Our opinion on the current state of TON

Tongaat (TON) is two businesses - land development and sugar. The company owns 17600 hectares of land of which 9100 hectares along the Natal coast can be developed. The property is valued at R11,7bn. A strategy was developed to own developed properties that can generate rental income - instead of selling them off. 57% of the land between Ballito and Umhlanga known as the "Durban Aerotropolis" next to King Shaka airport belongs to Tongaat. Its production and sales of sugar is essentially a commodity business, dependent on the international price of sugar - which, in turn, depends on the level of rainfall in sugar-producing countries. The company may also be highly exposed to the political discussion of "land expropriation without compensation". On 31st May 2019, the company announced that it was investigating "certain practices" which might lead to the financials for the year to 31st March 2019 having to be restated. The impact on equity was estimated to be a reduction of between R3,5bn and R4,5bn. On 17th June 2020 the company announced that it had sold Tambankulu Estates for R375m. On 15th July 2022 the company announced that it would not be able to produce its financials for the year to 31st March 2022 on time (they are due by end July 2022) and had requested a temporary suspension of its shares on the JSE as a result. The JSE suspended trading in Tongaat with effect from 19th July 2022 because of failure to publish its results within the time limit. The company was placed in voluntary business rescue on 27th October 2022 by the directors with R6,9bn in debt. On 1st November 2022 the Business Day reported that Tongaat had missed a R400m payment for sugarcane deliveries. On 30th January 2023 the company's CEO, Gavin Hudson, resigned with effect from the end of February 2023. On 23rd February 2023 the company reported that Deloittes had agreed to pay it R260m in settlement of its claim without admission of liability. In an update on 9th March 2023 the company said, "Shareholders are advised that the recent rains and flooding caused by tropical cyclone Freddy has had an impact on the Company’s Mozambique sugar operations". On 31st March 2022 the company announced that it had secured financing to allow it to continue operations until June 2023. On 31st May 2023 Business Day reported that Tongaat had 8 potential buyers interested in buying all or part of the business. On 21st July 2023 the company said that the Tanzanian company Kagera Sugar was the preferred buyer of its sugar interests. On 27th October 2022 the company went into business rescue. The business rescue plan (BR plan) is being amended to include a strategic equity partner who intends to acquire the company's sugar business. The publication of the 2022 financials are being held up by the auditors who are considering the "going concern assumption" and will only be able to decide once they have seen an approved BR plan. The interim results to 30th September 2023 are also now due and delayed. Despite this the company has reported the following in regard to the 2022 financial year. Revenue for continuing operations was unchanged at R15,5bn and the headline loss per share was 585c down from the loss of 699c in the previous year. The company said, "Tongaat Hulett experienced strong local demand across all its sugar businesses and maintained its good market share in all geographic areas in which it operates. These positive market developments were offset by an 8% reduction in sugar production, mainly due to the weaker agricultural performance in Zimbabwe and unsatisfactory milling performance in South Africa". Obviously, this share is not suitable for private investors until it's listing is reinstated, if it ever is.