Tongaat Hulett’s former CEO loses millions after share price dive

Peter Staude, former CEO of beleaguered sugar and property giant Tongaat Hulett, will have lost millions due to the group’s share price rout following revelations of accounting irregularities that have forced the group to restate its financial results.

Staude retired late last year, having spent four decades with Tongaat Hulett, more than 16 years of which he was CEO.

Moneyweb contacted Staude for comment on the group’s accounting anomalies under his watch, and the calls for him to pay back the more than R94 million in bonuses and incentives he received in his last 10 years as CEO.

In a messaged response regarding the bonuses, he said: “65% of my Tongaat Hulett bonuses went into a scheme that facilitated me buying shares … None of which I have sold.” He declined to comment further.

According to company records, Staude received a total remuneration package of just less than R176.4 million between 2008 and 2018, when he retired. Around R38.8 million of that was in the form of cash bonuses (between 2008 and 2017) and R55.8 million in long-term incentives, while the balance was made up of his salary and retirement and medical aid benefits.

Tongaat Hulett’s latest shareholder register (to June 2019) shows that Staude owns just over 402 000 shares, currently valued at more than R5.3 million.

Staude has kept a low profile since retiring and since Tongaat, under new CEO Gavin Hudson, announced in May that the group would have to restate its financial results with an expected reduction in its equity “by between R3.5 billion to R4.5 billion”.

It has tasked auditing firm PwC with undertaking a forensic investigation into the group’s accounting practices. This saw it suspend its shares from trade on the JSE on June 10, and its already pressured share price fell further.

More than 75% of Tongaat’s value has been wiped out since the beginning of the year. This is less than a tenth of its value compared to the end of January 2017, when the share price stood at over R133.

Chris Logan of Opportune Investments, a former minority shareholder in Tongaat Hulett and a vocal critic of the company in recent years, says Tongaat was mismanaged under Staude, especially in his last few years. “Besides the accounting irregularities that are now coming to light, there has been capital misallocation, poor cost controls and misaligned incentives at Tongaat.”

However, he says that despite the dire situation the company now finds itself in, he believes “it can be saved” under new CEO Hudson.

Mass exits

Tongaat Hulett has seen a rash of resignations since late last year, including its long-time CFO Murray Munro. Company records show that Munro received a total remuneration package of R97.6 million for the 10-year period until his departure in 2018. This included almost R19 million in bonuses and R30.5 million in incentives.

Hudson, a former SABMiller boss in Turkey, took over as Tongaat CEO in February, while Rob Aitken was appointed new CFO in March.

Michael Deighton, head of the group’s property and land conversion division, resigned in May, and last month Nonhlanhla Mjoli-Mncube, a non-executive director who has served on the board for more than nine years, joined the long list of exits.

A criminal case has been opened against an unidentified former executive at Tongaat, which the group says is being investigated by the South African Police Service. While Moneyweb is aware of who the executive might be, Tongaat would not verify this information and declined to comment further.

Restructuring and jobs cuts

Tongaat Hulett has confirmed that, as part of the turnaround plan currently being implemented, it is “reviewing a number of its assets, some of which may be sold, and others restructured or retained”.

The company says “the exact figure of how many people will be impacted by the headcount reduction will only be known once the restructuring process is further progressed”.

In the face of its financial woes and increased debt, Tongaat has sent out Section 189 notices to some 5 000 employees across its operations in the SADC (Southern African Development Community) region.

The group reportedly aims to cut its costs by R1 billion.

“Meaningful progress has been made and details of the turnaround plan, together with information on the cost savings initiatives, will be presented to shareholders in due course,” the group’s head of investor relations told Moneyweb.

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