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Profit warning hits sugar producer Tongaat Hulett’s shares

Tongaat had flagged a half-year loss in November.

Tongaat Hulett warned on Friday that it expected a loss for the year to March 31, sending shares in the struggling sugar producer down more than 14%.

The company, which has brought in a new chief executive and chief financial officer to lead a turnaround, has been hit by a sugar tax in South Africa and a currency crisis in Zimbabwe.

It said it expected a loss in headline earnings per share (HEPS) in excess of 803 cents and a loss in earnings per share (EPS) in excess of 927 cents.

It posted a profit of R617 million ($44.14 million) the year before.

“It has become clear that the business is facing more challenges and operational performance has continued to decline,” it said in a statement, adding that the problems had the board’s urgent attention.

New CEO, Gavin Hudson, who joined the firm at the start of the month, will expedite a strategic and financial review, it said.

The company added that it had appointed advisers and would enter into discussions with its lenders next week.

Tongaat had flagged a half-year loss in November, when it said net debt stood at R7.75 billion ($554 million).

High debt levels and interest costs had weighed on its earnings, it said on Friday.

The firm’s shares were down 14.49% at 1333 GMT.

($1 = 13.9796 rand) 

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What about impact of EWC on their property development business and the unwinding of the BEE deal, or is that not PC? Penny has dropped that the land portfolio may have zero value.

Share price down 20% on the day. Another historical (founded in 1892) ZA industrial firm heading to the garbage heap of history. Viva.

ZA=uninvestable

“Land Conversion and Development
While negotiations continue, no further land sales have been concluded since 30 September 2018. In addition, land sales where debtors have not performed have been terminated, allowing the company to pursue alternative customers and replacement sales. A thorough review of the land portfolio is underway.”

“Shareholders are further advised that Tongaat Hulett is aware of discussions between its B-BBEE shareholders, their advisors and their preference share funders and that a formal unwind of the 2007 B-BBEE transaction funding structure is likely. The funding is non-recourse to Tongaat Hulett.”

End of comments.

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