South Africa: Sugar manufacturer Tongaat Hulett back-pedal on its 2018 accounts

In the midst of restructuring, South African company Tongaat Hulett announced on Friday 31 May that it will review its financial statements for 2018 after identifying « past practices of concern ».

Quoted by the business daily Business Live, the company’s management, mainly active in the sugar industry, explains that « these past practices seem to have resulted in financial statements that did not accurately reflect the underlying business performance of Tongaat Hulett ». Facts that will cost the company dearly: Tongaat Hulett has indicated that it could have to reduce its 2018 balance sheet equity by 4.5 billion rand (277 million euros). The group also stated that its results for the 2019 financial year would not a priori be published until October.

However, the announcement of the reformulation of the accounts cannot be described as a surprise. At the end of May 2018, the investment company Investec strongly criticized the management of the then CEO, Peter Staude, indicating that he should resign after the company’s « deplorable » annual results (then down 37%, editor’s note). Arriving at the helm at the beginning of the year in this context of mistrust, the new CEO, Gavin Hudson, announced in March that a thorough review of past accounting practices was under way and may « require corrective measures ». This case has an impact on Tongaat Hulett’s listing on the Johannesburg Stock Exchange: when the early revision of the accounts was announced, the share price plunged to 16.70 rand (-6.63%) at the end of the session. A level close to its historical lows….

Tongaat Hulett: a stock at its lowest level (change in the stock over 5 years, on the Johannesburg Stock Exchange).
Source : Thomson Reuters.

Tongaat – which has been in difficulty for several years and operates in six southern African countries (Botswana, Namibia, Mozambique, South Africa, Swaziland and Zimbabwe) – had previously announced in February that it would begin discussions with its creditors to reach an agreement on its debt of nearly 8 billion rand (490 million euros).