Tongaat Hulett in talks to sell starch business

Darnall Mill, one of Tongaat Hulett’s four mills in KwaZulu-Natal. Picture: TONGAAT
Darnall Mill, one of Tongaat Hulett’s four mills in KwaZulu-Natal. Picture: TONGAAT

Sugar producer Tongaat Hulett, whose share price has fallen more than two-thirds since resuming trading in February, said on Thursday it may sell its starch business as it battles a R13bn debt pile.

Tongaat did not go into further details, but wants to cut R8.1bn in debt by March 2021. It is also considering asking shareholders for about R4bn.

Shareholders, who had been prevented from exiting the company since June 2019, reacted to its return to the market on February 3 by pushing the shares down 67% to a record low.

The company, once one of the country’s most recognisable blue-chip stocks, has seen its share price battered by allegations of irregular accounting practices.

In the group’s six months to end-September, the starch and glucose business had contributed about 24% of operating profit, and about 26% of the R8bn in revenue. During the half-year, starch and glucose volumes had risen 4.5%, the company said.

It reported increased demand in the alcoholic beverages sector after customer marketing campaigns, the continuing growth in the coffee creamer sector, and the recapture of imported glucose volumes within the confectionary sector, which also benefited from new customer investments.  

After a strong recovery in volumes in the first half of the year in the starch and glucose operation, the group said it expected a slowdown in growth in its second half for this business, due to muted domestic market demand and operational constraints related to load-shedding.

In morning trade on Thursday Tongaat’s share price was up 2.5% to R3.98, having lost almost 70% so far in February.

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