Job cuts on the cards as Ton­gaat shuts mill

Business Day - - FRONT PAGE - Siseko Njobeni and Karl Ger­net­zky

Agri-pro­cess­ing com­pany Ton­gaat Hulett, which is in talks to sell its starch business to re­duce its multi­bil­lion-rand debt, could re­trench about 390 em­ploy­ees at its SA sugar milling and re­fin­ing op­er­a­tions, it said.

Ton­gaat has be­come the lat­est big group to con­sider job cuts as SA bat­tles a high un­em­ploy­ment rate of more than 29%. About 9,000 em­ploy­ees al­ready stand to lose their jobs in 2020 as a num­ber of firms in­clud­ing SAB, Sibanye-Still­wa­ter, Telkom, Aspen, Mass­mart and Glen­core in­tend to lay off staff.

The re­trench­ments at Ton­gaat come as the com­pany races against time to re­duce debt by R8.1bn by March 2021.

The group, which has been em­broiled in a scan­dal that re­sulted in an un­prece­dented re­state­ment of 2018 fi­nan­cial re­sults, is also con­sid­er­ing a R4bn rights is­sue.

Ton­gaat said on Thurs­day it had de­cided to moth­ball the Dar­nall sugar mill as part of its drive to re­duce costs to en­sure its long-term sus­tain­abil­ity.

The com­pany said its four sugar mills were pro­duc­ing at lev­els lower than their in­stalled

ca­pac­ity. The amount spent on pro­duc­ing sugar made up about 85% of Ton­gaat’s to­tal costs in the sugar business, it said.

“The re­moval of ad­di­tional fixed costs will help us make strides to­wards lower pro­duc­tion costs in our sugar business, and in turn af­ford us op­por­tu­ni­ties for in­vest­ments for longterm sus­tain­abil­ity through diversific­ation,” the sugar pro­ducer said.

“We be­lieve there is sig­nif­i­cant scope for lo­cal growth through diversific­ation. By mak­ing the right de­ci­sions now we will cre­ate long-term op­tions for in­vest­ment in the diversific­ation of our sugar business through other sus­tain­able uses for sugar cane.”

Ton­gaat said sugar cane pre­vi­ously de­liv­ered to Dar­nall mill would be di­verted to the Amatikulu and Maid­stone mills, also in KwaZulu-Natal.

“While this was not an easy de­ci­sion, it is crit­i­cal that we do ev­ery­thing we can to en­sure the long-term sus­tain­abil­ity of our sugar business in SA, cre­ate a spring­board for fu­ture growth and de­liver on our strate­gic ob­jec­tives for the ben­e­fit of all.”

This comes as the com­pany, which ur­gently needs to re­duce its R13bn debt, in­tends to sell its starch business. It said in a state­ment that it had en­tered into ne­go­ti­a­tions about the po­ten­tial sale of that business.

In the group’s six months to end-Septem­ber, the starch and glu­cose business con­trib­uted about 24% of op­er­at­ing profit and about 26% of the R8bn in rev­enue. Dur­ing the half year, starch and glu­cose vol­umes had risen 4.5%, the com­pany said.

The com­pany, once one of the coun­try’s most recog­nis­able blue-chip stocks, re­ported in­creased de­mand in the al­co­holic bev­er­ages sec­tor af­ter cus­tomer mar­ket­ing cam­paigns, the con­tin­u­ing growth in the cof­fee creamer sec­tor and the re­cap­ture of im­ported glu­cose vol­umes in the con­fec­tionery sec­tor, which also ben­e­fited from new cus­tomer in­vest­ments.

Af­ter a strong re­cov­ery in vol­umes in the first half of the year in the starch and glu­cose op­er­a­tion, the group said it ex­pected a slow­down in growth in its sec­ond half for this business, due to muted do­mes­tic mar­ket de­mand and op­er­a­tional con­straints re­lated to load-shed­ding.

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