Tongaat plans starch sale


Tongaat plans starch sale

Published Date: 2020-02-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tongaat plans starch sale

The agricultural processing group is disposing of some assets as it tries to get its debt under control.

Tongaat Hulett is in talks to sell its starch business as it battles for survival by disposing of assets to reduce debt.

In a cautionary announcement yesterday, the sugar producer and land owner said it had entered discussion to sell Tongaat Hulett Starch, Africa's biggest producer of the carbohydrate.

Earlier this month it said assessments of potential disposals were at an advanced state but it would only consider sales at the right price and right time. In November, it announced the disposal of its sugar packaging distribution business for R220 million. It may also resort to a rights issue to improve its balance sheet.

The group lifted a suspension of its shares earlier this month after releasing interim results for the six months to end-September.

The starch and glucose operation continued its steady performance over the period. Revenue from starch was unchanged at R1.87 billion while operating profit was also stable at R306 million. The operation converts more than 670,000 tons of bought-in maize a year into starch and starch-based productions, according to information on its website. It also makes a wide range of products, from unmodified maize starch to highly-refined glucose products, which are key ingredients for manufacturers of foodstuffs, beverages and a variety of industrial products.

In its interim results, the company said it was making steady progress on improving cash flow, with an increased focus on operational performance and reducing costs. It was also on track to meet its first-year target of a R1 billion improvement in cash flows and had met and exceeded its first debt reduction milestone of R500 million. As part of a refinancing arrangement entered into last December, the group has committed to reducing its SA debt by at least R8.1 billion by March 2021, from R11.4 billion at the end of March 2019.

Its shares rose 3.15 to R4 yesterday.

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