Leading Southern African sugar producer Tongaat Hulett has warned investors that it expects to post losses of R220 million ($13.8 million) in the first half of its 2021 financial year.
The first-half-year report posted by the debt-ridden firm was impacted by hyper-inflationary effects and higher input costs in Zimbabwe and a disappointing milling performance in South Africa due to COVID-19-related maintenance delays.
Tongaat Hulett is a leading agri-business in sugar, ethanol, animal feed and cattle, with a significant asset base and operational footprint in Southern Africa.
The company operates under the leadership of CEO Gavin Hudson.
In addition, the agri-processing business is also focused on complementary feedstock of sugarcane and maize along the northern coast of KwaZulu-Natal, specifically in the town of Tongaat.
The results came at a transformative stage when the management implemented a turnaround strategy to facilitate future growth by improving operational efficiency, while reducing its debt portfolio and strengthening its cash flow.
Figures contained in the trading update revealed that it expects losses of between R220 million ($13.8 million) and R249 million ($15.6 million) for the period, with headline losses of between R242 million ($15.2 million) and R266 million ($16.7 million).
The management disclosed that it made steady progress in implementing its turnaround strategy and restoring the group to the path of sustainable growth as it experienced strong local demand across all its sugar businesses.
Despite the strong growth in its operating environment, the group noted that the first-half-year period presented several additional obstacles to navigate, including hyperinflationary effects and higher input costs in Zimbabwe and disappointing milling performance in South Africa due to COVID-related maintenance delays.
As of press time, Dec. 6, shares in Tongaat Hulett were trading at R5.57 ($0.3494), 124-basis points lower than their opening price on the Johannesburg Stock Exchange, giving the company a R752.6-million ($47.2 million) valuation.
In recent times, one of Zimbabwe’s wealthiest families, the Rudlands, moved to acquire a majority stake in the leading Southern African sugar producer, Tongaat Hulett, through a proposed major recapitalization and rights offer of new shares.
The deal would see Magister, a Mauritius-based investment holding controlled by Zimbabwean businessman Hamish Rudland, underwrite up to R2 billion ($127 million) in capital through a rights offer as a shareholder and strategic partner in the deal.