Tongaat Hulett CFO Rob Aitken unpacks climbing mountains “one step at a time”
Rob unpacked his journey over the past two years during a CFO Community Conversation.
Tongaat Hulett recently announced its results for the year ended 31 March 2021 following two years of mountainous challenges, showing continued progress in its turnaround strategy. CFO Rob Aitken unpacked some of those challenges during the recent CFO Community Conversation and how the sugar producer is climbing these mountains “one step at a time”.
Rob joined Tongaat Hulett in January 2018 to improve its processes and systems. “The appeal to join Tongaat was to learn more about the property and starch businesses,” he explained.
He joined Tongaat from its competitor, the Illovo Sugar Group, so the sugar industry wasn’t entirely new to him. “I tried to leverage the sugar knowledge and experience I had gained at Illovo to get exposure to the other businesses within the Tongaat group to broaden my knowledge.”
At the time he joined, Tongaat’s share price was around R115. He still had limited responsibilities in his role and spent time learning the business and integrating with the team.
However, the pressures of the challenges the company was facing at the time had already started to build over that period. “We steered into some headwinds around the financial performance of the business, which grew quite considerably,” he explained.
While he was officially appointed as the acting CFO in August 2018, Rob had largely assumed these responsibilities from the end of May 2018 when the former CFO took a medical leave of absence. “It wasn’t what I had aimed to become when I joined the company and I really didn’t know what I was taking on.”
Rob had to present the FY 2018 results to the market, which he said was a challenge. “Unfortunately there was quite a backlash around the results at the time, as they were not in line with the market’s expectations.” He explained this time as his “baptism of fire”.
On 22 February 2019, Tongaat released a trading update stating that its headline earnings would be at least 250 percent below the previous financial year. “I will remember that day forever,” he said. “It had been a very tough week as the CEO and I were preparing to engage with the lenders for the first time.”
Tongaat began the debt restructure process, and at the same time were getting to grips with the company’s financial position. This culminated in the company’s financial review and led to forensic investigations and restatements. “The hardest part was dealing with the banks when we didn’t have reliable information about our financial position.” Rob explained that the only two things he knew for certain at the time were interest and debt.
By December 2019 the forensic investigation was concluded, the refinancing was done and the restated financial results were published. “That was a massive mountain to get over,” Rob said.
Rob’s finance team took a week off to recoup and then came back to start working on the next set of interim results, while also trying to sell assets. “We ultimately made the strategic decision to sell the starch business at full value for debt purposes.”
He explained that there have been some “huge mountains” to overcome and just when they finished climbing one they would get to the top and see the next one ahead.
Just as the company was starting to recover, Covid-19 hit in 2020. “One of the biggest impacts it had on our business was that the starch business, which supplies products to the alcoholic beverage industry, couldn’t operate at full capacity due to the ban on alcohol sales. This led to a dispute with the purchaser as to whether a material adverse change had occurred in the business. While the dispute was resolved and the sale was concluded, it did necessitate a second restructure of our debt,” Rob explained.
Tongaat was again faced with a further challenge when it encountered production inefficiencies at its sugar refinery and lost some 27,400 tons of sugar. This, paired with the dynamics of hyperinflation in Zimbabwe, had a significant impact on the group’s FY 2021 year-end results.
In July 2021, just as Tongaat had announced the conclusion of its third debt restructure and its year-end results, civil unrest broke out across South Africa. The riots and looting that resulted from the unrest affected KwaZulu-Natal, where Tongaat operates.
A balancing act
Rob said that dealing with the turnaround required a balancing act for finance. “We had to split our team across three main activities. We had restructuring activities, which included selling various assets and refinancing debt in two countries. At the same time, we were trying to juggle the business as usual routines, as well as deal with the legacy issues like the restatement of the financial information.”
Rob explained that, when a company is in trouble it’s usually not as a result of one or two things, but layer upon layer of issues. “In our case we had R11 billion of debt in South Africa, but beneath the surface we also needed better management information systems and financial processes. To get those right takes some time and you need to split yourself between dealing with the problem and getting to its root cause.”
Rob said that he had learnt a number of things during this time and that it had given him a great opportunity to grow as a leader.
One of these learnings was realising that turnarounds take time. “You have some initial quick wins, but there are also times where you have to pick yourself up and dust yourself off,” he said, adding that you need to celebrate the wins in order to stay motivated.
The other thing he learnt was “you need to find good people, which can be a challenge if you’re facing financial difficulties”. He explained that you really need a team you can trust and rely on.
“Stand your ground and challenge things,” he said. “That’s becoming more key in finance. You need to have the ability to challenge the business and hold people accountable. If you leave the small things unchecked, they can become big things over time.”
Rob added that it’s also critical to have buy-in, a clear vision and a goal. “When you are strapped for resources, there’s no time to waste. You have to shift a large group of people from doing things one way to another. Change management and culture are critical.”
His last take-away during this time has been that “cash is king above everything”. “You may be generating a profit, but if you’re not generating cash you have an underlying problem somewhere in the business and you need to deal with it immediately.”
To no surprise, the last couple of years have been tough for Rob but he said that having supportive people around him has helped him stay balanced. “I have an incredibly supportive and understanding wife. There’s been a good couple of nights where I’ve got no sleep at all, but having a supportive wife makes a big difference.”
He added that he also has a mentor that is outside the organisation that he checks in with once a month to ask for advice and guidance. “You have to have one or two people you can confide in and be real with, which has helped.”
Rob explained that it comes down to surrounding yourself with the right people and also keeping them motivated during these tough climbs. “We tried to create some turnaround and financial incentives to keep people motivated. But you also have to try to rally the cause. The people who are here are all committed to saving the 129-year history of the company.”
The other CFOs in attendance then had an opportunity to share how they maintain their resilience during what have been some difficult times for South African businesses.
Hatch Africa CFO Craig Sumption said the key for maintaining his resilience has been to remain calm and take on the challenges one step at a time. “It’s very easy for things to become overwhelming when there’s a lot of pressure on the go, and that’s when things fall apart easily. You need to maintain that calmness and take it one day at a time.”