Sasol stocks rise on news of minor damage
In an update on the LCCP on Friday, Sasol, the global petrochemical giant, said an investigation into the cause of the explosion was under way.
“Initial findings indicate the damage is limited to a small portion of the LDPE unit, and, importantly, major equipment, such as the compressors, were unaffected,” it said.
An explosion and fire rocked the LDPE unit on January 13. Employers and contractors were unharmed in the fire.
It that parallel commissioning activities on the remainder of the LDPE unit would continue.
Sasol said the projected earnings for the LCCP complex in this financial year would be impacted only by the loss in the margin of ethylene to low-density polyethylene.
“In addition, the insurance process has been initiated and cover includes construction and commissioning activities. We expect to determine the repair scope and outage duration by the second half of February,” the company said.
It said that all previously commissioned units were unaffected and were operating to plan.
The Ethoxylates, Ziegler and Guerbet plants were also unaffected and remain within cost and schedule per its previous guidance.
Michael Treherne, a portfolio manager at Vestact Asset Managers, said on Friday that Sasol had given investors comfort about the extent of the impact of the explosion.
“It looks like the SENS announcement from them this morning put the market at ease about the extent of the damage at their Lake Charles operation. Undoing some of the losses from when they first announced the explosion,” said Treherne.
In October, Sasol said the softer chemical price outlook, combined with the increased capital cost on the LCCP, had placed additional pressure on the balance sheet, resulting in the decision to withhold the final dividend for 2019.
Sasol joint chief executives Stephen Cornell and Bongani Nqwababa resigned amid shareholder pressure after a review of the project had determined that it was likely to cost up to $12.9billion (R185.58bn) from an initial estimate of $8.9bn.
Sasol shares gained 1.73percent to close at R264.50 on the JSE on Friday.
Sasol, which operates in 32 countries, also said on Friday that given the continuing macroeconomic headwinds and the softer outlook on global gross domestic product growth in calendar year 2020, performance chemicals expects sales volumes for the full financial year to remain flat to slightly below the prior year’s level.
The company said that natural gas production in Mozambique was expected to be between 114billion and 118billion on standard cubic feet, in line with previous market guidance.
It said that Secunda Synfuels Operations full-year production would likely be to be between 7.7million and 7.8million tons, in line with previous market guidance.