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Botswana|Business|Financial|Projects|Maintenance|Operations
Botswana|Business|Financial|Projects|Maintenance|Operations
botswana|business|financial|projects|maintenance|operations

Tongaat’s shares fall as it announces plans to restate 2018 financial statements

31st May 2019

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed Tongaat Hulett's share price on the JSE fell by nearly 10% on Friday afternoon after it announced that it would have to restate its financial statements for the financial year ended March 31, 2018, as a strategic and financial review had revealed “past practices which are of significant concern”.

It explained that these practices appeared to have resulted in its financial statements for that year not reflecting the underlying business performance accurately.

The financial review is ongoing and incorporates an independent forensic investigation to establish whether any of these past practices were deliberate.

The impact of the past practices on the numbers reflected in the 2018 financial statements is in the process of being determined, but the estimated reduction in the amount reflected as the company’s equity as at April 1, 2018, is expected to be between R3.5-billion and R4.5-billion.

The adjustments are of a noncash nature and relate to the reassessment of land sales against the revenue recognition criteria defined by International Financial Reporting Standards and the associated profit margins, a revision to growing cane valuations and a reversal of costs capitalised to, besides others, projects, cane roots, maintenance and inventory, on a cumulative basis.

The board, with support from the company’s auditors, has concluded that reliance on the 2018 financial statements is no longer appropriate, Tongaat said.

As a result of the significance of the past practices, the company has also postponed the release of its results for the 2019 financial year to October.

STRATEGIC REVIEW
Meanwhile, the company noted good progress being made with its comprehensive turnaround strategy.

Tongaat holds a considerable asset base, including controlling interests in sugar operations in South Africa, Swaziland, Botswana, Namibia, Mozambique and Zimbabwe; an extensive property portfolio; and starch operations.

The company is committed to selling certain assets and is making progress in reducing its debt, strengthening the balance sheet and improving its liquidity position.

The company has obtained independent valuations of its various businesses, as well as its land portfolio, which is currently reflected in the financial statements at historical cost.

The board and management have taken several immediate and remedial decisions to improve cash generation by significantly reducing costs, rightsizing operations and improving operating performance.

Significant changes to management and reporting structures have been and continue to be implemented, and these changes are already showing benefits, it said on Friday.

Local sugar markets and trading conditions have deteriorated, resulting in lower-than-anticipated cash flows in the company’s business and the sugar sector as a whole.

While the current economic climate is not conducive for land sales, the company has negotiated two sale agreements and is taking steps to obtain the necessary planning approvals to conclude these transactions.

Management is focused on collecting the proceeds from previously concluded land transactions.

These challenges are, in part, balanced by the performance of the starch business, which remains strong.

To strengthen governance, a restructuring subcommittee of the board has been established to oversee the turnaround process and support executive management.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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