Job cuts on the cards as Tongaat shuts mill
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.