JSE-listed Tongaat Hulett’s business turnaround strategy has started paying off, with the company posting a smaller headline loss of R6-million for the six months ended September 30, against the prior interim period loss of R517-million.
The sugar manufacturer grew its operating profit by 95% year-on-year to R1.9-billion, compared with an operating profit of R973-million in the six months ended September 30, 2019.
Tongaat has made good progress in achieving its debt reduction milestones, with asset disposals totalling R6.4-billion to date, including the sale of the starch business to fellow-listed Barloworld.
Tongaat applied R5.76-billion towards the group’s debt reduction in the six months under review, out of a debt reduction target of R8.1-billion by September 30, 2021.
Basic earnings a share from continuing operations improved by 108% year-on-year to 32c, after recording a basic loss a share of 384c in the prior comparable period.
The increased earnings and profit were somewhat countered by a 23% increase in net finance costs to just over R1-billion, largely owing to an increase in exchange rate loss of R116-million on foreign currency borrowings and the impact of extending leases in Mozambique.
The impact of hyperinflation in Zimbabwe also had significant bearing on the reported profits and resulted in a nontaxable net monetary loss of R301-million.
Tongaat’s business turnaround strategy has involved driving efficiencies, building capability in people and processes, and fixing other fundamentals toward sustainable growth.
Tongaat had gone through significant change since early in the 2019 calendar year, which had culminated in the appointment of a new board and executive management team, strengthened governance and financial structures, and a new vision and strategy.
The company had initiated a forensic investigation and implemented a range of corrective actions accordingly, after struggling to determine the true financial position of the company. Tongaat had to restate its annual financial statements for the year ended March 31, 2018 to correct material errors contained in the annual financial statements for the years ended March 31, 2011 to 2017.
Further, CEO Gavin Hudson explains that although Covid-19 added challenges to already tough economic conditions in Southern Africa, Tongaat was fortunate in that most of its business activities were classified as essential services and could continue to operate through lockdowns.
Additionally, Hudson says that, with the process of having the company restructured and reinvigorated over the last two years, it has helped the company be leaner and more fit-for-purpose amid the storm.
The company did, however, feel an impact from Covid-19 on its property operation. Property transfers were delayed owing to the closure of deeds offices, but Tongaat still managed to sell three properties worth a combined R197-million after September.
Hudson remarks in the company’s results statement that trust is being rebuilt in Tongaat and the team will continue building on both existing opportunities and future diversification prospects.