MOSCOW (MRC) -- South African petrochemicals group Sasol said it would consider raising funds by selling additional shares and disposing of more assets amid growing investor concerns about its debt levels after a crash in the price of oil, reported Reuters.
Around 76.5 billion Rand (USD4.6 billion) was wiped off the company's market value last week, with Sasol's shares hitting a 21-year low last Thursday, falling as much as 42% as oil prices plunged before recovering slightly to end the day down 29.36% at 37.24 rand.
Barring a significant recovery, this will be Sasol's worst week since listing in September 1989. The unexpected fall in oil prices has rattled investors who were already concerned about the company's high debt after it renegotiated some debt covenants last November. Reacting to the frantic selling, Sasol said it would consider a potential equity issue, reduce costs, reschedule some capital expenditure, expand asset disposals in excess of the current $2 billion target and engage lending groups. The company said cash and available facilities stood at around $2.5 billion rand with no significant debt maturities before May 2021. It has just completed a review of its assets in a bid to reduce debt. Seeking to assuage investors' fears the company could break its debt covenants, it said that at the current oil price of approximately R580/bbl, it would be within current covenant levels at 30 June 2020. Sasol's newly appointed chief executive officer Fleetwood Grobler said it was critical the company acted quickly and decisively. "We are therefore working towards a package of measures to ensure that the business is profitable even at low oil prices and that we continue to have a strong balance sheet to support it," said Grobler.
Monday's crude price crash further hobbled a company already battling to restore shareholder confidence after delays and cost over-runs at its Lake Charles Chemicals project (LCCP) in Louisiana forced its joint chief executives to resign late last year. "With the oil price collapsing, it's eroded the margin they were expecting on the project," said an investor who sold his Sasol shares on Monday. The destruction of value at one of South Africa's biggest companies adds to headaches for a government already grappling with a heavily-indebted state power company and airline. Although not a state-run company, Sasol's two top shareholders are state agencies - State asset manager the Public Investment Corporation has a 15.05% stake, while local development finance institution Industrial Development Corporation holds 8.53%, according to Refinitiv Eikon. Sasol said it would update the market in a conference call on Tuesday.
As MRC reported earlier, in mid December 2019, Sasol announced that the LCCP Ethane Cracker was increasing production rates following the successful replacement of the acetylene reactor catalyst. Sasol’s Ethane Cracker with a nameplate capacity of 1.54 million tons per year achieved beneficial operation in August 2019 but has run approximately 50-60% of nameplate capacity due to underperformance of the plant’s acetylene removal system. The company stated that the issue had been resolved then.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
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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