Tongaat’s JSE suspension to protect investors

JOHANNESBURG – The JSE on Monday suspended the trading of Tongaat Hulett’s shares as concerns mounted about the embattled sugar producer’s financial irregularities.

The JSE said it suspended the company’s shares after the group sent a request for it to do so, following months of speculation about its assets, operations and other financial information as the company said its audited financials for the year to the end of March 2018 would have to be restated. This after a review found that the statements were in the process of being determined.

The company in a statement said that asking the JSE to suspend its shares was meant to protect investors from unreliable financial statements.

“This decision has not been taken lightly. While the board is conscious that some shareholders or potential investors would prefer to retain the ability to buy and sell shares, the board believes that the temporary suspension is in the best interests of shareholders as a whole,” Tongaat Hulett said.

“The board views the suspension as a temporary measure until the company is in a position to provide sufficient further information to the market. It is expected that the suspension will be lifted no later than the time of release of the March 2019 financial statements.”

Tongaat shares have plunged more than 75 percent in the past six months after it said its 2018 results could face a potential hit of up to R4.5 billion following a review of its accounting practices.

The group said past practices appeared to have resulted in financial statements that did not reflect Tongaat Hulett’s underlying business performance accurately.

PricewaterhouseCoopers is conducting a forensic investigation into the company’s books.

Shareholder activist Theo Botha said the step taken by Tongaat’s board was a sign that investors should brace themselves for more bad news.

“The fact that it is the company itself that asked for its shares to be suspended means more bad news was on the horizon. There must be further serious issues that have come out for the board to take such a drastic step,” Botha said.

“The question now is why hasn’t the Steinhoff board also moved to protect shareholders after serious misstatements? Maybe the Tongaat board is the more responsible board between the two.”

Tongaat’s secondary listing on the London Stock Exchange (LSE) has also been put on ice.

Tongaat said the halting of trading of its shares would also allow the group to restructure and reduce its debt.

“The company is continuing to formulate its ongoing strategic review and comprehensive turnaround strategy entailing, inter alia, cost reductions, possible sales of certain assets, restructuring of operations and improvements in operating performance.”

The unfolding accounting scandal at the sugar giant has already claimed the scalp of Jenitha John, who has been a member of Tongaat’s board since 2007 and chaired its audit and compliance committee.

The firm’s auditors, Deloitte, have also replaced all senior auditors, including partner Gavin Kruger, on the audit of Tongaat and launched an investigation into the audits the firm completed at Tongaat.

Asief Mohamed, chief investment officer at Aeon Investment Management, said the suspension of the listing of Tongaat on the JSE and the LSE came as a surprise.

“One can only speculate that the financial position is worse than initially expected. One cannot rule out a deep discounted rights issue to restore a healthy balance sheet in the next few months,” Mohamed said.

Tongaat said it expected to complete the review of its financials by October when its audited results for the year to end March 2019 would be released.


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