The sugar producer and agri-business says the restructuring has better positioned it to ride out Covid-19.
Tongaat Hulett says a turnaround strategy implemented last year has paid off, resulting in improved profitability. The sugar producer and agri-business says the restructuring has put it in a stronger position to weather the Covid-19 pandemic as a leaner, fit-for-purpose business. Its shares rose as much as 14% on Friday.
Releasing its results for the year to end March, Tongaat said the financial mismanagement uncovered early last year had a devastating impact across its business. CEO Gavin Hudson, who took over early last year, said to get the group operating efficiently, strategically and profitably required nothing short of a fundamental restructuring of our business.
We executed this swiftly and also undertook a sweeping review of our policies, procedures and processes as well as every aspect of our governance,” Hudson said.
The group benefited from an improvement in all its sugar operations, a strong performance from starch and glucose and continued land sales. Improved cash flow and working capital management helped it pay down 60% of a loan in Zimbabwe. It also moved creditors from 30 to 60 days and signed transactions of more than R6 billion to meet debt reduction milestones.
Revenue rose 18% to R15.4 billion and operating profit improved to R3.3 billion from R551 million in the prior period as it adopted hyperinflation accounting for its operations in Zimbabwe, which contributed to increased revenue. Excluding the Zimbabwe operations, operating profit improved by just over R1 billion to R375 million from a R650 million loss in 2019. Its basic loss reduced to R286 million from a R1.5 billion loss in 2019. Headline earnings per share increased by 111% to 90c from a loss of 823c, while its headline loss per share from continuing operations improved by 83% to 211c. The continuing operations exclude its starch business, which it sold to Barloworld subsidiary KLL Group earlier this year. Cash flow from operations rose 62% to R2.1 billion from R1.3 billion previously.
After a significant amount of hard work, we are pleased to report that our strategy to turn Tongaat Hulett into a low-cost sugar producer and a leading agri-business in Africa is starting to manifest in our financial results,” Hudson said. “More remains to be done and we are fully committed to achieving our goals.”
Meanwhile, Tongaat said a dispute over the sale of the starch business to KLL was yet to be resolved. KLL pulled out of the deal after declaring that Covid-19 had resulted in a material adverse change (MAC) that would result in a breach of the sale conditions. As the two parties have been unable to agree on whether a MAC has occurred or not an independent third party has been appointed to decide, with a determination expected towards the end of next month. The R5.35 billion disposal is aimed at further reducing Tongaat’s debt.
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