Tongaat soars as it returns to profitability

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Tongaat soars as it returns to profitability

Published Date: 2020-12-03 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tongaat soars as it returns to profitability

The sugar producer and landowner has also made progress in reducing debt in line with its commitment to lenders.

Tongaat Hulett's shares rose by more than a quarter at their best yesterday after it swung to a first-half profit, helped by stronger performances from its sugar operations in SA, Mozambique and Zimbabwe. It's also getting closer to meeting its debt reduction target as it disposes of non-core businesses to meet the requirements of a financing agreement with its lenders.

In a trading statement, the agri group said its SA sugar operations generated a convincing profit for the six months to end-September, relative to a loss in the prior period. The Mozambican sugar operations performed well, with increased sugar production across both operations in that country and production at its Xinavane refinery that almost doubled. Operating profit in the Zimbabwean operations increased by more than 60%, benefitting from ongoing improvements to operations as well as the effects of hyperinflation. However, land sales came under pressure due to delayed transfers after the deeds office was closed due to Covid-19. Some sales were also cancelled.

Operating profit for the six months was about 70% higher than the R1.3 billion reported last year. Cash flow from operating activities almost tripled. It expects to report a profit of between R204 million and R235 million for the period, up from last year's interim loss of R318 million. That translates into an improvement of as much as 174% in earnings per share (EPS) and a rise of up to 160% in headline EPS. It said the results included its starch and glucose business, which was sold to Barloworld at the end of October.

The company said the R4.54 billion it got for Tongaat Hulett Starch was applied to further reduce its SA debt, which amounted to R10.4 billion at the end of September. Total net borrowings, excluding the trade finance facilities of the starch and glucose operation, declined to R10.9 billion at the end of September from R11.8 billion a year earlier. To date, it said cumulative debt reduction transactions concluded totalled R6.4 billion, with debt reduction proceeds of R5.6 billion received and applied towards its debt reduction target of R8.1 billion by next September.

Its results are scheduled for release on 11 December. Its shares retraced some of their gains to close 17% up at R9.01 yesterday.





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