Tongaat Hulett said South African police are investigating an unnamed former executive for his role in an accounting scandal that’s forced the sugar maker to restate financials and ask for its shares to be suspended.
A criminal case has been opened against the individual, Tongaat said, without identifying the person. “Given that this is now a matter being investigated by the South African Police Service, we are not able to provide any further information,” the Durban-based company said in an emailed response to questions.
Further measures initiated by the group to hasten a recovery from the crisis include a review of assets, “some of which may be sold and others restructured or retained,” it said. “We are also reviewing, and possibly reducing, our headcount as part of the broader restructuring of the business to ensure the company has the right skills and experience to implement our new operating approach.”
Tongaat has started a forensic investigation into its financials, and found that the company booked profit on certain transactions before they were finalised, according to two people with knowledge of the matter, who asked not to be identified as the probe hasn’t been completed.
Tongaat's Bad Year
Tongaat’s shares were suspended this month after a series of disclosures on financial mismanagement wiped more than 75% off the market value. The 2018 statements will need to be altered by as much as R4.5 billion rand in non-cash adjustments, the Durban-based company said in late May, while annual earnings for the most recent fiscal year won’t be published until the end of October. The company was trading at R13.21 when suspended, valuing it at R1.78 billion.
The crisis at the sugar maker follows an accounting scandal at South African retailer Steinhoff International, which lost 97% of its value after reporting financial wrongdoing in late 2017. The country’s Independent Regulatory Board for Auditors is considering measures to strengthen testing for corporate fraud as a result, IRBA head Bernard Agulhas said this month.
Tongaat is also considering whether to claim back bonuses given to executives who oversaw the mismanagement, said the people. The company was formed through the merger of two sugar companies that are each almost 130 years old.
A number of senior executives have resigned or retired from the company over the past few months.