Tongaat Hulett Limited (TON) Earnings Call Transcript & Summary

Great. Welcome, everybody. And this is the meeting of shareholders in terms of Section 143(3)(b) of the Companies Act. So we've got 8 attendees, so I suspect that they're all shareholders. So maybe let's go to the next slide, please, [ Lauren ]. Great. Thank you. So as I said, this is a meeting of the shareholders of the company convened for purposes of procuring the vote from the shareholders with regard to the remuneration agreement. As it's a meeting of shareholders of Tongaat Hulett Limited, which I'll refer to as THL, but it's only open to shareholders of the company. So if there are any parties on the call that are not shareholders of the company that you're not regarded as an affected person, who will obviously have no vote or standing in these proceedings. Next slide, please, [ Lauren ]. Right. So just by way of background to give context to paint the picture here that on 27 October 2022, THL filed for voluntary business rescue and appointed myself, Peter van den Steen and Gerhard Albertyn as the joint business rescue practitioners. So Peter, if you could just raise your hand, please? Thank you. Gerhard, raise your hand. Thank you. So those are the joint business rescue repartitions appointed to the company. In terms of the regulations of the Companies Act, there is a prescribed hourly rate for the payment of fees for a business risk practitioner. And this is determined on the size of the company. THL is classified in terms of the regulations as a large company, as it has a public interest score of greater than 500 points. In terms of Section 143(2), there is provision made for the BRPs to propose an agreement with the company providing for further remuneration. Now that's in addition to the regulated tariff. So we have -- the BRPs have managed to negotiate and settle a remuneration agreement as contemplated in Section 143(2) of the Act. Next one, please, [ Lauren ]. So in terms of the regulations, the business rescue practitioner appointed for a large rescue is entitled to a fee of ZAR 1,739 an hour, excluding VAT or ZAR 2,000 an hour, including VAT. Now the company has recognized that the hourly rates prescribed in the tariff was determined way back in 2008 with the drafting of the Companies Act and no longer market related, and it just does not cater for any annual escalations. So as a result, between the company and the BRPs, we have concluded our remuneration agreement in terms of which it's been agreed that there would be further remuneration in addition to the tariff to increase the aggregate rate to a more market-related rate as you'll see in a bit. So the -- in addition to the hourly rate that is charged by the business rescue practitioners, any expenses incurred by the business rescue practitioners, reasonable costs and disbursements, would be able to be recovered from the company. And so these are typically discharged in the performance of the duties and responsibilities of a business rescue practitioner. The examples are of sort of travel and costs related to carrying out their duties. Thanks, [ Lauren ]. Next one, please. Now in terms of the Act 4, this agreement that's been concluded between the business rescue practitioners and the company, for it to be binding on the company, we need the support of the holders of a majority of the creditors' voting interests that were present in voting at the meeting to call for in terms of Section 143(3)(a) of the Act, which meeting we just had prior to this one. And then in addition to that, the -- we also require the holders of the majority of the voting rights attached to any shares of the company that entitle the shareholders to a portion of the residual value in the event that the company were to be wound up. And that's also -- the votes sought from the shareholders would be the votes present of the shareholders present then voting at the meeting, either in person or by proxy. Next one, [ Lauren ]. And what we've taken into account, we -- with the rate that was established in 2008 was ZAR 2,000 an hour, which exclude -- including VAT, which if we exclude VAT, gives you ZAR 1,754 per hour. And you'll see it a bit later, there's a marginal discrepancy. That discrepancy is in 2008, the VAT rate was 14%, which subsequently increased to 15%. And because the hourly rate includes -- the maximum is ZAR 2,000, including VAT. If we do it based on the current VAT rate, it comes to ZAR 1,739, I think it is, which we'll see in a little bit. So we do deem it appropriate to adjust that tariff that was set in 2008 by an annual increase equivalent to the CPI. So if we were to adjust the rate by the CPI, the -- excluding VAT rate, it would have increased to ZAR 4,335 per hour. And that's around about by mid-2023. So based on the above considerations, it's our opinion and that of the company that the remuneration concluded is in line with the inflationary escalation and is regarded as reasonable. And we're hoping that the shareholders consider this favorably. Next one, [ Lauren ]. So what we've done is just to show over time how the rate would have escalated from the -- on the left-hand side, the ZAR 1,754 per hour, and that's excluding VAT, up to the ZAR 4,335 by mid-2023. Next one, please. So the consequence of that adjustment, we're proposing that for the senior business rescue practitioners, which is Peter van den Steen and myself, that we work on an aggregate basic remuneration of ZAR 4,400 per hour, excluding VAT. And how we arrive at that is to take the regulated tariff of ZAR 1,739, excluding VAT, and add to that further remuneration in the amount of ZAR 2,660 per hour, and that aggregates to the ZAR 4,400 per hour. And you'll see the ZAR 1,739 that I referred to above it differs slightly from the ZAR 1,754 in the previous slide. And that -- the difference of that is because of the different VAT rates at the different periods. And then the agreement specifies that Gerhard Albertyn, who is an experienced business rescue practitioner, not senior, also have his rate adjusted so that the aggregate basic remuneration would be ZAR 2,950 per hour, which is made up of the ZAR 1,739, excluding VAT, per hour has regulated in the Act plus further remuneration in the amount of ZAR 1,210, excluding VAT per hour, getting you to the ZAR 2,950, excluding VAT. Next slide, please, [ Lauren ]. Right. So I think before we just go into the voting, maybe just open the floor up for any questions that anybody may have.

[Operator Instructions] At the moment, Trevor, there are no questions.

Let's give it a couple of seconds just to allow people, in case there are any.

Trevor, I've noticed that there are a few people that have logged on maybe a little bit after the top of the hour. So I would assume there might be some questions just saying, okay, well, backtrack a few slides and keep us informed. So that might happen. But in the meantime, in the absence of questions, I think, for the voting purposes, I think it's important to maybe just share the details for what's required for that, [ Lauren ].

Thank you. Maybe I can just run through that, and then [ Lauren ] can add in. So it's basically now that we've done the introductions and really the purpose of the meeting, we would request the shareholders present and voting at the meeting cast their votes in order to approve the proposed remuneration agreement. So the voting could take place in 1 of 2 ways that -- either the shareholders present at the moment and voting type their name, surname, the name of the shareholder they represent and their vote in the Q&A chat box to the right of the screen. Alternatively, via e-mail to the BR, the business rescue email address of br@tongaat.com at any time during the meeting and prior to the closure of the meeting. So anything you want to add to that, [ Lauren ]?

That about sums it up, Trevor. And then once we have received all of the votes, we will tally them. And we will circulate a notice, which shareholders will be notified of through [ SMS ] as per the usual notification purposes.

When will that take place, [ Lauren ]?

Peter, that will be at the beginning of next week.

Thank you.

So there is a dot on the Q&A. I can't see the questions.

There is one question that's come through, and it's, do you have a sense of a time line and how long this process will take?

Not at this stage. There's various permutations, which would dictate the length of the business rescue. But what we've been spending our time on today is the procuring of post-commencement finance. It is well known that we have secured emergency post-commencement finance of ZAR 900 million, which has enabled us to make critical payments to get the mills and the refinery up and running again. And we are in negotiations at the moment for further funding, which should assist us in getting to the end of the season, being the end of March 2023. But the exact period that we're looking at for this rescue is uncertain at this stage.

Thank you, Trevor. Another question. What do the BRPs think of the expression of interest submitted by the consortium of sugar farmers?

I think there is a number of interested parties that have approached us. And it's a bit premature to be considering interest like that. We -- as I said, the focus at the moment is to procure the funding to get us through to the end of the season. And yes, so we've got a lot of people who have come with various expressions of interest. But as we go forward from January onwards, depending on how we see the rescue unfolding, would dictate to what degree we're going to engage with those parties. We are well aware of them. And Peter [ is here ], do you want to add anything?

Nothing from me at this stage, Trevor, other than we've got expressions of interest. We have acknowledged receipts of those. To develop from an expression of interest to something that is bankable takes a lot of time for due diligence. I think we are a long way away from that. But obviously, it's all on the radar, and we're considering all the options going forward.

Just to close it out. The business rescue plan publication date, 31 January, so the idea is to cater for the ability to address those expressions of interest and the different options. But I think to Peter and Trevor's point, it's early days to be able to give any guidance on where that process is going.