Tongaat slumps on debt, sugar production loss


Tongaat slumps on debt, sugar production loss


Published Date: 2021-04-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tongaat slumps on debt, sugar production loss

The agri group says its lenders have agreed to extend a deadline for it to reduce debt or face a default.

Tongaat Hulett's shares fell sharply yesterday after it said it was negotiating another reprieve on its debt repayment targets and warned of production losses at its SA sugar operations.

The sugar producer and land owner has been disposing of non-core assets to help it pay down debt as part of a financing arrangement agreed with funders in December 2019. Late last year it sold its starch business to a subsidiary of Barloworld, using the R4.54-billion it received to reduce its gearing.

While the company met a 31 March deadline to repay at least R6-billion of its SA debt, it failed to meet a revised milestone to sign cumulative debt reduction agreements amounting to R8.1-billion. In order to prevent a default, its lenders amended the milestone measurement date to 30 April as it had only signed agreements totalling R6.56-billion by the end of March. It said it was now in advanced negotiations to lower the targeted amount from R8.1-billion to R6.4-billion, which would allow it to meet the milestone. However, it still has to reach the R8.1-billion target by the end of June.

Meanwhile, the company said a large sugar production loss would have a material, but not fully quantified, impact on the full-year financial performance of its SA sugar operations.

To honour its commitments to supply an increase in demand for refined sugar, the company said it became necessary to keep its refinery running. That meant delaying the planned annual maintenance shutdown for the 2021 financial year to the off-season period. Consequently, actual production of refined sugar for the 2021 financial year increased by 40% to more than 450,000 tons, against a previously planned production level of 304,000 tons.

Unfortunately, the extra pressure of the production ramp-up on the refinery led to increased production costs and process inefficiencies and resulted in a 25,000 ton sugar production loss.

Tongaat said shareholders were advised to exercise caution when dealing in its shares until the amount of the full impact of the loss had been quantified.

After falling as much as 27%, Tongaat's shares retraced some of their losses to close 23% down at R7.99.


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