Times Of Swaziland: TONGAAT HULETT RECEIVES ESWATINI PROCEEDS, SHARES RISE

TONGAAT HULETT RECEIVES ESWATINI PROCEEDS, SHARES RISE
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BY SABELO MAJOLA on 04/12/2020 01:07:00


MBABANE – Having received its proceeds of the E375 million for the disposal of
its Tambankulu sugarcane estate in Eswatini and other profits, embattled sugar
producer Tongaat Hulett’s share rose to an almost seven-month high on
Wednesday.
The Tambankulu sugar estate was bought by the Public Service Pension Fund (PSPF)
for E375 million in June this year.
The company shared that the proceeds from Eswatini were received at the
beginning of December this month as revealed by Business Day.
This comes after the company said it managed to return to profit and was now
more than two thirds of the way to achieving its SA debt reduction target.
Assets
The group has battled with a corporate accounting scandal and a debt mountain
that has forced it to sell assets, but said on Thursday it has now put E5.6
billion towards its target of reducing debt by E8.1 billion, with more to
follow.
Cost containment, a weaker rand, improved exports and better prices all helped
achieve a E900m rise in operating profit in the six months to end-September, the
group said, a 70 per cent increase year on year.
This was mostly due to a turnaround in its SA sugar business, which saw strong
local market and export sales, and saw an operating profit swing of E500m.
In afternoon trade on Wednesday, the group’s share had surged 22.14 per cent
to E9.38, on track for its best day in almost eight months. The group’s share
has still lost about 29 per cent so far in 2020 and more than 90 per cent in the
past three years.
Tongaat was once one of South Africa’s most recognisable blue chip stocks, but
an accounting scandal in 2019 left the group battling for survival.
Practices
An investigation by PwC into bookkeeping practices at Tongaat found that the
company had, among other things, overstated sugar sales and the value of assets.
The company has launched a civil suit to recover bonuses and benefits of 10
executives it alleges played a role in the misleading financial statements, and
has also filed criminal charges in SA and Zimbabwe.
In a trading update on Wednesday, Tongaat said it expects to report headline
earnings of between E158m and E189m to end-September, a profit swing of up to
E504m from the loss it saw previously.
The results, however, include the contribution of since disposed businesses,
including the sale of its starch and glucose unit to Barloworld, the proceeds of
which were received in October, with that transaction almost derailed by the
Covid-19 pandemic.
Productivity
In the group’s SA sugar business — which accounted for over a third of
revenue to end-March — improvements in production and productivity were
further supported by notably stronger local market sales, while export sales
benefited from the weaker exchange rate and improved pricing, particularly in
refined sugar markets, Tongaat said. In the prior comparative period, this unit
generated an operating loss of E283m.
“Together with a variety of successful cost saving initiatives, this
culminated in a convincing profit for the current six months, relative to a loss
in the prior period,” Tongaat said.
The group has about a quarter of the SA sugar market, and 35 per cent of its
white sugar market.
Group total net debt fell about 7.6 per cent to R10.9bn in the period, while in
SA net debt fell E600m to E10.4bn.
After year end, the group received E4.5bn in proceeds from the sale of its
starch and glucose business and, so far, the group has concluded transactions
worth E6.4bn that will also be used to reduce its debt.