Tongaat-Hulett taking action

8 Dec 2003

Peter Staude, Chief Executive of Tongaat-Hulett said today that all its businesses are implementing actions to counter the negative impact of current conditions on the Group.;

The sugar industry in South Africa is particularly facing one of its most extreme challenges in recent history brought about by a number of factors converging at the same time.;

The most important factors being the rapid strengthening of the Rand against the US$ to levels last seen in early 2000; cost push pressures since 2000 that have rendered the industry less competitive in US$ terms; the recently announced reduction in the domestic market sugar price; and the “dumped” world market price being at its lowest level in recent years largely attributable to the rapidly growing Brazilian sugar industry that is expanding even though there is little movement in world sugar trade liberalisation.

This environment has been exacerbated by poor rainfall in many parts of the cane belt with production in some of the worst affected areas reaching full-blown drought status.

On 13 November 2003, Tongaat-Hulett Sugar Managing Director Bruce Dunlop announced that the company had initiated consultations with Entumeni mill employees, their representative Unions and cane growers regarding the company’s proposal to close the Entumeni sugar mill. Consultations with stakeholders are ongoing.

In a further development today, Dunlop briefed employees that the company intends to cut its overheads by at least half. This would inter alia require the downsizing of its head office at La Lucia. Consultations with employees that might be affected would commence shortly. The intention is for centralised services to operations throughout Southern Africa to be downsized and where appropriate merged with activities closer to the ‘coal face’. All services operating out of La Lucia will be reviewed including Finance and Accounting, Information Technology, Purchasing and Procurement as well as Technical Services. Outsourcing where appropriate would be considered. The La Lucia office has a complement of 190 employees.;

At the same time Dunlop announced a review of the make-up of the Tongaat-Hulett Sugar Board as well as a re-organisation of executive responsibilities with an emphasis on a leaner and flatter structure. This is to be followed by a review of management structures at Tongaat-Hulett Sugar’s mills, refinery and agricultural estates in South Africa. The feasibility of relocating from the La Lucia offices in Umhlanga Rocks Drive to smaller premises and the need for an office in Maputo would also be examined. Major emphasis will be placed on empowering employees at operating level to assume greater responsibility and accountability for Tongaat-Hulett Sugar’s performance.

Peter Staude commented that the restructuring at Tongaat-Hulett Sugar was one of the actions being taken in the Group to get its businesses into better shape and to energise the organisation to become more proactive and action orientated in unlocking earnings growth opportunities within the Group with a greater sense of urgency.;

Over and above cost reductions, other areas of focus include volume growth initiatives, rationalisation of facilities and the optimisation of capacity utilisation.