Specialty chemicals will help achieve Sasol 2.0 strategy – CEO

Will Beacham

02-Dec-2020

Growth in specialty chemicals such as specialty aluminas, surfactants and alcohols will help South Africa’s Sasol deliver growth as part of its Sasol 2.0 transformation programme, its CEO said on Wednesday.

In a strategy update today, the troubled company unveiled a series of 2025 targets to help improve profitability and cut costs as it aims to recover from the impact of a low oil price environment and problems with its Lake Charles chemicals projects in the US.

It also today finalised the sale of a 50% stake in the Lake Charles cracker and polyethylene (PE) plants through the formation of a joint venture (JV) with LyondellBasell. It also revealed amendments to its debt covenants.

The new Sasol 2.0 2025 targets include:

  • 5-10% rise in gross margin
  • Lower net debt ratio from 4X  to around 1.5 X ND:EBITDA
  • 30% reduction in capital expenditure
  • 1% cut in working capital to 14%
  • 15-20% cut to cash fixed costs
  • Will enable breakeven at $30-35/bbl oil compared with $35-45/bbl now
  • Polymer price basket assumption of $800/tonne
  • “Today was about resetting the cost base and free cash flow to allow our chemical businesses to prosper” – Fleetwood Grobler

CEO Fleetwood Grobler told ICIS:  “The Lake Charles JV is a clear indication that we will in the future put less emphasis on polymers and base chemicals where we don’t own technology. We have a much stronger right to succeed in specialty areas where we have proprietary technology and customer intimacy compared to a commodity which is sold by everyone.”

Grobler highlighted Sasol’s leadership in advanced materials where he said the company is one of the top 2-3 in specialty alumina products such as a 99.9% pure grade for scratch resistance and LED lighting.

Sasol’s Zieglar and Guerbet technology produces C6-C36 alcohols with plants in Germany and the US, enabling the company to offer a wide range of surfactants, he said.

He said for these areas of advanced materials and essential care chemicals its broad portfolio puts Sasol in the top three globally.

ACQUISITIONS
The CEO hopes to grow chemicals inorganically once the finances improve: “After this organic growth period our next realistic target is to ask how we can get some adjacencies to broaden our offering by doing acquisitions within our capital allocation framework.”

Sasol’s use of the Fischer–Tropsch process also means it can harness the opportunities green hydrogen will present, said Grobler.

“As we get more green hydrogen we have prioprietary Fischer–Tropsch technology. When you combine a green hydrogen with a carbon source that’s renewable or is sequestered – that gives you the opportunity to make green chemical products.”

Cost reductions in this area should make this commercially viable in the next 5-10-15 years, he added.

CHEMICAL FEEDSTOCKS MOVE TO GAS
The CEO said that while Sasol has a competitive position in coal, they want to gradually increase the amount of gas it uses to help cut carbon intensity. This gas will also be used for chemical production.

“South Africa is a developing country and lacks the pipeline infrastructure you have in the US and Europe. It will take time to develop that. If we want to get more access to gas, we will have to focus on improving access,” he added.

During the strategy presentation, Grobler ruled out separating or selling Sasol’s chemicals businesses. He said: “Splitting the oil and chemicals business is not a consideration as we believe there is more value in the two businesses together.”

He also said that there would be future opportunities to debottleneck and increase capacity of the Lake Charles cracker and PE plants by 5-10% with very low capital expenditure. The Lake Charles performance chemicals assets can also be debottlenecked.

Interview by Will Beacham

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