Jobs secure in Sasol assets review
Move not part of plan to disinvest in Southern Africa
GLOBAL fuels and chemicals group Sasol had begun a “retain, grow or sell” review of all its assets in which “nothing is off the table”, except for the core Secunda Synfuels operations, joint chief executive Bongani Nqwababa said.
Nqwababa said the review was not likely to result in retrenchments, allaying fear that the group would launch another severe cost-cutting programme.
In 2014-15, Sasol restructured its operations for lower oil prices and about 2 500 jobs were lost.
Joint chief executive Stephen Cornell insisted that Sasol remained committed to South Africa and Southern Africa and the move was not part of a plan to disinvest in the country.
“We are evaluating our assets all around the world, not just in South Africa.
“We are doing it to assess the fit with our strategy and return on investment.
“We have just opened two new mines in Secunda to supply our operations; we have a 2050 plan; we are here for the long haul,” Cornell said.
However, the review could mean that even the $11-billion (R145-billion) Lake Charles Chemical Project being built in Louisiana in the US could be considered for disposal, although an analyst said this was not very likely.
Lake Charles is an ethane cracker and chemicals project, originally budgeted at about $9-billion (R119-billion) as part of a $21-billion (R278-billion) project with a gas-to-liquids plant nearby.
The gas-to-liquids project has been deferred and partly written down because of uncertainty on its timing.
Byron Lotter, a portfolio manager at Vestact Asset Management, said while it was possible the US gas-to-liquids project would never go ahead, the Lake Charles project was likely to be retained as it would be a good-quality asset in an operating environment that was stable.
Cornell said the Lake Charles project was 74% complete by the end of June, with $7.5-billion (R99-billion) of the capital spent.
Sasol had included a contingency to complete it without any further need to increase the budget. The first units were on track to start operating by the second half of next year.
Nqwababa said the review would tackle analysts’ concerns about its capital allocation and returns, but it would not be a “fire sale” to raise cash.
With about R83-billion of cash and undrawn facilities, Sasol had sufficient liquidity to meet its commitments that are mainly at Lake Charles and oil and gas developments in Mozambique.
The objective of the review, he said, was to bring return on capital invested to about 15% and to create headroom for strategic acquisitions including Sasol’s long-held objective of increasing its fuel retail footprint in South Africa.
Sasol’s profit from mining fell 21% to R3.7-billion as a result of a strike.
In the year to June, group headline earnings fell 15% to R35.15 a share, affected by one-off costs and the strong rand.
The full-year dividend was R12.60 a share, from R14.80. Sasol has liabilities of R12.8-billion arising from two tax disputes relating to crude-oil purchases for Natref dating back to 2004.
On the first, for R1.2-billion, the Tax Court ruled in favour of the South African Revenue Services, but Sasol is appealing.
The second liability of R11.6-billion arises from a subsequent claim raised by SARS on other grounds. The case is still being argued.
Sasol’s share price was 0.4% higher at R392.01 in late trade on the JSE on Monday. The price is well below its peak of R652 reached in 2014, before oil prices collapsed from more than $100 a barrel to about $50 now. — BDLive