Tongaat Hulett could have learned a thing or two from their condescending sugar packets.
The sugar giant has now been suspended on the JSE, as well as the London Stock Exchange, due to accounting irregularities.
That’s right, folks – here we go again. It’s Steinhoff 2.0.
Business Insider reports that at the end of last month, the board announced that its 2018 financial results couldn’t be relied on.
An ongoing financial review has revealed that “certain past practices” do not reflect the business performance of the company accurately.
The company’s equity (the value of the business after liabilities) in its 2018 financial results has been overstated by between R3.5 billion to R4.5 billion.
The overstatements were related to the treatment of Tongaat’s property assets, analysts told Business Insider SA.
PricewaterhouseCoopers has been called in for a forensic investigation.
Tongaat has requested that its listing be suspended to protect investors against speculative trading, because there isn’t currently enough accurate financial information regarding how much the company is worth.
There’s also more to this story than just mismanaged property assets.
Here’s Moneyweb with more:
[Tongaat]will also have to reverse capitalised costs related to cane roots, projects, maintenance and inventory. What may have happened here is that Tongaat undercounted actual expenses by ‘capitalising’ them – which has the effect of removing them from the income statement and recording them as assets on the balance sheet.
To add to the debacle, the audit profession is not looking good. Deloitte was Tongaat’s auditor for more than 15 years. It’s also the same company that audited Steinhoff.
The audit profession, already in damage control for signing off on Steinhoff’s fake figures and facilitating other corporate debacles (such as the looting at VBS Bank), will be bracing itself for another round of public opprobrium.
All of this implies that the financial results released last year are for the most part a work of fiction that takes into account land sales counted before they were due, and inventory and other capitalised costs fattened up to allow for large bonuses for executives.
Back to Business Insider for more on those top execs:
While Tongaat has blamed “certain past practices” for its accounting woes, it hasn’t yet implicating former CEO Peter Staude nor financial head Murray Munro.
Staude served as CEO since 2002 while Munro served as CFO since 2003. Both resigned days before Tongaat’s annual meeting in August 2018.
Analysts who spoke to Business Insider South Africa said Staude should face the music. He received a total pay package of more than R13.5 million in 2018, and R20 million in the previous year – which included a R6.6 million cash bonus.
Tongaat’s current market capitalisation is R2,2 billion, while its 2018 financial results show that total liabilities amount to R14,6 billion. They’re blaming the decline on sugar imports and the sugar tax introduced last year.
That’s still no excuse to cook the books, guys.
Stay tuned for more news as the scandal unfolds.
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