading.
Tongaat announced on Thursday that the production of refined sugar for the 2021 financial year increased 40% to more than 450,000 tonnes, against a previously planned production level of 304,000 tonnes. Production soared because the company delayed the planned annual maintenance shutdown of its refinery to honour the sugar industry’s commitments in terms of the Sugar Master Plan and supply the 100,000 tonne (13%) increase in refined sugar demand.
It said the extra pressure of the production ramp-up led to increased production costs and process inefficiencies and resulted in a 25,000 tonne sugar production loss.
“This will have a material impact on the full-year financial results of the SA sugar operation, though the amount thereof has not yet been fully quantified,” the company said.
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