Sasol swings to full-year loss, schedules share issue

LONDON (ICIS)–Sasol has swung to a South African rand (R) 91.3bn ($5.2bn) loss for its fiscal 2020 as the energy and chemical firm set out a schedule for a rights issue to raise funds.

Shares in the South Africa-based firm fell over 5% in early trading after it announced that an issue of new shares worth up to $2bn will move forward in the first half of 2021.

The move is part of a raft of measures aimed at shoring up Sasol’s capital reserves as leverage on its Lake Charles, Louisiana, complex reaches its highest point amid weak oil pricing, the ongoing spread of coronavirus and the global economic collapse it has brought on.

Ratings agency Moody’s estimated earlier this year that Lake Charles expenses would drive company leverage to 4.5 times earnings before interest, taxes, depreciation and amortisation (EBITDA), above the level of leverage customary for an investment-grade company.

(Rm)	H1 2020	H1 2019	% change
Adjusted EBITDA	34,976	47,637	-27
EBIT	-111,030	9,697	/
Profit	-91,300	6,100	/

Sasol’s loss was driven by R112bn in writedowns for the 12 months to the end of June 2020, with the bulk of that sum attributed to the basic chemicals division as a result of Lake Charles expenses, according to preliminary results issued by the company last week.

“In the past months, we have navigated volatility that I have not seen in over 36 years at Sasol,” said CEO Fleetwood Grobler.

The company is also on track to raise the $2bn from divestments it had expressed hopes of raising when it issued a strategy to shore up its balance sheet in March, and is moving forward with discussions to sell a stake in the Lake Charles project.

Reports that Hanwha Solutions, the latest firm said to be in talks for the Lake Charles stake, put the range at a 50% stake in the $13bn petrochemicals complex at $1.5bn-2bn.

Nearly all units at the site are current online after numerous delays, while the low-density polyethylene (LDPE) unit that was hit by an explosion earlier in the year is now expected back online in October.

The company is also in talks regarding its stake in Mozambique pipe joint venture ROMPCO and in power station CTRG, also in the country.

Sasol has already agreed the sale of a 51% stake in its explosives business to Enaex, an interest in the Escravos gas to liquids project to Chevron, and  has entered exclusive talks to sell 16 air separation units in Secunda, South Africa to Air Liquide.

“In terms of the partnering discussions at our US Base Chemicals assets, the process is well advanced, so I hope that we can provide a more detailed update in the near term,” Grobler said.

Aside  from the LDPE unit, ethylene oxide units have reached targeted production levels at Lake Charles, and linear LDPE is producing at nameplate capacity.Product trials are now underway at the Ziegler and Guerbet units, which have reached beneficial operations, Grobler added.

($1 = R17.46)

Photo credit: KIM LUDBROOK/EPA-EFE/Shutterstock