Troubled South African sugar processor, Tongaat Hulett, which has postponed a key meeting to consider and approve a business rescue plan, saw basic losses for the year to March 2022 from continuing operations widen from R762 million to R1.07 billion even as it started to receive dividends from Zimbabwe.
The government of Zimbabwe and other losing bidders are disputing Tongaat Hulett’s preference for Tanzanian entity, Kagera to acquire assets of the South African agro-processing group which also has operations in Mozambique and Botswana.
There has also been widespread speculation that Mozambican entity RGS – which offering double the offer by Kagera – has emerged as the third preferred bidder after the little known but preferred Tanzanian bidder and a consortium led by Mpumalanga businessman, Robert Gumede.
Zimbabwe, feeling hard done by opaqueness in how Kagera was chosen as the preferred bidder for Tongaat assets, appears to be looking beyond the company after it invited bids for fresh investment into sugar mills in the country.
Postponement of a key meeting to vote on the amended business rescue plan to the end of November has been viewed as having been prompted by “the emerging development of a third bidder as well as legal battles being put up” by Gumede and his consortium, said a South African industry player.
Tongaat Hulett was suspended from the JSE in July last year and remains suspended from trading. It has also delayed its financials for the full year to the end of March 2022, only releasing its financial statements for the period yesterday.
Now under business rescue, Tongaat Hulett will consider and vote for a business rescue plan by no later than November 30, 2023. It reported Tuesday that the basic loss for the year to March 2022 amounted to R1.07bn while the headline loss per share ballooned from 508 cents in 2021 to 585c for the period under review.
Borrowings, which have hobbled the company in the past three years strengthened to R8.2bn, compared to R7.2bn as at March 31, 2021, a 13% increase of up to R962m. The South African business alone carries about 85% of this at R6.9bn while Mozambique accounts for 12%, with Zimbabwe making up for R255m or 3% of the total figure.
“A matter worth noting is that most of the profits were generated in Zimbabwe which further increased the loss attributable to Tongaat Hulett’s shareholders for the year,” Tongaat said.
Away from the company’s financial and corporate woes, revenue in Tongaat Hulett for the year to March 2022 remained unchanged at R15.5bn with the operating profit of R584m falling from the 2021 restated profit of 1.4bn.
Ebitda for the period fell 67% to R591m against a marked reduction in free cash flows from R802m to R297m, prompting the company to withhold a dividend for the period.
“Operational improvements, asset care, debt restructuring, and liquidity management were high priorities for the Tongaat Hulett group during FY22. The focus on these areas was intensified as headwinds in the form of civil unrest, severe climatic conditions and frequent operational breakdowns slowed down progress with Tongaat Hulett’s turnaround strategy,” the company said.
It said it had made progress in recent years in improving governance and management controls, reducing debt, improving cash flow and in the repatriation of dividends from Zimbabwe as well as renewal of “investment in people” and processes.
The impact of these positives was however less pronounced as an 8% reduction during the period under review mainly due to the weaker agricultural performance in Zimbabwe and unsatisfactory milling performance in South Africa had a dampening effect.
There was some respite though from the Mozambique operations as well as from the Zimbabwe sugar operations, which benefited from buoyant local sales but suffered effects of hyperinflation, increased costs, and lower exports.
Capital expenditure for the Zimbabwe operations increased by R54m “in line with efforts to recoup a backlog of” capital projects. There was a 65% decrease in dividends and management fees received from Zimbabwe to R139m during the year under review to March 31 2022, Tongaat reported.
In Mozambique, free cash flow of R418m was higher compared to the previous outturn of R390m and was solidified by capital expenditure of R99m. There was however limited cash available as a result of high interest rates of up to 22%.
“The South African sugar operations experienced a challenging year. The civil riots and low economic growth also weighed on the revenue, profits, and cash flows of the property business.”
The South Africa operations of Tongaat resultantly suffered impairment losses of R325m.
BUSINESS REPORT