Troubled JSE-listed agriculture and agroprocessing company Tongaat Hulett has, following requests from shareholders and engagement with the JSE, released the unaudited and unreviewed financial information for the year ended March 31, 2022, in the interest of transparency.

"While Tongaat Hulett’s 2022 annual financial statements, including the audit thereof, had largely been finalised and completed in the appropriate time frames, it has not been possible to publish these statements to date, as the auditors have not yet concluded the going concern assumption applied in the preparation of the statements to be able to sign off on the 2022 statements.

"This requires the content of the business rescue plan and the company’s solvency and liquidity position for at least 12 to 15 months, which remains uncertain to date," the company explained.

The delay in the finalisation of the 2022 annual financial statements has also resulted in Tongaat Hulett being unable to publish its interim results for the six months ended September 30, 2022, and its audited annual financial statements for the financial year ended March 31, 2023.

Further, Tongaat Hulett noted that it had disposed of its starch, Namibian packaging and eSwatini agricultural operations during the 2021 financial year. While the starch operation was classified as a discontinued operation in the 2021 financial results, the Namibian and eSwatini operations did not each represent a separate major business segment and consequently remained classified as continuing operations.

During the 2022 financial year, strong local sugar demand persisted, and good market share was maintained across all geographies, and the company achieved ongoing improvements in environmental, social and governance matters.

Further, net finance costs of R1.2-billion were reduced by 25% owing to lower debt levels and favourable exchange rate movements. Dividends and management fees received from Zimbabwe decreased by 65% to R139-million and cash flow from operations deteriorated by R1.1-billion in the 2022 financial year, it said.

Revenue for the year to March 31, 2022, was unchanged from the prior year at R15.5-billion. Operating profit was R584-million, lower than the restated 2021 financial year profit of R1.4-billion. Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) were R591-million, 67% lower than the restated R1.8-billion Ebitda in the 2021 financial year.

Additionally, basic loss from continuing operations increased to R1.07-billion, up from the restated loss of R762-million in the 2021 financial year. Headline loss from continuing operations in the 2022 financial year decreased to R789-million, compared to the restated loss of R942-million during the prior year.

Free cash outflow during the 2022 year was R297-million compared to a restated cash inflow of R802-million during the preceding year.

Additionally, several events negatively impacted on the 2022 financial year results, including 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, and civil unrest negatively impacted on profits of the South African sugar operation by R158-million.

Other items that negatively impacted it during the year include restatements arising from a review of technical accounting matters following the transition to new auditors, the contributions from the disposal of starch, Namibia and Eswatini operations in the prior year and the benefit from lower borrowings following asset disposals being offset by remaining operations continuing to use cash during the 2022 financial year.

Basic loss a share was 790c for the 2022 financial year, compared to the restated loss a share of 565c in the prior year. Further, the company posted a headline loss a share of 585c during the period, compared to the restated 699c headline loss a share of 508c during the 2021 year, Tongaat Hulett said.

2022 YEAR
"Operational improvements, asset care, debt restructuring and liquidity management were high priorities for the Tongaat Hulett group during the 2022 financial year. The focus on these areas was intensified as headwinds in the form of civil unrest, severe climatic conditions and frequent operational breakdowns slowed down progress with Tongaat Hulett’s turnaround strategy.

"This was particularly disappointing after the excellent progress made in recent years in improving governance and management controls, reducing debt, improving cash flow and repatriation of dividends from Zimbabwe, the renewed investment in people and processes, and a strengthened focus on environmental, social and governance matters," the company said in commentary.

The positive market developments during the 2022 financial year were offset by an 8% reduction in sugar production, mainly owing to the weaker agricultural performance in Zimbabwe and unsatisfactory milling performance in South Africa.

"The Mozambique sugar operations delivered excellent results, with strong growth in adjusted Ebitda on the back of robust local sales, as well as an improved sales mix and higher export realisations. The Zimbabwe sugar operations benefitted from buoyant local sales but were materially impacted by the effects of hyperinflation, increased costs and lower exports.

"However, the South African sugar operations experienced a challenging year. The civil riots and low economic growth also weighed on the revenue, profits, and cash flows of the property business," Tongaat Hulett said.

"The subdued revenue generation amplified the vulnerability emanating from the fixed-cost nature of the sugar business, leading to decreased profitability. Profitability was also adversely affected by higher commodity input costs, particularly following the invasion of Ukraine, maintenance disruptions from civil unrest, higher labour costs, as well as the costs for the restructuring-related activities of the business.

"These factors, together with the various inflation and currency dynamics in Zimbabwe, contributed to a marked reduction in adjusted Ebitda, with more than 80% of the reduction originating from the Zimbabwe operations," the company said.