Sweeter tidings from Tongaat


Sweeter tidings from Tongaat

Published Date: 2020-06-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sweeter tidings from Tongaat

The agri group and land owner will report return to profitability when its releases its annual results at the end of next month.

Tongaat Hulett jumped close to 20% after it said operating profit more than tripled last year as its business turnaround strategy took shape. The agri group and land owner said the underlying fundamentals of its business were good and that it was in a much stronger position than a year ago.

In a trading statement, Tongaat said while the impact of hyperinflation in Zimbabwe had a significant bearing on its 2020 growth, it was the return to profitability of its Mozambican operations and a reduction in its operating loss in SA that most clearly demonstrated the improvements made over the past year. Excluding Zimbabwe, its operating profit increased from R6 million to close to R1 billion in the year to end-March. Its starch and glucose business continued to operate according to plan, delivering strong cash flows.

For the year, it said headline earnings would show a substantial improvement to the headline loss of R923 million it reported last year and would be in a range of between R68 million and R178 million. That would result in headline earnings per share of between 50c and 132c, up from a 823c loss previously.

Its Mozambican operations generated a meaningful operating profit for the year after two years of losses as sales increased by more than 20% and its Xinavane refinery generated a notable profit in its first full season of operation. In Zimbabwe, operating profit increased by more than 140%, distorted by the the application of hyperinflation accounting.

Land conversion and development profits increased by more than 130% as it finalised two large land sales, with new deals totalling R144 million concluded and transferred during the period.

The group has included the financial results of its starch and glucose operations in its estimates for the year but said full disclosure of its classification as a discontinued operation would be provided in its results for the period. Barloworld subsidiary KLL, which agreed to buy the business in February for R5.35 billion, wants out of the deal as it said Covid-19 would result in a material adverse change that breached the sale conditions.

Last week, Tongaat reached a deal to sell its Tambankulu agri business in eSwatini (Swaziland) to the country's Public Service Pensions Fund for R375 million as it continues to pay down debt to meet commitments agreed with its bankers. It must reduce its SA debt by at least R8.1 billion by next March as part of a financing arrangement agreed with funders in December.

Tongaat said the financial impact of Covid-19 on its sugar operations was so far limited, while the starch operation had seen a reduction in volumes related to demand for alcohol due to lockdown restrictions, which have since been eased.

Its results are scheduled for release on 31 July. Its shares retraced most of their gains to close 4.6% higher at R5.70 yesterday.

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