Tongaat Hulett's listing has been suspended - here's what we know about the crisis at the sugar giant

Business Insider SA
Tongaat Hulett share price (Sharenet)
Tongaat Hulett share price (Sharenet)
  • Trading in Tongaat Hulett has been suspended on the JSE and in London.
  • SA's largest sugar producer is in crisis as its financial accounts cannot be trusted.
  • Deloitte is under fire - the audit firm was Tongaat's auditor for 15 years.
  • For more stories, go to Business Insider SA.

On Monday, trading in South Africa's biggest sugar producer Tongaat Hulett was suspended on the JSE and in London.

The 127-year company was first listed on the London Stock Exchange in 1939, and on the JSE since 1952.

Tongaat asked that its listings be suspended because of accounting irregularities.

Here’s what we know:

Its results cannot be trusted

At the end of last month, the board announced that its 2018 financial results can’t be relied on.

Tongaat said an ongoing financial review has revealed that “certain past practices” do not reflect the company's business performance accurately. The company's equity (the value of the business after liabilities) in its 2018 financial results has been overstated by between R3.5 billion to R4.5 billion. 

The overstatements were related to the treatment of Tongaat's property assets, analysts told Business Insider SA.

PricewaterhouseCoopers has been called in for a forensic investigation.

Now, Tongaat has asked that its listing be suspended to protect investors against speculative trading - given that there isn’t enough reliable financial information about what the company is worth. The suspended listing will also allow management more time to support the completion of the investigation.

“Whilst the Board is conscious that some shareholders or potential investors would prefer to retain the ability to buy and sell shares, the Board believes that the temporary suspension is in the best interests of shareholders as a whole.”

Questions about its former CEO

While Tongaat has blamed “certain past practices” for its accounting woes, it hasn't yet implicating former CEO Peter Staude nor financial head Murray Munro. 

Staude served as CEO since 2002 while Munro served as CFO since 2003. Both resigned days before Tongaat’s annual meeting in August 2018. 

Analysts who spoke to Business Insider South Africa said Staude should face the music. He received a total pay package of more than R13.5 million in 2018, and R20 million in the previous year - which included a R6.6 million cash bonus.

Deloitte is in the firing line

Deloitte was Tongaat’s auditor for more than 15 years. (It also audited Steinhoff.) The firm has launched an internal investigation, and replaced all senior auditors on the Tongaat audit.

The Independent Regulatory Board for Auditors (IRBA) has also started an investigation into Deloitte’s work for Tongaat. 

Trading should resume in October this year

Tongaat’s board says that it will ask for its listing to be reinstated when it releases its reviewed financial statements by the end of October.

But the company is battling to survive

Tongaat’s current market capitalisation is R2.2 billion, while its 2018 financial results show that total liabilities amount to R14.6 billion. 

Tongaat in February warned that its earnings will decline by as much as 250%.  It has blamed a surge in sugar imports into South Africa for its difficulties, as well as the introduction of the sugar tax last year, which had a larger than expected impact on local demand, particularly in the beverage industry. 

The company is currently cutting costs, and has sent retrenchment letters to over 5,000 employees. 

It has also concluded agreements with its creditors.   

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