Tongaat Hulett today released its results for the year to end March 2020, which showed the group had posted an operating profit of R3.3 billion against R551 million the previous year. If the Zimbabwe operations are excluded, operating profit improved by just over R1 billion, increasing to R375 million against a loss of R650 million the previous year.
The group recorded an 18% increase in revenue to R15.4 billion from R13.1 billion previously, while the headline earnings per share improved 111% to 90c from a loss of 823c in the previous year. Cash flow from operations increased 62% to R2.1 billion from R1.3 billion previously.
Tongaat Hulett’s improved results reflect the steps taken to stabilise and restructure its business to become more profitable and sustainable. The performance was achieved in a market characterised by weak economic growth, significant business uncertainty and volatility. Hyperinflation accounting was used for the first time in the 2020 financial year for the operations in Zimbabwe, which contributed to increased revenue in Zimbabwe.
Strategic highlights for the year Included:
• Worked to improve the safety of workplaces, and deepened relationships with stakeholders: Improved communication both internally and externally and worked closely with governments across geographies in which we operate;
• Improved operational performance: Significant improvement in all sugar operations, solid performance in starch and glucose and continued land sales;
• Enhanced cash position and entered into transactions to pay down debt: Improved cash flow and working capital management, paid down 60% of a loan in Zimbabwe; moved creditors from 30 to 60 days and signed transactions of more than R6 billion to meet debt reduction milestones;
• Managed and bought down our cost base: Rightsized our structures and reduced our headcount, deepened strategic sourcing, reduced our office footprint, optimised our route to market in sugar;
• Improved sugar production: Crushed one of the largest South African sugar crops in years and ramped up production in Mozambique’s Xinavane refinery;
• Grown market share: Local sales in Mozambique increased by 22% and we increased sales and market share in South Africa, white sugar market share over 35% and overall share of >27%. We relaunched our packaging in South Africa and became a member of Proudly South African;
• Appointed a strong leadership team and a new Board;
• Strengthened governance and financial controls: Adopted zero based budgeting, increased oversight and financial control, new three-year business strategy and implementation of new systems and improved management reporting;
• Repositioned and revitalised assets: Turned Mozambique’s Mafambisse mill from loss-making to break-even, reduced loss in SA sugar operation and optimised our farming operations in South Africa;
• Progressed transformation and empowerment: Created the largest empowerment cane farming enterprise in SA and began the biggest farming initiative in Zimbabwe since independence; and
• Optimally improved and better positioned human capital: Employed specific skills to improve our bench strength, Implemented performance management across our business and brought in capability in sales, logistics and route to market.
Commenting on the results, Tongaat Hulett CEO Gavin Hudson said:
“After a significant amount of hard work, we are pleased to report that our strategy to turn Tongaat Hulett into a low-cost sugar producer and a leading agri-business in Africa is starting to manifest in our financial results. More remains to be done and we are fully committed to achieving our goals.
“The financial mismanagement uncovered in early 2019 was devastating for Tongaat, and affected every aspect of our business. To get Tongaat back to operating efficiently, strategically and profitably required nothing short of a fundamental restructuring of our business. We executed this swiftly and also undertook a sweeping review of our policies, procedures and processes as well as every aspect of our governance.
“The work that we have done to restructure Tongaat Hulett has allowed us to enter COVID-19 as a leaner, fit-for-purpose organisation better able to weather the pandemic and other challenges as well as lay the groundwork for a return to sustainable value creation for shareholders.
“Given the challenges we have faced, I am exceptionally proud of these results for the 2020 financial year. We have emerged as a better managed, better controlled and more resilient business with a much healthier culture.”