Tongaat Hullet expect losses to narrow as it finalises half year results

  • Headline loss expected to narrow by between 17% and 23%
  • The losses are attributed to hyperinflation in Zimbabwe, as well as higher finance costs and taxation
  • The Group is in talks with JSE for the lifting of the suspension of its shares, potentially in the first week of February 2020

JSE listed Tongaat Hulett is expecting headline loss for the six months ended 30 September 2019 to show an improvement compared to the R354 million loss (restated) in the same period in 2018.

The Group whose operations in Zimbabwe through the wholly owned Triangle Sugar operation and its 50.3 percent holding in Hippo Valley Estates said headline loss for the period under review would be between -R327 million and –R303 million, which is between 17% and 23% improvement from the same period in the previous year.

“Higher finance cost and taxation, together with a net monetary loss arising from hyperinflation accounting in Zimbabwe, countered the strong improvements in operating profit of the group discussed above, leading to the earnings outcomes depicted in the table above,” the Group said in a statement released on Wednesday.

Even though the headline loss for the period is expected to narrow, its high margins will likely be difficult for shareholders to swallow.

Likewise, the Group expects a headline loss per share of between -238 and -222 cents, which would be an improvement on the loss per share of -322 cents from 2018.

The embattled sugar producer asked the JSE to suspend its shares from the main bourse in June 2019 after it uncovered accounting irregularities that resulted in inflated assets and profits. Its shares were also suspended on the London Stock Exchange.

The company asked the JSE in December 2019 to postpone lifting the suspension, saying it needed more time to analyse its numbers after it had finally published pending 2018 full year results (restated).

Meanwhile, trading of Hippo Valley shares also remains suspended on the local bourse.

Commenting on its Zimbabwe operations the company said, “The application of hyperinflation accounting, particularly with its impact on the fair value of biological assets, has had the impact of increasing Rand-denominated operating profit in these operations threefold.”

“Further details of the impact of hyperinflation on the operations and the assumptions used will be provided in the interim results,” the Group added.

According to the company’s statement, South African sugar production improved by 10% relative to the comparable period and good progress was made with cost reduction efforts.

“Despite these positive interventions, lower local sales volumes and the consequent change in the sales mix toward lower margin exports, has increased the South African operations’ operating loss during the period,” the Group said.

Elsewhere, the Group said that its Mozambican operations experienced a notable turnaround, benefiting from higher local sales on the back of beneficial pricing and promotions, as well as from successful cost containment.

“This, together with the positive impact of the Xinavane refinery coming on stream in the six months under review, returned the operations to profitability after a loss in the comparable period.”

The Group advised that its board of directors have entered into discussions with the JSE to request the lifting of the suspension of its shares, potentially in the first week of February 2020, and a further announcement will be made once the JSE conveys its decision.

The interim results for the six months to 30 September 2019 are scheduled to be released on SENS on 31 January 2020.

Equity Axis News


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