Sound value for asset in tough market
JOHANNESBURG - Sasol shareholders have voted overwhelmingly for the 50 percent sale of its US-based chemicals business to LyondellBasell in a bid to reduce debt.
The shareholders gave over 99 percent support for the sale that would see Sasol jointly operating the Lake Charles Chemical Project (LCCP) jointly with LyondellBasell. LyondellBasell, one of the largest plastics, chemicals and refining companies in the world, bought the recently completed LCCP for $2 billion (R33.4bn).
Chief financial officer Paul Victor told shareholders the sale was a positive development for in beefing up its balance sheet.
“The low debt on the balance sheet translates into lower risks, and translates into a better uptake of shareholders or potential shareholders.”
Sasol’s debt ballooned to R190bn during the year ended June and the petrochemicals giant booked a R72bn impairment as a result of the fair value it realised on bids for the portion of the LCCP in Louisiana compared to its original capital.
Audit committee chairperson Colin Beggs described the sale as good value given the tough market.
“We felt we received good value in the offer, and felt it presented a good opportunity for Sasol to alleviate the balance sheet and obtain sound value for an asset that is in a difficult market,” Beggs said.
Sasol shares have crashed and it has underperformed its peers after the Covid-19 pandemic which wreaked havoc in oil markets and operational issues at the LCCP resulted in a massive selloff.
In March, Sasol announced asset disposals, a possible rights issue and self-help measures to cushion the blow of the volatile market.
The company is expected to announce whether it will go ahead with the $2bn rights issue in February.
The LCCP, which suffered major events this year has been a headache for investors after its capex increased from $8.9 bn to $12.8bn.
The group is expected to face US courts in March next year where investors have lodged a class action against the group and its directors for allegedly misrepresenting costs for the LCCP.
Sasol is South Africa’s second highest emitter of greenhouse gases after Eskom and its synfuels plant in Secunda is reportedly the world’s largest single-source point of emissions, and was also under fire for pollution.
Shareholders raised concerns that Mpumalanga, said to have some of the dirtiest air globally, saw people suffering from bronchitis and asthma.
They questioned Sasol’s carbon emission reduction targets. Sasol is among the 100 companies estimated to be responsible for 71 percent of global greenhouse gas emissions.
The group reported an R91.3bn annual loss for the year ended June on the combination of unprecedented low oil prices, destruction of demand for products and impairments of R111.6bn.
The group recorded earnings of R6.1bn in the prior year. Chief executive Fleetwood Grobler said Sasol’s carbon reduction roadmap was a holistic approach that would be executed across its operations including the Sasolburg operation where emissions will be reduced.
“We are complying with air quality standards that are applicable to us at this time,” said Grobler.