The JSE is considering the suspension of trade in the shares of Tongaat Hulett at the request of the board of the sugar mill giant, which has been criticised by shareholders for poor leadership and lack of transparency.
The debt-laden sugar group said on Friday it does not expect to be in a position to release its annual report by end-July as it pursues restructuring efforts.
Tongaat’s board, without a chair since Louis von Zeuner resigned abruptly in May, said the decision to ask the JSE for a temporary suspension over delayed finalisation of its provisional and its audited financial statements for the current financial year was “not been taken lightly”.
Tongaat had appointed turnaround specialist Piers Marsden as its chief restructuring officer in June. It said on Friday that efforts to replace a seasonal overdraft facility with a longer-term facility hinge on the finalisation of a restructuring plan.
The intention is to table the plan before end-September, the group said, while the JSE is considering its request. The board and auditors need more certainty about the debt-refinancing and balance-sheet restructuring, Tongaat said in a statement.
“By progressing a comprehensive restructuring solution, we are working to create a long-term future for the company, and the half-a-million people that depend on it across Southern Africa,” said CEO Gavin Hudson.
Despite being on opposing ends of the battle over Tongaat Hulett’s proposed capital raise for the past seven months, shareholders at the feisty Artemis Investments and the esoteric Magister Investments agree that Tongaat’s board and management are dysfunctional.
Raise shareholding
Harry Smit, part of the Artemis-led team leading the charge against Magister’s waiver deal with the sugar giant, lambasted the attitude of the board as oblivious.
“The company should as first step acknowledge that we are uncomfortable with anything they say,” Harry Smit told Business Day. He said that Artemis had to raise its shareholding to effect any real change at the food producer.
“The board is hiding behind closed periods for now, and even delayed financial results to extend this period... They can try to buy as much time as they want, we are coming for them,” warned Smit.
Speaking to Business Day, Zimbabwean billionaire and CEO of Mauritius-based Magister Investments Hamish Rudland scoffed at Tongaat’s offhand management style.
Rudland said he was stunned last year when he met Tongaats leaders who were on their first visit in nearly a decade to the Zimbabwe site.
“The Zimbabwe operation is their biggest asset and they had not been here in over 10 years. The previous CEO apparently never set foot at the Zimbabwe plant,” Rudland said. A business cannot be run remotely or by phone, he said.
Rudland said Tongaat’s debt-laden position stems from “a historic problem created by an incompetent board and management”. He castigated the leadership for continuing to pile on debt.
Debt pile
“The level of debt is so high, it [the company] has to go on its knees to the bank every week just to keep operating,’ he said. He said he understands that Tongaat recently borrowed R900m more to fund the business, but “to what end?”
The company is choking on a debt pile that stood at R6.8bn at end-March. The debt was about R1bn more than a year earlier due to lower sales and slower-than-expected progress in selling properties in KwaZulu-Natal.
Tongaat said it would apply to the JSE for the temporary suspension to be lifted as soon as the audited 2022 financial statements are released, should the JSE give the suspension the go-ahead.
The future of Tongaat, a key player in the Southern African ecosystem with operations in Botswana, Mozambique and Zimbabwe, has been in doubt since early 2019 when it disclosed holes in its balance sheet due to the overstatement of profits, assets and revenues in previous years.
In a matter related to the accounting scandal, the Financial Sector Conduct Authority (FSCA) has announced it will appeal against a high court ruling that the investigation it undertook against Michael Edward Deighton, former MD of Tongaat Hulett, was procedurally unfair and so unlawful.
The authority instituted an investigation in 2020 to determine whether any individuals were involved in the publication of false, misleading or deceptive statements on Tongaat’s performance in previous financial periods.
Former Tongaat executives who are implicated in the scandal, including former CEO Peter Straude and former Deloitte auditor Gavin Kruger, are expected to appear in the Durban Specialised Commercial Crimes Court on July 25.
They face charges of fraud amounting to about R3.5bn and contravening the Financial Markets Act, the Companies Act and the Prevention of Organised Crime Act.
Tongaat’s share price jumped 10.23% to R3.88 on Friday, having climbed 49.23% in the last 30 days.
With Karl Gernetzky
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.