Tongaat falls after reporting loss
Luxury brands group comes under pressure over new executive system amid push into online retail and greater focus on lucrative Chinese market
Shares in Tongaat Hulett, the sugar producer that drew sharp criticism earlier in 2018 after reporting profits well short of its own guidance, lost as much as 6.1% on Friday after it reported an interim headline loss.
The conference call held last week for luxury brands group Richemont’s latest results was at times surprisingly tense.
This was especially noticeable when CFO Burkhart Grund took questions on why incoming CEO Jérôme Lambert would not be responsible for the whole group. Under the new structure Grund will not report to Lambert but directly to the board.
The revised Richemont structure will also see subsidiaries Cartier and Van Cleef & Arpels not reporting to Lambert but rather having their CEOs report directly to the board.
Grund said Cartier and Van Cleef & Arpels had strong management teams and could give real insight to the board as they were “ahead of the curve” when it came to what the market was looking for.
Grund underlined this point by noting how a change in Cartier’s leadership two and half years ago had reversed a slide in its market share. “What we are seeing is a new Cartier,” he said. Under its new management, Cartier had gained traction in making watches for female customers and what he called the “elegant male”.
As for the CFO reporting directly to the board, Grund said it is important the CEO and CFO work well together, but having both of them report directly to the board would provide “checks and balances”.
The restructuring of the reporting process is not the only change happening at the group.
Its recent acquisition of online retailers YOOX Net-aPorter (YNAP) and Watchfinder is part of its strategy to expand into e-retail.
The addition of YNAP’s contribution had a marked impact on Richemont’s results for the half year to end-September. Group sales rose 21% to €6.8bn and online sales amounted to 14% of total sales.
Prior to the acquisition of YNAP only about 1% of the group’s total sales were online.
Though sales were up, operating profit dropped 3% to €1.13bn as a result of a once-off cost of €77m, related to the disposal of French luxury leather goods group Lancel and an €82m charge for the amortisation of YNAP and Watchfinder’s intangible assets.
Besides going into online retail, Richemont is also orientating a sizeable part of its operations to the Chinese market. Grund said the Chinese customer was the dominant customer in the industry.