LONDON (ICIS)--Sasol shares fell on Friday after the South Africa-based company announced delays to the release of its fiscal 2019 results as it continues to scrutinise issues at its flagship US cracker project.
Share prices slumped over 5% from Thursday's closing price as of 15:38 London time after the company admitted that it needed more time to assess the situation at its Lake Charles, Louisiana, cracker and petrochemicals complex.
The delay is linked to the spiralling costs and completion dates at the site, with September 19 set as the new date for results to be released.
The company said in July this year increasing costs at the Lake Charles Chemical Project (LCCP) could drag down earnings before interest, taxes, depreciation and amortisation (EBITDA) for the fiscal 2019 year, running to 30 June, by as much as 14%.
A decision to postpone results announcement was made by the board off the back of a preliminary report and independent review, which highlight weaknesses at the Louisiana cracker, which will be put forward to the company’s auditors.
Costs at the site climbed from an initial projection of $9bn to levels of $12.6-12.9bn announced by the company in May, due to torrential rain, engineering difficulties and staffing issues.
“Management and the Board will assess such control weaknesses and identify whether any further remedial actions are required,” the company statement read.
“Notwithstanding the independent review, the Board remains confident that the guidance on the earnings ranges provided in the Trading Statement and the previous cost guidance for the LCCP of $12.6-12.9bn remain unchanged.”
In the announcement the company reiterated its message from the statement released on 25 July, confirming that the LCCP ethane cracker was expected to begin operation in earnest “at the end of July 2019 or soon thereafter.”
It added: “The final stages of the ethane cracker startup were initiated in July 2019. As is often the case with major plant startups, a technical challenge relating to a large heat exchanger was encountered."
"As a result, the cracker startup was interrupted for several days to resolve this issue. The startup has now resumed and an update on the achievement of beneficial operation will be provided on or before 26 August.”
The producer has signed a $1.8bn credit facility to refinance the outstanding loan balance on the project, and the difficult gestation of the facility has led it to scale back investments on new ventures to the $500m-$1bn range for the immediate future.
Pictured: A Sasol production facility in Sasolburg, South Africa (Source: Themba Hadebe/AP/Shutterstock)