Africa-Press – South-Africa. Sugar producer Tongaat, whose debt pile is more than tenfold its R545 million market value, has now received board approval for a proposed restructuring plan, saying on Friday it will now start talks to get the necessary nods from various stakeholders.
Tongaat on Friday did not go into any significant detail of its restructuring plan, and it has said previously all options are on the table, including a capital injection by some or all of its strategic partners, or a disposal of some or all of its non-SA operations.
The firm said on Friday that those whose participation is required for the plan will be receiving it “imminently”, adding that “the sustainability of our businesses, employees and value change are front and centre of the plan”.
“Critically, the restructuring plan contemplates an extension and an increase in the company’s commercial debt facilities to allow it to conclude the milling season and allow sufficient time to implement the restructuring plan.
“The company is engaged in ongoing negotiations to determine the availability of such facilities,” it said.
The company, which produces almost half of SA’s sugar and is one of the biggest employers in KwaZulu-Natal, is battling to recover from an accounting scandal, SA’s second biggest after Steinhoff, while also trying to whittle down a R7.6 billion net debt pile. It has been hit with a series of adverse events, including a downturn in the property market in KwaZulu-Natal that hobbled plans to sell property, civil unrest in that province which led to destruction of cane fields, and more recently flooding in the province.
A proposed capital raise of up to R5 billion failed to materialise in 2022, and the firm’s SA operations have been bleeding cash, while it currently needs to spend significantly as it is milling season.
Tongaat said on Friday that it has delivered an improved milling and sugar production performance, relative to previous seasons, and it is also experiencing strong local demand in its sugar businesses. The Mozambique sugar operations delivered excellent results, it said.
“The board and management team continues to act with speed, determination and the highest standards of governance to secure the future of Tongaat Hulett,” CEO Gavin Hudson said in a statement.
“Securing funding will be key to our ability to continue operating into the next milling season and ensuring that Tongaat Hulett is able to continue to support the local sugar industry with critical milling capacity. Over 500 000 dependents and community members across SADC rely on Tongaat Hulett for their livelihood.”
“Our strategy has focused on delivering a plan to make Tongaat sustainable and allowing it to maintain its socio-economic contributions. Tongaat Hulett plays a systemic role in the food security of the region and the economy of South Africa. For every job created by Tongaat Hulett South Africa, 10 jobs are supported elsewhere in the economy.”
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Hudson had been appointed in 2019 to drive a recovery for the group. The over 150-year-old sugar producer had asked the JSE to temporarily suspend trade in its shares in June 2019 after an investigation flagged accounting practices that meant previous financial results could not be relied on.
A PwC investigation identified 10 executives, including former CEO Peter Staude, who were allegedly involved in profit inflation. It concluded that there was a culture of deference within Tongaat that led to employees not questioning accounting practices.
The PwC investigation identified practices that inflated profits, as well as practices that inflated the value of assets, including its sugar cane, and the company has been forced to restate previous financial results, including for the six months to end-September 2018. That restatement resulted in total assets decreasing by about R12 billion, or just over a third. Charges have since been laid against former executives in a R3.5 billion fraud case, which is ongoing.
Tongaat has seen its shares lose more than 96% of their value over the past four years, and had again asked for a temporary suspension from the JSE in July, due to delays in releasing its results as it finalised its plan.
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