THL Notice of Beginning of Business Rescue Proceedings

• THL Notice of Beginning of Business Rescue Proceedings

TH Developments Sworn Statement

• TH Developments Sworn Statement

THL Sworn Statement

• THL Sworn Statement

TONGAAT HULETT DOES NOT OFFER JOBS IN EXCHANGE FOR MONEY

We follow sound and fair recruitment processes, and any offer of employment would never be contingent on a candidate making any form of payment.

Please be aware that if you are approached and offered a position in exchange for money, this is fraudulent. We encourage you to report it anonymously on our 365/24/7 FreeCall Tip-offs Anonymous service – 0800 21 21 87 or tongaat@tip-offs.com.

If you would like to work at Tongaat Hulett, our career vacancies are advertised on the following website portals:

• Careers24
• PNet

TONGAAT WELCOMES DECISION ON STARCH SALE

Tongaat Hulett has welcomed the decision by independent third-party Rothschild & Co that a material adverse change (MAC) has not occurred with relation to the R5.35 billion sale of its starch business to Barloworld.

Tongaat CEO Gavin Hudson said was pleased that the decision by the independent expert had confirmed Tongaat’s belief that a MAC event had not occurred, and that the transaction would now go ahead.

“Throughout this process we have continued to work to close out workstreams to meet our other obligations under the agreement reached with Barloworld in February this year, so that we can conclude the sale and move forward. It is expected that we will be able to finalise this process by the end of October with the Starch business transferring to Barloworld from 1 November 2020.

“Starch is a great business and Barloworld is fortunate to be buying such a valuable asset with excellent people. However, the rationale for the sale remains unchanged – it will help us to continue meeting our debt reduction targets. Tongaat is a high potential business with a significant asset base, and this decision will ensure that our focus remains on bedding down the turnaround of our organisation,” he said.

Hudson said Tongaat would work with Barloworld in a collaborative manner to close the starch transaction as soon as possible now that the issue of the MAC dispute was behind the two companies.

“The sale of starch will position the group for longer-term sustainability as we deliver on our strategic business partnerships that will step-change our transformation initiatives, protect employee jobs and help support the economies of the countries in which we operate,” he said.

TONGAAT HULETT SELLS STARCH DIVISION TO BARLOWORLD FOR R5.35 BILLION

Tongaat Hulett Limited confirmed today that it would sell its Starch business to Barloworld Limited for an enterprise value of R5.35 billion.

The deal will have a significant impact on reducing Tongaat’s debt.

In terms of the agreement, all jobs at the Starch business will be retained, with the transfer of employees’ conditions of service intact.

Tongaat CE Gavin Hudson said: “This was a compelling offer for our Starch business, which the board reviewed in detail.”

“Our number one priority is to ensure the long-term sustainability of Tongaat, and a key element of this is paying down our debt as quickly as possible. Our agreement is to reduce debt by R8.1 billion by March 2021 and we have already met and exceeded the first debt repayment milestone agreed with our lenders.

“We have said for some time that we would consider a number of opportunities to reduce our debt and stabilise the business, including the sale of both core and non-core assets. Other debt-reducing activities include accelerating operational efficiencies, and a potential strategic equity capital raising initiative.

“The sale of the Starch business will allow us to make excellent progress on paying down our debt, and that in turn will give us breathing room and free us up to put measures in place to grow the business. The sale positions us for longer-term sustainability and value creation for our shareholders.”

“Debt reduction is an important part of our sustainability strategy, but by no means the only one. We have put in place a number of strategic business partnerships to raise cash and/or step-change the company’s transformation initiatives and build strong partnerships. These include:

• Within our SA farming operations an initiative was launched through which Tongaat is exiting its direct sugarcane farming activities in SA. As part of this initiative, Uzinzo Sugar Farming, a large-scale black-owned sugarcane farming enterprise was created to farm a portion of this land.
• Within our SA milling operations, we are creating an initiative aimed at establishing a well-structured competitive sugar business on the KwaZulu-Natal North Coast that mills, refines and sells sugar and associated products, with equity held by, amongst others, farmers.
• We are re-strategising the property and land business by creating a special purpose vehicle to facilitate diverse investment partnership opportunities and through this, deliver a stable and sustainable long-term earnings platform.
• We officially launched project Kilimanjaro with the Zimbabwe government in November 2019. The project aims to increase productivity of land through the development of 4 000 hectares of new land for sugarcane farming for the benefit of 200 farmers.”

“The company is energised and motivated, with a human capital base that’s fit for purpose. We are well on the road to sustainability,” said Hudson.

Looking to the future, Hudson said: “Tongaat Hulett is considering multiple options in terms of the potential sale of assets, with our main priority being to protect shareholder value while we honour our debt-repayment glide path in a responsible way. Disposals will be considered at the right price and right time. We are focused, but in no hurry.”

Tongaat’s Starch division was established in 1919 and is one of the largest wet millers in sub-Saharan Africa, operating four wet milling plants located at Germiston, Kliprivier and Meyerton in Johannesburg, and Bellville in Cape Town. The mills have a combined total installed capacity to process more than 850 000 tons of maize per annum.

The Starch Business uses non-genetically modified maize, predominantly yellow maize, to manufacture high quality unmodified and modified starch as well as liquid and powdered glucose and agri-products for some of the largest companies in the food, industrial and animal feed sectors in the domestic and international markets.

The Starch Business is one of the largest producers of unmodified and modified starch, and glucose in Sub-Saharan Africa and enjoys a strong market position as the sole manufacturer of starch and glucose in South Africa. It supplies a significant proportion of the local market across a diverse range of industries, including paper manufacturing, alcoholic beverages, prepared foods and other food manufacturing and consumer end markets.

The sale to Barloworld is subject to shareholder approval and other conditions precedent.

KEY FINDINGS OF PWC INVESTIGATION

TONGAAT HULETT CONTRIBUTING TO THE TRANSFORMATION OF THE SUGAR INDUSTRY

Tongaat Hulett is advancing the establishment of a transformative milling, refining and sugar marketing business which aims to offer small-scale growers, commercial growers; and equity partners an opportunity to partner in a well-structured, sustainable and competitive sugar business spanning the North Coast of KwaZulu-Natal. 

Strategic assets owned by Tongaat Hulett’s South African sugar operations will form the initial assets in this business. These assets include the four Tongaat Hulett owned mills, Tongaat Hulett’s stand-alone Refinery as well as its animal feeds business, Voermol.  The entity will also become the producer of sugar related products, including its speciality sugars, syrups and liquids.

The shareholding will specifically be aimed at inclusively integrating all the company’s current sugar value chain participants, including supplying growers. The shareholder mix will accordingly target black ownership of greater than 50%, towards which Tongaat Hulett will contribute via its current B-BBEE ownership at a group level.

The worlds’ demand for sugarcane is increasingly shifting from sugar consumption to the growing relevance of the high-margin green economy. The company has identified opportunities in bioplastics, ethanol and additional co-generation. The key benefits of these opportunities include margin expansion, lower carbon footprint and high and growing demand for renewable products globally.

The initiative was launched recently by the Tongaat Hulett CEO, Gavin Hudson, supported by the Transaction Advisors, Capricorn Capital and BSM, and a significant number of growers attended the two launch events.

“The milling, refining and sugar marketing business will be implemented on a scale that has never been achieved in the sugar industry”, said Hudson. “For many years, growers have called for equity participation in the milling and refining business which would allow for their increased participation in the sugar industry value chain. The initiative is providing this opportunity, which is revolutionary for the industry.” It is envisaged that the transaction will be completed by December 2019 and Hudson concluded that this transaction will allow the company to further embed its objectives of transformation, empowerment, inclusivity and partnership.  

Grower representatives welcomed the initiative, particularly its inclusivity and they have requested that Tongaat Hulett assist them in identifying potential funders and ensure that women and youth were prioritised in the process.

“This is a great initiative that promotes empowerment and transformation in the milling sector. It will afford growers the opportunity to participate in the full sugarcane agriculture value chain.  Growers will engage further with Tongaat Hulett to explore the detail of the concept”, noted Dave Littley, Amatikulu Local Grower Council Chairman.

“A key focus area for SAFDA is to ensure full value chain participation of black farmers. We believe any opportunity that aligns with this must unlock value creation for our farmers and contribute to the sustainability of the industry at large – particularly at this time when the industry is facing a number of challenges,” commented Lee Hlubi, Deputy Chairperson of SAFDA.

UZINZO: CHANGING THE LANDSCAPE OF SUGARCANE FARMING IN KZN

As agri-processing giant Tongaat Hulett exits sugar farming, sweet success is being tasted by previously disadvantaged individuals who are taking the gap.

A strategic review and turnaround process currently underway within Tongaat Hulett has identified the opportunity for the company to exit its direct sugarcane farming activities in South Africa.

Tongaat Hulett’s South African sugar operations encompass 119 000 hectares of which 8 400 hectares are owned and farmed by the company, 61 500 hectares are owned and farmed by white commercial farmers and 49 300 hectares are owned and farmed by previously disadvantaged individuals (PDIs). Tongaat Hulett’s aspirations is to shift the PDI supply mix towards a 50% share.

To meet these aspirations, Tongaat Hulett has established FarmCo, a transformation initiative to ensure that land which has been targeted for future property development remains productive under sugarcane. Numerous farms will transition through creating opportunities for third party growers to farm company owned land thereby mitigating potential job losses at the farm level.

Phase 1 of FarmCo is set to meet the Agri-BEE scorecard objectives including equity and ownership profiles, through the creation of a large-scale black-owned sugarcane farming enterprise. The initiative will also reduce the impact of retrenchment through employee empowerment; focus only on the estates that have the highest agronomic potential; and maintain full economies of size and scale of estates. In addition, FarmCo is set to encourage youth participation and ensure meaningful participation of black farmers within the sugar industry.

To make the transformation initiative a reality, Tongaat Hulett facilitated the creation of Uzinzo Sugar Farming, which means stability in isiZulu. Uzinzo will enable shareholders to lease three prime agricultural estates at below market-related rental. The leased area is approximately 3 900 hectares with an estimated annual production of 160 000 tons of sugarcane, making Uzinzo Sugar Farming one of Tongaat Hulett’s top five largest supplying growers.

The three farms extend over both coastal and the Midlands regions, mitigating climate risks. They also grow different variants of cane, some of which are harvested annually and other crops every second year. Farming will also include food crops.

Uzinzo’s annual revenue is expected to be around R79 million, which together with its scale of production, will make it the first broad-based agricultural company to feature amongst the largest 10 sugarcane farmers in KwaZulu-Natal.

Three dynamic individuals, Nonhlanhla Gumede (33), Khetha Ncalane (45) and Khumbulani Mthethwa (44) have been selected to be at the helm of Uzinzo Sugar Farming. These individuals have a 65% shareholding. There is also a 15% shareholding for the employees through an Employee Trust that has been created. Tongaat Hulett, which will retain a 20% shareholding, will play a facilitative and mentorship role in the short-term while the shareholders familiarise themselves with the various intricacies of this sugar farming business.

Nonhlanhla has a nine-year experience within the agricultural sector. She spent a short period at the start of her career within the banking sector. In 2011 she joined her father in the management of a 90.3-hectare farm. The six-years’ experience on her father’s farm motivated her to buy her own farm, which she did in 2017. Nonhlanhla’s 170-hectare farm has the potential to produce 3 300 tons of sugarcane. She has diversified her business to also grow, supply and distribute fresh produce to schools as part of the Ilembe Enterprise development programme, which has enabled her to employ more labour on her farm.

“I’m very excited to be part of Uzinzo Sugar Farming,” said Nonhlanhla.

“Uzinzo will allow me to grow and learn from my colleagues who have considerable experience in farming. It will also encourage young women to see the future in agriculture.”

Nonhlanhla also believes that the sugar industry plays an important role in assisting government to deal with the challenge of unemployment.

“Agriculture is contributing to employment creation and local economic development,” said Nonhlanhla.

Khetha Ncalane, another shareholder within Uzinzo Sugar Farming, has a long history with Tongaat Hulett. He was first introduced to Tongaat Hulett when his father was employed as a general worker. Many years later, Ncalane joined Tongaat Hulett himself and has worked as a trainee; an estate supervisor and manager in many Tongaat Hulett Estates including Wewe, Hillhead and Dube Ridge.

In 2003, Ncalane established his own company, called Emkay. In its first year of operation Emkay harvested 45 000 tons of sugarcane. The business has grown over the past 16 years and he now harvests between 200 000 – 250 000 tons of sugarcane in his various operations. He also provides a wide range of agricultural services to small-scale and land reform growers. As a true operator, Ncalane said that based on the current projections, the three estates have the potential to produce 160 000 tons. However, Ncalane believes that Uzinzo will in fact be able to produce between 180 000 and 190 000 tons.

“I’m honoured to be part of Uzinzo Sugar Farming,” said Ncalane. “Uzinzo is responding to the government’s transformation agenda as 65% of the company is black-owned.”

He also believes that his other business partners were well equipped to make Uzinzo a success.

Khumbulani Mthethwa, the third shareholder, was born in Ndulinde under Inkosi Mhlongo. This traditional leadership area forms part of the Ilembe district municipality. Mthethwa knew from an early age that he wanted to be part of the agricultural sector. This passion propelled him to purchase a 271-hectare farm in 2011 which is annually producing 10 000 tons of sugarcane. In 2018, he bought his second farm which is 120 hectares and has the potential to produce 5 000 tons. In addition, Mthethwa is one of the largest harvesting contractors within the sugar industry. He is currently harvesting 270 000 tons of sugarcane for small-scale growers in communal areas.

As part of his commitment to poverty alleviation and food security, Mthethwa has established a five-hectare vegetable block in Ndulinde. He supplies Enterprise Ilembe with his produce monthly. He has also applied through the Department of Economic Development, Tourism and Environmental Affairs to be part of the Radical Agrarian Socio-Economic Transformation (RASET) programme. Through RASET, he will also be one of the service providers producing vegetables for the surrounding schools and hospitals.

“I have been humbled by the trust bestowed to Uzinzo by Tongaat Hulett,” said Mthethwa. “There was no room for failure. We will work in partnership with government to address issues of unemployment, youth and rural development.”

 

SUSPENSION OF LISTING OF SHARES

The decision this week by the Board to request the suspension of the listing of Tongaat Hulett shares on the Johannesburg Stock Exchange was voluntary, and followed the recently announced delay in publishing our financial statements and the ongoing review into past financial practices.

The reason for the suspension was to ensure that the market had relevant information to enable fair trading. It will also allow management more time to complete the forensic investigation and the restatement of the financial results. The suspension of our listing is temporary, and the Board plans to re-instate the listing when we publish our financial results at the end of October this year.

Tongaat Hulett CEO Gavin Hudson said the suspension does not have an impact on day to day operations and Tongaat Hulett continues as a going concern. Tongaat Hulett has a significant asset base and is in the process of finalising the valuation of its underlying businesses and land portfolio.

“It is important to note, that from an operational point of view, it is business as usual, and we will continue to deal responsibly with our customers, suppliers, growers and all other stakeholders,” he said.

The suspension would also allow the management of Tongaat to focus on the company’s comprehensive turnaround strategy, he said.

The Board and management have taken several immediate and remedial decisions to improve cash generation by significantly reducing costs, right-sizing operations and improving operating performance. Significant changes to management and reporting structures are being implemented, and these changes are already showing benefits.

The company continues to engage positively in a collaborative process with its lenders to ensure Tongaat Hulett’s long-term sustainability by reducing the business’s debt to an appropriate level.

A restructuring sub-committee of the Board has been established to facilitate the turnaround process and support executive management.

Tongaat, KwaZulu-Natal
11 June 2019