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TONGAAT HULETT LIMITED - Reviewed Condensed Consolidated Interim Financial Results for the Six Months Ended 30 September 2021

Release Date: 09/12/2021 07:05
Code(s): TON     PDF:  
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Reviewed Condensed Consolidated Interim Financial Results for the Six Months Ended 30 September 2021

Tongaat Hulett Limited
(Registration number 1892/000610/06)
Share code: TON
ISIN ZAE000096541
("Tongaat Hulett", "the Group" or “the Company”)

REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2021

SALIENT FEATURES
•  Continued progress with the business turnaround strategy
•  Strong local sugar demand across all geographies and market share gains
•  Ongoing improvements in ESG
•  Net finance costs down 50% on reduced debt and favourable exchange rate movements
•  Debt refinancing agreements concluded in South Africa and Mozambique
•  Up to R4 billion equity capital raise initiated and partial underwriting of R2 billion for rights
   offer secured
•  Dividends and management fees of R140 million received from Zimbabwe
•  The financial results have been impacted by the following:
   -    Lower raw sugar production
   -    Land sales delayed by civil riots
   -    Zimbabwe hyperinflation dynamics
   -    Restatements arising from correction of prior period errors
   -    R158 million impact of civil unrest on profits of the South African sugar operation
   -    Group taxation at an effective 97% tax rate due to deferred tax on losses not recognised
   -    Partial contribution from the disposed of starch and glucose, Namibia and Eswatini
        operations in the comparative period
Group financial results (including the discontinued starch and glucose operation)
•  Basic loss per share of 174 cents (September 2020: earnings per share of 214 cents)
•  Headline loss per share of 188 cents (September 2020: headline earnings per share of 178
   cents)
Group financial results from continuing operations
•  Revenue up 5% to R8.5 billion (September 2020: R8.1 billion)
•  Operating profit down 23% to R1.3 billion (September 2020: R1.7 billion)
•  Hyperinflationary net monetary loss of R110 million (September 2020: loss of R71 million)
•  Basic loss of R234 million (September 2020: earnings of R108 million)
•  Basic loss per share of 174 cents (September 2020: earnings per share of 80 cents)
•  Headline loss of R254 million (September 2020: earnings of R59 million)
•  Headline loss per share of 188 cents (September 2020: headline earnings per share of 44
   cents)
•  Segmental cash flows of R958 million (September 2020: R1.4 billion)
•  No dividend was declared in the current period (September 2020: Rnil)
Steady progress continues to be made in the implementation of the turnaround strategy and in
restoring the Group to a sustainable growth path. In addition to the implementation of a range of
initiatives to improve operational performance and strengthen governance, the Group has
substantially reduced its debt burden and improved cash flow, successfully repatriated dividends
from Zimbabwe, invested in people and processes and strengthened its focus on ESG over the
past two years. A 5-year capital programme has also been initiated to sustain and improve all
operations. More recently, the refinance of the South African debt facilities has been concluded,
an equity capital raise was initiated and a partial underwriting of R2 billion for the rights offer was
secured.

The Mozambique sugar operations delivered an excellent result, with strong growth in operating
profit on the back of robust local sales. The Zimbabwe sugar operations benefitted from buoyant
local sales but were materially impacted by the effects of hyperinflation. The South African sugar
operations experienced a very challenging six months compounded by breakdowns at the three
raw sugar mills, the unrest in KwaZulu-Natal during July 2021 and the challenges experienced in
processing sugarcane that arose from the unrest-related arson. COVID-19 related impacts, civil
riots and a weak economy continue to weigh on the revenue and profits of the property business.

Financial performance in the current period is notably skewed by hyperinflation, the disposal of
the Namibian and Eswatini operations, which contribute to the comparative results, as well as
restatements of certain prior year numbers.

Outlook
We will continue to firmly re-establish a culture of operational excellence, reduce debt, and restore
confidence in Tongaat Hulett. In the short term, this will involve targeting the conclusion of a
successful rights offer, which is a key step in securing the future of the Group.

With the sugar season drawing to a close, full year sugar production for the Group is expected to
be between 8% and 10% below that of the prior year. Our focus for the remainder of the year will
be to ensure a good crop for the next season, closing out the current season and preparing for
the next season from a milling perspective, and continuing with the improvements to restore the
South African refinery to historic production levels.

In Zimbabwe and Mozambique, water security for multiple seasons arising from the full dam levels
will support improved sugarcane yields and increased cane supply to the mills, thereby increasing
operating efficiencies and cost competitiveness in these regions. In South Africa, there is an
intensified drive to reinvest in the asset base of the sugar business to improve the operational
performance and maximise both efficiencies and economies of scale. We believe that the property
portfolio continues to hold considerable value for the Group. Efforts to close out legacy land
development projects, finalise historic land sales and deal with legacy infrastructure commitments
continue to gain traction.
We expect that lower debt levels will further benefit finance costs in 2022. Cash generation,
reducing debt to a sustainable level, liquidity management, and the ongoing review of the Group’s
capital structure, remain as priorities.

Any forward-looking statements have not been reviewed or reported on by the external auditors.

For a more comprehensive analysis of Tongaat Hulett’s financial results and strategy,
please refer to the full results announcement on www.tongaat.com.

SHORT-FORM NOTICE
The contents of this short-form announcement are the responsibility of the board of directors of
the Company. It is a summary of the information in the full announcement and does not contain
full or complete details.

Any investment decision should be based on the full announcement, published and available at:
https://senspdf.jse.co.za/documents/2021/jse/isse/thgl/Interims22.pdf
and on Tongaat Hulett’s website https://www.tongaat.com/.

Investors and/or shareholders may request copies of the full announcement by contacting the
Company Secretary, details of whom are set out below. The full announcement is available for
inspection at the registered office of the Company, or at the offices of the sponsor or copies of
the full announcement may be requested during business hours from the Company at no charge.

This short-form announcement has itself not been audited or reviewed but has been extracted
from reviewed results. Any forecast financial information contained in this announcement is the
responsibility of the directors and has not been reviewed or reported on by the external auditors.

The condensed consolidated financial statements for the six months ended 30 September 2021,
from which this short form announcement has been extracted, have been reviewed by Ernst &
Young Inc, who have expressed an unmodified review conclusion in terms of the International
Standards on Review Engagements, including an emphasis of matter paragraph on the material
uncertainty relating to going concern. The auditors also expressed an unmodified review
conclusion in terms of the International Standards on Review Engagements, including an
emphasis of matter paragraph on the material uncertainty relating to going concern on the
condensed consolidated interim financial statements for the six months ended 30 September
2021. Events and other matters indicate that material uncertainty exists that may cast significant
doubt on the group’s ability to continue as a going concern.

The directors of Tongaat Hulett take full responsibility for the preparation of this report and the
financial information has been correctly extracted from the underlying reviewed condensed
consolidated interim financial statements for the six months ended 30 September 2021.

Tongaat
9 December 2021

Tongaat Hulett Limited
Registration No: 1892/000610/06, JSE share code: TON, ISIN: ZAE000096541
Directorate Non-executive directors: L von Zeuner (Chairman), DC Noko (Lead-independent
non-executive director), L de Beer, RM Goetzsche, JJ Nel, AH Sangqu, L Stephens
Executive directors: JG Hudson (CEO), RD Aitken (CFO), DL Marokane
Company Secretary: JJ van Rooyen
Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal
P O Box 3, Tongaat 4400. Telephone: +27 32 439 4019
Transfer secretaries: Computershare Investor Services (Pty) Limited, Telephone: +27 11 370
7700
Sponsor: PSG Capital, Telephone: +27 21 887 9604
info@tongaat.com

Date: 09-12-2021 07:05:00
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