Sentiment sours towards Tongaat Hulett


Sentiment sours towards Tongaat Hulett

Published Date: 2019-03-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sentiment sours towards Tongaat Hulett

In the latest problem to beset the sugar producer, it says it may have to review financial statements from previous financial years.

Tongaat Hulett's shares sank by a third on Friday after it said a strategic and financial review had unearthed "certain practices" which may require further examination and remedial action. If verified, this could require remedial action, including the restatement of prior years' financial results. The sugar producer and landowner has also called in PwC to assist so that management can focus on the strategic review.

The review under new CEO Gavin Hudson, who started on 1 February, is aimed at stabilising the business, addressing its debt levels and setting it on a path that will deliver acceptable shareholder returns.

Tongaat's shares have been under huge pressure this year. They slumped by 20% on 22 February after the group warned that it would report a significant loss for the year to end-March due to weakness in its sugar business and a dearth of land sales over the past year. While sales of the vast tracts of the land it owns in KwaZulu-Natal usually cushion the group when the cyclical sugar business reports poor earnings, that hasn't materialised this year. An overhang of sugar in the market has weighed on prices, while demand has been constrained by the new sugar tax. As a result, it's had to rebase the value of its cane. The same goes for its operations in Mozambique.

The group said it was making meaningful progress with the formulation of a comprehensive turnaround strategy. Although still at an early stage, the Tongaat board was encouraged by the quality of work performed but it said the circumstances faced by the company remained challenging.

After sliding as much as 33% on Friday, Tongaat closed 28% lower at R22. Its shares are down 60% this year.

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