Sasol shares soar as joint chief executives call it quits
JOHANNESBURG – Sasol shares soared 15 percent after joint chief executives Bongani Nqwababa and Stephen Cornell quit yesterday amid the release of the board’s review of the ballooning costs and delays at the US-based Lake Charles Chemicals Project (LCCP).
Sasol’s share price hit a high of R307.69 at 1.18pm yesterday – its highest level in more than a month – after the company said that Nqwababa and Cornell had agreed to an amicable mutual separation with the company and would step down effective on Thursday. The shares closed at R298.74 on the JSE yesterday.
The petrochemicals giant named Fleetwood Grobler, the executive vice-president for chemicals, as the incoming president and chief executive from next month. “To be clear, the board has neither identified misconduct nor incompetence on the part of the joint chief executives,” the company said.
Asked whether the joint chief executives would receive a golden handshake, Vuyo Kahla, Sasol’s vice-president advisory and assurance, said the board was expected to determine an appropriate separation package for the joint chief executives.
“Because there were no integrity or misconduct issues found on the part of the joint chief executives, the board would in the ordinary course of business determine an appropriate arrangement,” said Kahla.
Costs at the LCCP have sky-rocketed from the initial estimate of $8.9 billion (R130bn) when the investment was announced in 2014. This has weighed heavily on Sasol, which has lost 28 percent in the year to date. Sasol said yesterday that the cost completion estimate for the project would be in line with the previously announced cost guidance range of between $12.6bn and $12.9bn. It said the overall project was 98 percent complete.
Sasol delayed the release of its financial results for two months, saying the board needed to complete an investigation into possible internal control weaknesses identified during the independent review of the project.
The company said it had completed the review of the root causes and the legal consequences of the cost overruns and delays.
“The primary responsibility for shortcomings in relation to LCCP lies with the former leader of the LCCP project management team, which engaged in conduct that was inappropriate, demonstrated a lack of competence and was not transparent,” said the company.
Sasol said as a punitive measure it would award zero short-term incentives to all members of the group executive committee in the 2019 financial year.
Michael Treherne, a portfolio manager at Vestact Asset Management, said it was good to see that executives would not be receiving their short-term bonuses.
“The board says that they want a change in culture, the best way to do that is to change leadership,” Treherne said.
In terms of results, for the year to June, Sasol said cash generated by operating activities increased to R51bn compared with R43bn in the prior year, due to favourable Brent crude oil prices and the exchange rate.
Sasol’s net cash position declined to R15.8bn in June 2018.