Embattled agri-processing group Tongaat Hulett has taken another step towards reducing its debt after the sale of a property in Umhlanga for R167m to JSE-listed property company Balwin Properties.
The sale of 64ha to Balwin, SA’s largest sectional title developer with a R1.77bn market capitalisation, comes after the company, one of the biggest landowners and employers in KwaZulu-Natal, said earlier in February it was in talks for the potential sale of the starch business as it battles a R13bn debt pile.
Tongaat, which has lost 17.71% of its value on the JSE since it resumed trading in early February, intends to reduce SA debt by R8.1bn by March 2021. At Friday’s close of R3.95, the company had a market capitalisation of about R533m. Before the suspension of trade in its shares in June 2019, it closed at R13.21.
The property sold to Balwin is situated within the Izinga Precinct, north of Umhlanga Ridge and above the town of Umhlanga Rocks, Tongaat said. A portion of the Umhlanga property is already zoned and will be used for the immediate construction of 335 residential properties, Tongaat said.
Balwin intends to obtain rights for a minimum of 1,286 residential apartments.
Tongaat’s subsidiary, Tongaat Hulett Developments, had been negotiating with Balwin since 2018, and the land is the last remaining significant portion of developable land with an Umhlanga address, the sugar producer said on Friday.
“The sale of the property is aligned with the Tongaat Hulett development strategy of land conversion for residential and commercial development and in the ordinary course of its business,” Tongaat said.
Balwin designs, builds, markets and sells sectional title residential apartments.
Tongaat has 17,600ha of land and 9,100ha of that land can be converted for property developments. The company’s land portfolio is valued at R11.7bn, according to the 2019 annual report.
Alongside the sale of assets, Tongaat has also prioritised improving cash flows and liquidity. When it released interim results in January, the company said that while it still expected to struggle in 2020, it was on course to improve cash flows by R1bn. In the six months to end-September 2019, Tongaat’s operating cash flow before working capital movements improved from R1bn to R1.47bn.
Tongaat, which intends to raise R4bn by issuing new shares as part of various steps to improve its finance, has a strategy to offload assets. The group has said that it is in talks to sell its starch business.
The property sale is the sugar producer’s latest disposal. In November 2019, Tongaat announced the sale of its sugar and distribution business in Namibia for R220m to Bokomo Namibia.
In 2019, the company, once one of SA’s most recognisable blue-chip stocks, asked the JSE to suspend trade in its shares after an investigation flagged accounting practices that meant its statements could not be relied on.
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.