JSE-listed agriculture and agroprocessing company Tongaat Hulett this week said it was making progress with its debt restructuring plan, which has resulted in a new R600-million borrowing base facility being concluded with a South African lender, which will remain in place until September 30.

The company continues to progress the turnaround and restructuring plan that will be delivered to the board at the end of September, said CEO Gavin Hudson.

The intention is for the borrowing base facility by the lenders to be increased from R600-million to R750-million and extended to the end of the 2023 financial year. This is dependent on the mutual agreement of the board’s restructuring plan.

In addition, negotiations with funders outside of the lending group to secure a further R750-million are progressing.

If both engagements are successful, the total liquidity requirements of the South African operations will be met for the 2023 financial year, the company said.

An initial restructuring plan was presented to the board and lenders at the end of July and a draft plan was submitted to lenders on August 31. As part of the conditions of the borrowing base facility, a board approved plan is to be available by September 23. The plan is aimed at dealing with the group’s excess debt in South Africa, which is currently estimated to be around R6.3-billion.

As part of the plan, Tongaat is exploring options, including an equity capital injection by strategic partners at various levels within the group, the disposal of some or all of the African operations or a combination thereof.

When assessing the disposal of the African operations, a key consideration is the ability of the South African operations to operate as a listed entity on a standalone basis, and the ability to fund the necessary reinvestment to be sustainable long-term, Tongaat Hulett said.

“The publication of the annual results for the year ended March 31, is dependent on approval of the restructuring plan. Every effort is being made to publish the financial results and integrated report and request the listing of the JSE’s temporary suspension of its share as soon as possible thereafter. In the meantime, Tongaat Hulett’s business operations will continue as usual,” it noted.

EXPECTED LOSSES
Further, the company advised that a reasonable degree of certainty exists that it would report a loss of between R1.07-billion and R1.34-billion, compared with the restated loss a share of R2.68-billion for the financial year ended March 31, 2021.

Its loss a share is expected to be between 793c and 992c, compared with a loss a share of 1 985c in the 2021 financial year.

Its headline loss is expected to be between R852-million and R912-million, compared with a headline loss of R593-million in the prior year, while the headline loss a share is expected to be between 632c and 676c, compared with 440c the year before.

“As part of the transition to new auditors, the group revisited a number of complex technical accounting matters. This resulted in the restatement of the prior year's financial statements. In aggregate, the restatements improve both earnings a share and headline earnings a share for the year ended March 31, 2021, by about 190c,” the company said.

In an operational update, Tongaat said it saw strong local demand across all the sugar businesses and good market share gains, which offset an 8% reduction in overall sugar production, resulting in revenue generation being in line with that of the prior year.

Lower sugar production stemmed mainly from poorer agricultural performance in Zimbabwe and unsatisfactory milling performance in South Africa. The Mozambique sugar operations delivered excellent results.

The property market in KwaZulu-Natal remains subdued with limited appetite for development property investment in the aftermath of the Covid-19 pandemic, the civil unrest and recent flood damage. This culminated in fewer and smaller transactions being finalised at a slower pace, the company added.

“We have addressed the group’s short-term liquidity needs and are working to extend the borrowing base facility as a matter of urgency.

“It is pleasing to note that, despite the flooding in KwaZulu-Natal and rain-induced lower sucrose levels, the South African sugar mills are performing well ahead of the prior year and have benefitted from the significant efforts invested in the offcrop maintenance programme. Both sugar and animal feed products are delivering a strong commercial performance,” Hudson said.

“In Mozambique, the season start-up was also affected by heavy rainfall, but the sugar mills are gradually catching up on this lost milling capacity and the business continues to perform favourably. Macroeconomic conditions within Zimbabwe remain challenging and unpredictable with the introduction of several measures to curtail inflation,” he noted.