MOSCOW (MRC) -- Sasol’s earnings before interest and taxes (EBIT) for its fiscal year 2019 dropped 45%, said the company.
Cost over-runs at the Lake Charles cracker and petrochemicals complex, due to poor weather, worker issues, defective components, contract issues and other problems have seen the forecast cost of the project bloat from USD9bn to USD12.6bn-12.9bn.
Stating that the debacle has “tarnished” the company’s image, Sasol’s board is set to remove Sasol joint CEOs Bongani Nqwababa and Stephen Cornell as of 31 October, to be replaced by chemicals division executive vice president Fleetwood Grobler.
Base chemicals EBIT for fiscal year slipped to a R1.43bn (USD98.2m) loss compared to a USD918m gain during 2018, while performance chemicals earnings plummeted to a R7.04bn loss compared to a positive R7.85bn during the previous year.
Sasol’s gross margin dropped two percentage points as a softer macroeconomic environment impacted on demand, particularly for chemicals, which the company claims is a temporary dip.
Total expenditure amounted to R56bn, with R30bn of that siphoned into the Lake Charles project, raising company gearing to 56.3% as of the end of the fiscal year, significantly above market guidance of 44-49%.
As MRC wrote previously, Sasol's world-scale US ethane cracker reached beneficial operation on 27 August 2019. Sasol’s new cracker, the heart of our Lake Charles Chemicals Project (LCCP), is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at our Lake Charles multi-asset site.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,255,800 tonnes in the first seven months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the estimated PP consumption in the Russian market was 796,120 tonnes in January-July 2019, up by 11% year on year. Shipments of PP block copolymer and homopolymer PP increased.
Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
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