SOUTH AFRICA – The Anglo-South African financial services group Old Mutual has announced that it was unsatisfied with Tongaat Hulett, the agri-processor’s executive pay saying it is set to discuss the issue with the company, reported Business Day.
Old Mutual raised concerns on how Tongaat’s executive remuneration was structured and voted against the pay policy at the annual general meeting in August 2017.
This follows a report by the asset management group, Investec calling on the Tongaat Hulett’s CEO, Peter Staude to step down after posting unsatisfactory 2017 annual results and underperformance over the past decade.
The sugar producer is reported to have recorded negative cumulative free cash flow, declining returns and nil cumulative earnings growth over the last 10 years.
In their report entitled Time for change, Investec appealed to the CEO who have served Tongaat since 2002 together with top executive to step aside.
“We welcome the fact that brokerage houses are taking an active interest in these kind of governance-related issues,” said Jon Duncan, head of responsible investment at Old Mutual Investment Group.
“As an asset manager, our preferred approach is to raise concerns directly with management teams as a basis for productive engagement.
“We will be engaging management on this issue in order to seek greater alignment between company strategy and reward structure.”
In full year results ended March, Tongaat reported headline earnings fell 37.2% to US$49.05 million while share price slid 9.6% on Thursday morning, before closing 5% down at US$6.44, the lowest since June 2009, according to Business Day.
Although it blamed the slump in performance on import duties which were inappropriately applied by authorities forcing it to export excess production, the company management maintained a positive outlook for the full year to end March.
After reporting the results which also plunged on lower international sugar prices and the stronger rand, the company said in a statement had awarded Staude and chief financial officer Murray Munro shares bought on the market as part of Tongaat’s long-term incentive plan.
“Apart from the interim guidance … the most frustrating aspect of the 2018 financial results is the painfully slow pace of unlocking value from Tongaat’s land portfolio,” said a statement from the company.