JSE trading in South Africa’s biggest sugar producer, Tongaat Hulett, suspended on Monday in both South Africa and London as it’s financial accounts cannot be trusted.
The 127-year sugar producer who registered with the London Stock Exchange in 1939 and on the JSE in 1952, requested that it’s listings be suspended due to accounting irregularities.
A review was conducted and revealed that the Tongaat’s business performance has been inaccurately reflected. The company’s value of business after liabilities for it’s 2018 financial year has been overstated by around R3,5 billion to R4,5 billion.
According to Business Inside SA Hulett’s the discrepancy relates to the property assets and PricewaterhouseCoopers are conducting a forensic investigation.
The board believes that the suspended listing is in the best interest of shareholders and has been done to protect investors against speculative trading. This will also allow management time to complete the investigation and obtain reliable financial information into the company’s worth.
Deloitte, who was Steinhoff’s auditing firm, has been Tongaat’s auditors for over 15 years. An internal investigation at the firm is being conducted and all senior auditors on Tongaat’s audit have been replaced.
Tongaat announced in February that their earnings will decline by around 250% due to sugar imports into the country as well as the introduction of sugar tax which had mainly affected the beverage industry.
Their current market capitalisation is R2.2 billion however their financials reflect a total liability of R14.6 billion in 2018.
Tongaat Hulett’s are in crisis and have sent out 5,000 retrenchment letters to employees in order to cut costs.
It appears that the troubles started at the very top with executives receiving huge bonuses while workers are struggling, but the question on everyone’s mind is whether this will be another Steinhoff crash.