eBusiness Weekly
Michael Tome Business Reporter
JOHANNESBURG Stock Exchange-listed Tongaat Huletts Limited says its net monetary loss arising from hyperinflation accounting in Zimbabwe, countered the strong improvements in profit elsewhere for the six months to September 2019.
The sugar producing company also lamented high finance costs and heavy taxation in Zimbabwe as part of some encountered limitations in their sugar manufacturing business.
In its trading statement and operational update to September, Tongaat Huletts indicated that Zimbabwe’s official inflation rate increased substantially to 350 percent as at September 30, 2019 equated to the relative October 2018 figure.
Zimbabwe’s inflation soared as Government instituted macro-economic reforms that mainly focused on the reinstatement of the local currency. Resultantly the reintroduced local currency shed value as it moved to locate its own value from the previously pegged 1:1 value with the US dollar.
As it stands Tongaat is facing a potential loss ranging between R303 million to R327 million from a previously reported loss of R354 million loss in 2018.
“The application of hyperinflation accounting (in Zimbabwe), particularly with its impact on the fair value of biological assets, has had the impact of increasing Rand-denominated operating profit in these operations threefold.
“Further details of the impact of hyperinflation on the operations and the assumptions used will be provided in the interim results,” said Tongaat in an update to shareholders.
However, the burdened sugar concern is anticipating to be back on the South African bourse, JSE, in February after completing the requisite procedures that will see the release of its financial statements for the six-months ending September 30, 2019.
The company called for the postponement of its shares trading after it discovered accounting irregularities that resulted in inflated assets and profits.
Subsequently the company’s shares also got suspended on the Zimbabwe Stock Exchange.
On the other hand, the Mozambican operations realised an outstanding improvement, accruing from higher local sales on the back of valuable pricing and successful cost containment measures.
South African operations saw sugar production improving by 10 percent, positive of the figure in the prior comparable period as the company directed more effort towards cost reduction.
This all comes at a time when the company in collaboration with Government commissioned a $600 million (US$40 million) Kilimanjaro Sugar Cane project in the Hippo Valley Estates which is expected to produce an additional 50 000 tonnes of sugar per annum while creating an excess of 2 000 jobs by the end of 2020.
