Tongaat Hulett flogs assets but says sugar business safe

Embattled Tongaat Hulett is flogging assets to make its mountain of debt more manageable, but the company is not about to pitch a For Sale sign at its sugar mills, CEO Gavin Hudson says.

Coffee-to-go drinkers will know Tongaat for its Hulett-branded sugar sachets, often sporting a pearl of wisdom.

But the company’s journey of a thousand miles, which started in February with a management overhaul and a PwC forensic investigation, this week led to an R11.9bn restatement of its accounts.

The company said two weeks ago it intended to pursue claims against individuals responsible for the misstated accounts.

It is now rejigging the business to tackle debt of R11.4bn.

But sugar is not on the block as it is Tongaat’s core business.

The company has sugar-producing operations in SA, Zimbabwe and Mozambique.

Tongaat also has a starch business and property portfolio in KwaZulu-Natal.

Hudson said the sugar business had the biggest growth potential.

But the feeble economy weighed on demand and a global supply glut depressed prices.

SA’s sugar tax also prompted beverage manufacturers to use substitutes for cane sugar to lessen the impact on their bottom line.

The fiscus pocketed R1.7bn from the tax in 2018.

The result has been weaker demand for sugar in the local market.

Lulama Qongqo, a consumer analyst at Mergence Investment Managers, has little hope Tongaat’s revenue will improve unless the global sugar price rises meaningfully.

But Hudson said Tongaat’s core business remained strong, with positive cash flows from operating activities and strong margins at an operational profit level.