No sugarcoating for Tongaat as it warns of R249m loss

Embattled sugar producer Tongaat Hulett expects to report a loss of up to R249 million in the six months to end September due to a number of factors including the July unrest and high inflation in Zimbabwe.

“The interim period presented several additional obstacles to navigate, including hyperinflationary effects and higher input costs in Zimbabwe, disappointing milling performance in South Africa due to Covid-related maintenance delays, as well as significant challenges and losses related to the civil riots in South Africa, which also weighed on the revenue and profits of the property business,” the company announced on Monday morning.

Tongaat Hulett’s share price was down by over three percent in early morning trade.
The company said two important things needed to be noted, the first being that the effective tax rate for the period under review was 97 percent due to deferred tax assets not being provided for tax losses in South Africa, as well as the non-deductible net monetary loss.

The other was that since the majority of the profits are generated in Zimbabwe, and the interest and tax is carried in South Africa, its share of the profits for the period is negative.

It expects a loss of between R220 million and R249 million for the period, with a headline loss of between R242 million and R266 million. It also expects a loss per share of between 163c and 185c, with a headline loss in the range of 179c and 197c.

In November the company proposed a rights issue of up to R4 billion, as it aims to reduce its R6.5 billion debt pile – with Mauritius-based Magister Investments partially underwriting R2 billion of the transaction.

Explaining the rationale for the R4 billion rights offer, Tongaat’s CFO Rob Aitken said at the time that the group has excess debt of R3.7 billion that can’t be repaid through operational cashflows, resulting in the proposed offer.

For the past two years, Tongaat has been working to regain its footing after the revelation that the company inflated its financials by almost R12 billion over a period of seven years. Since then the company has embarked on a turnaround strategy, disposing of non-core assets to cut down on the debt and tightening corporate governance. – fin24