Tongaat’s shares slide at chairperson’s surprise resignation, but it is not a ‘red flag’

THE SHARES in Tongaat Hulett slid 5.45 percent yesterday on market uncertainty after the sugar producer announced that its chairperson, Louis von Zeuner, had unexpectedly resigned due to “personal reasons”.

The share closed at R2.65 on the JSE yesterday, having tumbled 97.68 percent in five years.

Opportune Investments founder Chris Logan said in an interview yesterday the market should not see the move as a “red flag”. The company is a “going concern”.

Tongaat Hulett said: “Louis von Zeuner, chairperson and non-executive director of the Tongaat Hulett board, has regrettably informed the board that he will not be available for re-election as chairperson at this year’s AGM (annual general meeting) due to a change in his personal circumstances.“

Von Zeuner, who had “consequently resigned” as the chairperson, would remain on the board to assist with the transition and handover until June 30. He would also resign as an independent non-executive director of the company at the same time.

Tongaat Hulett chief executive Gavin Hudson said: “On behalf of the board and executive team of Tongaat Hulett, we wish to sincerely thank Mr Von Zeuner for his exceptional leadership, guidance and support during the difficult time that THL (Tongaat Hulett Limited) faced when he took over the role as chairperson.”

Von Zeuner was originally appointed as chairperson in September 2019 amid a boardroom shake-up at Tongaat after management fraud came to light at the sugar producer.

This gutted the firm, which lost more than 90 percent of its market value in the aftermath and has been fighting to regain financial stability ever since.

Tongaat said David Noko would assume the role of interim chairperson while the board identified a suitable replacement.

The process was already under way, and shareholders would be advised as soon as an appointment had been made.

Noko had served as lead non-executive director on the Tongaat board since July 1, 2020, and was the lead independent non-executive director.

Noko has an HND in Mechanical Engineering, an MDP and an MBA and has served on the boards of several prominent companies.

Hudson said: “In welcoming Mr Noko as the interim chairperson, we take comfort that our efforts to complete the turnaround and recapitalisation will benefit from an exceptional depth of management expertise on the board.

“We remain committed to the recapitalisation process, which we believe will protect intrinsic shareholder value and create a legacy for the half a million people dependent on the existence of Tongaat Hulett across the Southern Africa Development Community.

“Our engagement with lenders, shareholders and regulators to bring this to fruition continues,” he added.

Tongaat in April flagged that lenders had granted an extension to April 29, 2022. This as a rights issue to recapitalise the group was hiked to R5 billion from R4bn as the year-end net borrowings in South Africa rose to about R6.8bn from R5.8bn.

It expected earnings for the year to March 31 to plunge by at least 120 percent below the earnings of last year.

However, in a major blow to getting the company back on its feet, Tongaat’s hands are tied as the Takeover Regulation Panel (TRP) investigates the rights offer. This after a red flag was raised on concern that shareholders associated with the prospective takeover might have bought shares during the prohibited period.

However, Logan, an analyst who has in-depth Tongaat insight, said yesterday that Von Zeuner’s decision wasn’t unexpected. “This was part of the plan before the GM (general meeting), but it wasn’t well known,” he said.

With the annual results expected out around June 30, the AGM was expected to take place some time in August.

Logan said Tongaat was in a dire financial position.

To contextualise it, the board, including Von Zeuner, had inherited an extraordinary challenge.

No other board had been faced with such a formidable challenge. This was a legacy of gross mismanagement of the previous regime, which were being prosecuted for fraud.

“It is a stupendous and multi-faceted challenge,” he said.

Logan said to compound the board’s job, the banks were calling the shots as the firm juggled huge debt and had been technically insolvent since it had to restate its figures in 2019.

“I have a great respect for the board and executive. The market doesn’t appreciate how onerous the task is (of turning the firm around).

“Against the background, Tongaat is such an important firm,” Logan said, adding that KwaZulu-Natal was on a knife edge after floods and last year’s looting, as well as the mismanagement in the province due to an inefficient bureaucracy.

He said there was market uncertainty due to the delay of the company’s rights issue due to the TRP probe.

“The longer the probe takes, Tongaat’s financial position becomes more acute and the more uncertainty it raises,” he said.