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Tongaat Hulett invests R460 million in off-season maintenance ahead of upcoming 2025/26 sugar season
Tongaat Hulett invests R460 million in off-season maintenance ahead of upcoming 2025/26 sugar season
Tongaat Hulett Limited (THL) is prepared for the upcoming 2025/26 sugar season, with all operations set to open and run smoothly as scheduled in April and early May.
As part of THL’s commitment to operational excellence, extensive off-season maintenance and investment to the value of R460 million was undertaken over the past few months across the company’s Maidstone, Amatikulu, and Felixton mills along with its central refinery in Durban and the Voermol animal feeds facility.
As a result, the company will be ready to welcome sugarcane deliveries from growers ensuring a strong start to what promises to be a productive season.
As the industry navigates ongoing threats including declining global sugar prices, job losses due to the sugar tax, and insufficient import tariffs resulting in increased volumes of imported sugar, THL remains focused on ensuring a seamless and efficient milling process, supporting growers, and sustaining the broader sugar community.
THL remains a key economic contributor in South Africa, supporting thousands of jobs and farmers in KwaZulu-Natal. The company’s South African operations contribute around R9.3 billion to the country’s GDP each year and it directly employs over 2,600 people – supporting more than 25,500 jobs in communities surrounding its three mills, refinery and animal feeds plant. More than two-fifths (43%) of the sugarcane processed by THL mills is sourced from 15 000 black cane growers and cooperative members with these farmers collectively paid around R500 million each year.
At the same time, the ongoing business rescue process is firmly on track and moving steadily towards substantial implementation. The post commencement financing from the Industrial Development Corporation (IDC) has been fundamental to this success, ensuring the company has remained operational during the business rescue process.
Most critically, the IDC’s funding ensured crucial off-crop maintenance on the mills and refinery could continue over the past three financial years. This saw THL allocating a total of R1.425 billion to strengthening its infrastructure, ensuring reliability and efficiency in production:
- 2022/23: R472 million
- 2023/24: R493 million
- 2024/25: R460 million
This investment underscores THL’s dedication to maintaining world-class facilities and enhancing operational performance for the benefit of growers, employees, and industry stakeholders.
The off-season maintenance has included significant infrastructure investments across all three mills. In addition to general maintenance, nearly 40% of the budget has been allocated to boiler improvements, enhancing steam efficiency, ensuring consistent factory performance, and addressing environmental compliance. Around 30% has been directed towards Front-End equipment to improve sugar extraction from cane, while the remaining funds have been invested in Back-End processing and service areas of the plants.
Finally, in line with the legally binding business rescue plan, which incorporates the transaction with the Vision Parties and was adopted by over 98% of creditors on 11 January 2024, the closing of the South African sale of assets transaction is drawing ever closer.
This will mark a significant step toward securing the long-term sustainability of the operations and towards the successful implementation of the business rescue plan. The business rescue process has provided a critical lifeline to all stakeholders invested in the rehabilitation and long-term survival of the business, people and assets of Tongaat Hulett, and avoided the devastation that liquidation in October 2022 would have wrought on local communities, the broader industry and the economy.
As the 2025/26 sugar season begins, we look forward to working closely with our growers, employees, and industry partners to build a more resilient and competitive sugar sector. With continued investment in infrastructure, operational efficiencies, and strategic partnerships, THL is well-positioned to drive sustainable growth and innovation in the industry.
HIGH COURT JUDGEMENT UPDATE AND CHANGES TO THE BOARD
TONGAAT HULETT LIMITED BUSINESS RESCUE PLAN ADOPTED
98.51% voted in favour
The business rescue practitioners (BRPs) of Tongaat Hulett Limited (THL), today announced that creditors voted in favour of the Vision Parties (Vision) business rescue plan.
91.91% of accepted creditor claims exercised their right to vote. 98.51% of those present and voting voted in favour and 1.49% of those present and voting voted against.
The BRPs said:
Today finally provides some certainty to stakeholders on the way forward. This is positive news for employees, the businesses across all geographies and THL’s stakeholders. While there is still much to be done, we are celebrating the achievement of a key milestone. We would like to express our gratitude to employees, the lender group, the IDC, SASA, creditors, Vision and the various stakeholders who have walked this journey with THL during the process.
With the continued support of the employees, the suppliers, the IDC and Vision, we will work together towards achieving substantial implementation of the now approved and adopted business rescue plan as efficiently and as quickly as possible. Substantial implementation will be the new beginning for a company that has been in existence for more than 100 years and has a significant impact on the economy of KwaZulu-Natal and the country.
In the Affected Persons’ meeting, Vision confirmed its belief that THL is a leading sugar and animal feeds business with a good asset base across Southern Africa. Vision is committed to keeping the group together and has developed a strategy entailing five strategic pillars that will be implemented to create a sustainable business.
The BRPs will now proceed with the implementation of the adopted plan. THL can only exit business rescue once the plan has been substantially implemented (which could take several months) or alternatively if it is no longer financially distressed. The decision to terminate business rescue lies with the BRPs or alternatively the High Court on application.
Key features of the business rescue plan:
| Key Features | Vision Plan |
| Acquisition of Lender Group claims and security and the subsequent conversion into equity | Acquisition of the Lender Group claims and security amounting to c.R8 billion and subsequent conversion of c.R4.1 billion of such claims into new equity in THL. |
|
Recapitalise balance sheet |
Conversion of c.R4.1 billion debt into equity. |
|
Existing shareholders |
Retain an interest of 2.7% in THL equity after the debt to equity conversion. |
Distributions to Creditors:
|
Secured Creditors |
Cash paid to Lender Group not disclosed. |
|
PCF Creditors |
Renegotiate a working capital facility, to be approved by IDC as PCF in a manner that will result in the extinguishment of the PCF. |
|
South African Sugar Association (SASA) Claims |
100c in the Rand (subject to declarator appeal process). |
|
Unsecured Creditors |
A R75 million distribution, paid pro-rata to Unsecured Creditors’ respective claims. |
|
Working capital facility (PCF) to fund THL businesses for the duration of the business rescue process and after |
THL, with support from Vision, will secure working capital facilities in the form of ongoing PCF sufficient to fund the THL businesses for the duration of the business rescue process and thereafter. |
|
Impact on employees |
The Vision transactions do not currently contemplate retrenchments. |
|
The continued trading of THL and business improvement, including ongoing employment of current employees and opportunity for new jobs to be created. |
Notice THSSA Adjournment of Meeting Outcome
EXTENSION OF THE PUBLICATION OF THE AMENDED BUSINESS RESCUE PLANS AND RELEASE OF 2022 RESULTS
The business rescue practitioners (BRPs) of Tongaat Hulett Limited (THL), Tongaat Hulett Sugar South Africa and Voermol Feeds today confirmed that creditors of the respective companies voted in favour of an extension of the publication dates of the companies’ respective amended business rescue plans to no later than 24 November 2023. The meetings to vote on the plans will take place by no later than 30 November 2023.
Following requests from shareholders and in the interest of transparency, the group also released a financial and operational update for the year ended 31 March 2022. The group has been unable to publish these updates, or the interim results for the six months ended 30 September 2022 and audited annual financial statements for the financial year ended 31 March 2023 to date, as the auditors of THL require more certainty to conclude on the going concern assumption to sign off those results. Sign off is linked to the content of the business rescue plans and the company’s solvency and liquidity position for at least 12-15 months.
The BRPs commented:
It is important to note that an extension of the publication of the amended business rescue plans does not impact the current workstreams or the length and cost of the business rescue process. These extensions will provide additional time for the conclusion of the relevant transaction(s) and for the incorporation of such transaction information in the plans. In addition, it will allow us to specify the recoveries and expected distributions to the various classes of creditors of the companies. The current court proceedings relating to THL’s payment obligations to the South African Sugar Association also remain ongoing.
SALIENT FEATURES OF RESULTS FOR THE YEAR ENDED 31 MARCH 2022
- Strong local sugar demand and good market share maintained across all geographies
- Net finance costs of R1.2 billion were reduced by 25%, due to lower debt levels and favourable exchange rate movements
- Dividends and management fees received from Zimbabwe decreased by 65% to R139 million
- Cash flow from operations deteriorated by R1.8 billion
FINANCIAL RESULTS
Recovery in the financial results for FY22 compared to FY21 was hampered by the following:
- Lower raw sugar production
- Continued negative effects of hyperinflation and currency devaluation in Zimbabwe
- Property transactions constrained by COVID-19 pandemic conditions and social unrest
- Civil unrest negatively impacted profits of the South African sugar operation by R158 million
- Restatements arising from a review of technical accounting matters following the transition to new auditors
- Contributions from the disposal of starch, Namibia and Eswatini operations in the prior year
- Benefit from lower borrowings following asset disposals offset by remaining operations continuing to utilise cash
Group financial results
|
Basic loss per share of 790 cents (FY21: earnings per share of 1 918 cents, restated) |
Headline loss per share of 585 cents (FY21: headline loss per share of 508 cents, restated) |
Group results from continuing operations
- Revenue unchanged at R15.5 billion (FY21: R15.5 billion restated)
- Operating profit of R584 million (FY21: Profit R1.4 billion restated)
- Adjusted EBITDA* down 67% to R591 million (FY21: R1.8 billion restated)
- Hyperinflationary net monetary gain of R86 million (FY21: loss of R91 million, restated)
- Basic loss from continuing operations increased to R1.07 billion (FY21: loss of R762 million restated)
- Basic loss per share from continuing operations increased to 790 cents (FY21: loss of 565 cents restated)
- Headline loss from continuing operations decreased to R789 million (FY21: loss of R942 million restated)
- Headline loss per share from continuing operations decreased to 585 cents (FY21: loss of 699 cents restated)
- Free cash outflow of R297 million (FY21: cash inflow of R1.5 billion restated)
- No dividend was declared for the financial year
*‘Adjusted EBITDA’ (a non-IFRS measure) is defined as operating profit adjusted to exclude depreciation, amortisation, any impairment (or reversal thereof) of non-financial assets, any other non-trading, or non-recurring items, as well as fair value adjustments relating to biological assets.
POST-COMMENCEMENT FINANCE EXTENDED
The business rescue practitioners from Metis Strategic Advisors today confirmed that they have reached an agreement with the Company’s current funders to extend the post-commencement funding facility to 6 October 2023.
This will allow the Company to deliver on operational and business rescue requirements while the approval process for longer-term funding is finalised.
TONGAAT HULETT LIMITED BUSINESS RESCUE UPDATE – PREFERRED BIDDER SELECTED
The business rescue practitioners (BRPs) today announced that the preferred strategic equity partner (SEP) has been selected.
The proposed transaction will comprise the acquisition of the complete sugar division of Tongaat Hulett Limited (THL) in South Africa and the investments in Zimbabwe, Mozambique and Botswana (Tongaat Sugar Assets).
The selected SEP, Kagera Sugar Limited (Kagera), is a sugar manufacturing company situated in Kagera in the North-Western part of Tanzania. It is part of a group of companies which are the largest producers of sugar in Tanzania and owns sugar assets in Tanzania, the Democratic Republic of Congo and the Middle East.
The BRPs commented:
We started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets. After a rigorous process, we identified Kagera Sugar as the preferred candidate. The group is financially sound, with a solid track record. Its exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of THL’s South African sugar assets. In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.
Continuing to operate Tongaat Sugar Assets as a combined multi-country group will ensure continuity for the operations in Mozambique, Zimbabwe and Botswana. It will also provide the South African business with access to technical capability to improve and to retain jobs in KwaZulu-Natal and to protect the livelihoods of several stakeholders across THL’s value chain, including that of the group’s many small-scale growers.
Mr Nassor Seif, Managing Director of Kagera Sugar Ltd, commented:
The acquisition is in line with the group’s overall strategy to expand its operations throughout Africa, and its vision of becoming a leading sugar producer on the continent. We will extend the core values that have resulted in the success of our Group companies to the new Southern African operations to benefit employees, growers and ultimately the economy of the region. The Group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies.
Additional information on the process and the preferred bidder will be reported to creditors in monthly reports and included in the updated business rescue plan.
POST COMMENCEMENT FINANCE FACILITY EXTENSION SECURED & UPDATE ON PAYMENT OF SASA OBLIGATIONS
The business rescue practitioners (BRPs) today announced that they have reached agreement with current funders to extend the post-commencement funding facility from 30 June to 21 July 2023 pending finalisation of negotiations aimed at obtaining a longer term extension.
The BRPs commented:
We thank our funders for their continued support. The ongoing funding does allow the Company to continue delivering on operational and business rescue requirements as in the past.
The BRPs also clarified recent comments around the payment of levies to the South African Sugar Association (SASA) and confirmed that all payment obligations from 1 April 2023 have been complied with.
TONGAAT HULETT BUSINESS RESCUE UPDATE: CREDITORS SUPPORT ADJOURNING THE BUSINESS RESCUE PLAN VOTING
Voting on the business rescue plans of Tongaat Hulett Limited (THL) and its subsidiaries, Voermol Feeds (Voermol) and Tongaat Hulett Sugar SA (THSSA), to be postponed
The business rescue practitioners (BRPs) today confirmed that 85% of the total claims of creditors of THL (94% for Voermol and 78% for THSSA) voted regarding motions to:
- adjourn (postpone) the meeting to vote on the published business rescue plans
- allow the BRPs to amend the business rescue plans to take into account various developments
Of those creditors present and voting, 100% voted in favour of these motions. Accordingly, creditors will consider and vote on the amended business rescue plans by no later than 30 September 2023.
The BRPs commented:
The BRPs have always preferred to publish a business rescue plan containing details relating to specific transactions. Since the release of the business rescue plans, we have continued discussions with a range of parties and agreed that updating the business rescue plans with additional details in terms of the strategic equity partner process and other matters would be in the best interests of creditors before they are requested to vote. As is clear, the creditor bodies agreed with this.
The postponement is therefore a positive step, as it creates increased certainty for affected persons as it will allow for the outcome of the SEP process and the associated consequences on the claims against the company to be outlined in greater detail in an amended business rescue plan.
Engagement with the potential strategic equity partners interested in acquiring the whole of THL and/or the SA Sugar businesses and/or parts thereof will continue despite the adjournment. The postponement does not impact the operations, with the same workstreams, as set out in the currently published business rescue plans, to continue.
