African Markets

No sugarcoating for Tongaat Hulett as it cautions of over R200m loss

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Due to a combination of issues, including the July instability and rising inflation in Zimbabwe, embattled sugar producer Tongaat Hulett expects to declare a loss of up to R249 million in the six months to end September.

“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. 

In early morning trading, Tongaat Hulett’s stock was trading at a loss of almost 3%. The effective tax rate for the period under review was 97 percent, according to the corporation, due to deferred tax assets not being supplied for tax losses in South Africa, as well as the non-deductible net monetary loss.

The other was that, because the majority of the earnings are created in Zimbabwe, and interest and tax are paid in South Africa, the country’s portion of profits for the time is negative. For the quarter, it predicts a loss of R220 million to R249 million, with a headline loss of R242 million to R266 million.

It also forecasts a loss per share of 163 to 185 cents, with a headline loss of 179 to 197 cents. The company planned an R4 billion rights issue in November to help pay down its R6.5 billion debt, with Mauritius-based Magister Investments helping to underwrite R2 billion of the transaction.

Tongaat’s CFO Rob Aitken explained the rationale for the R4 billion rights offer at the time, saying the business had excess debt of R3.7 billion that can’t be repaid through operational cashflows, necessitating the planned offer.

Tongaat has been struggling to regain its footing for the past two years, following the disclosure that the business falsified its financials by nearly R12 billion over a seven-year period.

Since then, the business has pursued a rehabilitation strategy that includes selling non-core assets to reduce debt and tightening corporate governance.

Story by : Norvisi Mawunyegah