SOUTH AFRICA – Tongaat Hulett has made substantial progress in the execution of its turnaround strategy, evident by its report of an 18% increase in revenue to R15.4 billion (US$892.4m) for the year to end March 2020 from R13.1 billion (US$759m) recorded the previous year.
The turnaround strategy aims to stabilise and restructure the business to become more profitable and sustainable as it recovers from its accounting scandal.
The sugar processor has emerged from the scandal in better shape than it was 12 months ago after it reduced its headline loss to R285 million (US$16.5m), a 79% improvement from last year’s headline loss of R1.4 billion (US$81m).
The group has posted an operating profit of R3.3 billion (US$191.2m) against R551 million (US$31.9m) the previous year.
Cash flow from operations increased 62% to R2.1 billion (US$121m) from R1.3 billion (US$75m) previously.
Commenting on the results, Tongaat Hulett CEO Gavin Hudson said, “After a significant amount of hard work, we are pleased to report that our strategy to turn Tongaat Hulett into a low-cost sugar producer and a leading agri-business in Africa is starting to manifest in our financial results.”
The performance was achieved in a market characterised by weak economic growth, significant business uncertainty and volatility.
The agriculture and agriprocessing business is on a rebound following a report by PwC which revealed that some of its former executives were responsible for overstating assets and profits by using “undesirable accounting practices”.
Last year, Tongaat asked the JSE to suspend its shares because its results for the year to end March 2018 could not be relied upon as they had been inflated by up to R4.5bn (US$260m).
However, the suspension was lifted in February after the group recorded an improvement following the implementation of the turnaround strategy.
“The financial mismanagement uncovered in early 2019 was devastating for Tongaat, and affected every aspect of our business.
“To get Tongaat back to operating efficiently, strategically and profitably required nothing short of a fundamental restructuring of our business. We executed this swiftly and also undertook a sweeping review of our policies, procedures and processes as well as every aspect of our governance,” Hudson stated.
However, Hudson said that more remains to be done to position the group to where it should be as its biggest challenge or ‘Achilles’ heel’ is its huge debt burden.
The group plans to reduce its debt by R8.1bn (US$469m) by March 2021 and wants to exit some core and non-core businesses in an effort to reduce debt.
In June, the group announced the sale of Tambankulu Estates to Eswatini’s Public Service Pensions Fund for R375m (US$21.7m) in a share purchase agreement, with the proceeds earmarked to reduce its R13bn debt.
Next in line is the sale of its starch business for R5.35billion (US$342.6m) to KLL Group, which has been met with the company wanting an out of the deal on grounds that the Covid-19 pandemic has affected the commercial merits of the deal.
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