Sasol is exploring value enhancing options for its chemicals business, including finding other partners and even a separate listing. Picture:supplied
Sasol’s share price shot up 9.4% to R102.16 on the JSE on Friday after it said it was planning to revive its chemical business and explore options including finding additional shareholders and possibly even spinning it off in a separate listing.
The petrol-from-coal and manufacturer of chemicals reported a loss before interest and tax of R27.3 billion in the year to June 30, compared to R21.5bn earnings before interest and tax in the prior year, due mainly to increased impairments, lower earnings, translation losses, and reduced derivative gains. It suspended dividend payments and was sitting with some R75 billion of debt at the financial year end.
Sasol CEO Simon Baloyi, who took over the role in April, said in an interview with Bloomberg that they viewed the group’s Lake Charles chemicals facility in Louisiana as playing a significant role in generating cash and raising investor confidence.
The international chemical business had been separated from the operations in South Africa, and targets had been set to increase its contribution to earnings and strengthen it as a standalone entity. Chemicals makes up about a third of group earnings, but the regional contribution of the US is about 6%.
The Lake Charles Chemicals Project was built to expand Sasol's operational footprint, but suffered from mismanagement issues, hurricanes, and cost overruns that ballooned the company's debt. In 2020, the year it reached completion, Sasol sold a $2bn stake in the US base-chemicals business to form a joint venture with LyondellBasell Industries to cut debt. It also accelerated an asset-sale programme that wrapped up the following year.
Sasol’s share price has shed 35.3% over 12 months. On the JSE, the share price has historically often moved in tandem with the oil price.
Over the past year, however, the price of Brent crude oil has fluctuated significantly, with the highest price recorded at $93.12 per barrel, while the lowest was $70.31 per barrel. The average in January so far was $77.27 per barrel, but, according to reports, Brent closed at $80.73 per barrel on Friday amid concern that the latest US sanctions on Russian energy trade have added to worries about oil supply disruptions, with sanctions already causing tight supply in Europe, India, and China.
Meanwhile, Sasol was this month forced to close its oil refinery at Secunda, Natref, due to a fire - which has since been extinguished - that impacted infrastructure around the Crude Distillation Unit.
The refinery is a joint venture between Sasol (R64.6%) and Prax Group (36.6%). The production and supply of jet fuel, petrol, and diesel are expected to be impacted, and measures were being put in place to mitigate potential supply shortfalls. The timing of a start-up and the impact on production volumes would be provided in the group's second quarter 2025 production and sales report, due out Thursday.
BUSINESS REPORT
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