Sasol dives further on the JSE over cash-raising plan
The troubled petrochemicals giant fell 17.99percent to R36.69 a share on the JSE, wiping more than R55bn off its market capitalisation just hours after it unveiled a planned $6bn cash-raising initiative by the end of the 2021 financial year.
Sasol said it would enter into partnerships for its base chemicals business in the US through asset sales and generate another $2bn from self-help management actions.
Chief financial officer Paul Victor said the equity raise would be assessed depending on the progress made through the asset disposal programme.
“The equity raise is the last resort for us,” adding that cutting of jobs would also be a last resort, Victor told analysts and journalists during a press conference late yesterday. He said that the group had identified several assets that would be put up for sale.
“We are very cognisant of the fact that we have a short-term issue, which is pressure on the oil price. However, we cannot sell good assets below their fair value.”
Sasol was downgraded by Moody’s to junk status this month over concerns that its debt levels from the Lake Charles Chemicals Project (LCCP) in the US were unsustainable.
The group yesterday said that it needed to act quickly on measures that aimed to reshape its balance sheet.
Sasol, which has an R125bn debt burden, said it was speaking to lenders on providing balance sheet flexibility by the 2021 financial year.
Victor said partnerships in the US would be pursued not only for the LCCP, but mainly the ethylene and polyethylene assets. “We are not in a position to divulge the names of partners. Once we have assessed the offers, we will inform the market,” he said.
Sasol said the self-help management measures were likely to rake in $1bn in cash improvement by the end of June, including $800million from working capital optimisation and $200m to be realised from cost-saving measures.
The group said it wanted to deliver an additional $1bn improvement in its net debt position by the end of the 2021 financial year. It said this would include $700m to be saved from re-prioritising capital and working capital expenditure, and $300m from continuing cost savings and business optimisation.
“We will stop spending on all non-permanent labour. We will be looking at freezing global head count, stopping IT upgrades and conducting a comprehensive review on all costs - in a way that is not going to impact safety and credibility of our assets,” said Victor.
The company said despite the headwinds, it had current liquidity of $2.5bn, with no significant debt maturities before May 2021.
It said it believed that it remained well positioned to withstand recent market volatility in the short term and could maintain liquidity headroom over $1bn in the next 12 to 18 months with an oil price of $25 per barrel before the benefits of hedging.