17 October 2022

Tongaat Hulett (“Tongaat” or “the Company”) today announced that the critical next step in delivering the comprehensive restructuring strategy to reduce its excess debt to sustainable levels and ensure the sustainability of the group has been completed. The Board has approved the capital restructuring plan created by the Chief Restructuring Officer (CRO) and Restructuring Committee and it will be submitted to stakeholders whose participation is required in relation to various elements of the plan, for their consideration imminently.

The near collapse of Tongaat Hulett under high debt levels, financial misstatements and historic mismanagement resulted in the loss of significant value to its shareholders. Since 2019, the Group embarked on a comprehensive turnaround strategy, guided by a new management team and new board of directors, with a focus on financial controls, oversight, asset care and protection and our people and the communities they support. 

Over the past four years, debt has reduced by more than R6 billion from a high of R11.7 billion through the selected sale of assets and various cost and liquidity management actions. Despite this progress, delays experienced in the recapitalisation of the Company, particularly the failed planned equity capital raise, have seen high debt levels remain well in excess of what can be serviced by the Company. Consequently, further initiatives are urgently required to address the excess debt burden in the South Africa operation of more than R6.3 billion.

The restructuring plan, which was developed by the recently appointed CRO with the support of the Restructuring Committee, seeks to address how this excess debt can be repaid in a manner that recognises the South African lenders’ secured position while accommodating other stakeholders’ requirements to the fullest extent possible. The sustainability of our businesses, employees and value change are front and centre of the plan.

The plan also addresses the Company’s liquidity constraints after a R1.5 billion shortfall in facilities necessary to cover the peak working capital requirement of the current milling season, and which arose out of the challenging commercial environment experienced towards the end of March 2022, the lack of any meaningful dividend or fee income from the African sugar operations and higher restructuring costs. Despite these and other setbacks, the lenders have continued to support the Company with the introduction of a new R600 million facility which is scheduled to be repaid on 25 October 2022.

Critical point reached to realise restructuring benefits

After almost four years of following the comprehensive turnaround strategy, the company is seeing the first green shoots of recovery.

Tongaat has delivered an improved milling and sugar production performance, relative to previous seasons, and it is also experiencing strong local demand in its sugar businesses. The Mozambique sugar operations delivered excellent results.

Critically, the restructuring plan contemplates an extension and an increase in the Company’s commercial debt facilities to allow it to conclude the milling season and allow sufficient time to implement the Restructuring Plan. The Company is engaged in ongoing negotiations to determine the availability of such facilities.

The green shoots of recovery and the significant progress in delivering the turnaround strategy have been achieved despite the headwinds from unprecedented events outside of management control which included Covid 19, the civil unrest in July last year and flooding earlier this year in KZN. These events, and the delays experienced in the recapitalisation of the Company have contributed to further increasing the debt burden. Despite these setbacks, the lenders have remained supportive.

Gavin Hudson, CEO of Tongaat Hulett said: “The Board and management team continues to act with speed, determination and the highest standards of governance to secure the future of Tongaat Hulett. Securing funding will be key to our ability to continue operating into the next milling season and ensuring that Tongaat Hulett is able to continue to support the local sugar industry with critical milling capacity.  Over 500 000 dependents and community members across SADC rely on Tongaat Hulett for their livelihood. Since the new management team and Board were appointed three and a half years ago, we have shared a singular focus – to fight for the future of this great company. Our strategy has focused on delivering a plan to make Tongaat sustainable and allowing it to maintain its socio-economic contributions. Tongaat Hulett plays a systemic role in the food security of the region and the economy of South Africa. For every job created by Tongaat Hulett South Africa, 10 jobs are supported elsewhere in the economy.”