Sasol chooses specialty chemicals as growth path
No further investment is planned in gas-to-liquid projects
CHEMICALS and energy group Sasol is charting a new path to growth in which it would no longer invest in further “greenfields” gas-to-liquid (GTL) projects and new capacity in crude refining.
Instead, Sasol told a group of investors and analysts yesterday that, in terms of its “value-based growth” strategy, the group would seek growth in specialty chemicals, Africa-focused exploration and production and liquid fuels retail footprint in southern Africa.
Sasol joint chief executive Stephen Cornell said yesterday that the strategy was premised on leveraging the company’s strengths in specialty chemicals, exploration and production and retail fuels “underpinned by increased discipline in capital allocation.
“Our existing application know-how and strong product portfolio in a broad range of specialty chemical products gives us confidence we can deliver in this area. Our push into specialty chemicals is further supported by the benefit of the scale and cost advantage we enjoy through our investment in commodity chemicals in South Africa and North America.”
The move away from GTL contributed to the company’s decision to dispose of its Canadian shale gas asset. This followed Sasol’s review of its global assets. The group said that it had completed a review on more than half of its assets.
“This far, the reviews have confirmed that the majority of the company’s assets will be retained and clear improvement actions have been defined for each,” Sasol said. Cornell said the decision not to invest in crude refining would not affect existing assets.
“We are very happy with what we have in Secunda and Natref. We are not saying we want to reduce the amount of refining capacity that we have. We are just not interested in growing,” said Cornell.
Sasol joint chief executive Bongani Nqwababa said the group had made a number of clear choices to drive its growth strategy. In addition to the decisions not to invest in greenfield GTL and further crude oil refining capacity, Sasol would not invest in whollyowned mega scale commodity chemicals projects beyond the Lake Charles Chemicals Project (LCCP) and renewable energy. He said renewable energy was not a growth focus for Sasol.
Sasol chief financial officer Paul Victor said, between now and 2022, Sasol would focus on the delivery of the LCCP, a $11 billion (R153bn) project made up of world-scale 1.5-million-ton per year ethane cracker, and six downstream chemical units near Lake Charles, Louisiana, in the US and the production sharing agreement in Mozambique.
Sasol was targeting an improvement in return on invested capital of at least 2 percent.
“Beyond 2022, we will focus on building an investment portfolio of smaller to mediumsized organic and inorganic opportunities, in the range of $500 million to $1bn,” said Victor. Sasol expected to deliver at least 12 percent return on invested capital and 5 percent earnings before interest and tax growth.
Sasol would also increase shareholder dividend payouts to 40 percent by 2022. Thereafter, the dividend would increase towards 45 percent.
Sasol shares on the JSE yesterday closed 1.55 percent lower at R432.10 a share.