Sasol better able to raise $2bn through rights issue
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By Dineo Faku
JOHANNESBURG - SASOL’S financial position was stronger compared to earlier in the year when it announced a plan to raise $2 billion (about R30.66bn) through a rights issue as part of measures to address debt, the JSE-listed petrochemicals giant told investors yesterday.
Chief financial officer Paul Victor said the market would be informed in February whether or not the rights issue would proceed and if so how large it would be.
“The rights issue is an important factor we must consider in creating a sustainable capital structure. We are aware of the intense scrutiny of this matter,” Victor said, adding that the rights issue would be a final step.
“There is no doubt that we have put ourselves in a much stronger position than earlier in the year. As we said by the end of this financial year we want our balance sheet to be back in a sustainable position,” Victor said.
The business performance, the Sasol 2.0 transformation project, macroeconomic volatility, and the asset disposal progress would be considered before a decision was made on the right issue.
Sasol, whose share price has taken a knock due to the slump in the oil price, told investors that it was resilient at an oil price of $45 a barrel. The group plans to deliver $3.5 billion from asset disposals and reduce capex by R20bn to R25bn a year as part of the Sasol 2.0 project.
Victor told investors that Sasol’s run rate needed to be maintained, and the company was comfortable with the run rate that it had achieved thus far despite the challenges.
“Of all dimensions of growth margins, cash fixed costs, and working capital we have been hitting our targets for financial year 2021 and we are slightly ahead of our run rate. If we can sustain this, that contributes well to a decision of a rights issue, whether to go and what the size is,” said Victor.
Earlier yesterday, Sasol said that it had received a $2bn cheque after completing the disinvestment in its 50 percent interest in its Base Chemicals business in the US.
Sasol sold that its 50 percent stake in the base chemicals project at Lake Charles in Louisiana to LyondellBasell, which was approved by shareholders during a general meeting last month.
“Sasol is pleased to announce that the transaction successfully closed on Tuesday and the 50/50 Louisiana Integrated Polyethylene joint venture with LyondellBasell has now been established. The proceeds of approximately $2bn will be received within two days of closing, with standard closing adjustments to be effected 30 days thereafter,” said Sasol.
It had also successfully concluded discussions with its lenders regarding the covenant amendment for December 31, which was four times net debt:earnings before interest, taxation, depreciation and amortisation (Ebitda). “Our lenders have agreed that the covenant calculation will not be impacted by once-off events or delayed receipt of disposal proceeds that are expected by December 31. The covenant for June 2021 will remain at three times net debt:ebitda,” said the group.
Sasol shares closed 1.28 percent lower at R77 on the JSE yesterday.