Lake Charles delay rains on Sasol’s shares


Lake Charles delay rains on Sasol’s shares


Published Date: 2019-02-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Lake Charles delay rains on Sasol’s shares

Bad weather is one of the reasons given for a delay to Sasol's biggest project yet, which has resulted in escalating costs.

Sasol's shares fell sharply on Friday after it announced more setbacks to its Lake Charles Chemicals Project (LCCP) in Louisiana in the US.

The oil and chemicals group says the project will now cost it as much as $11.8 billion, up from previous guidance of $11.1 billion. The revised figure includes a contingency and weather provision of $200 million.

Last August, the group said the project was 88% complete and on schedule. The project is Sasol's biggest yet and is expected to transform the company's earnings profile once it's fully up and running.

Factors which have pushed out its timetable and impacted costs include a changes to the scope for the Cracker as a result of incomplete engineering work that wasn't picked up in time; a cumulative month of work lost due to excessive rainfall towards the end of last year; and productivity losses exacerbated by high absenteeism around public holidays. After assessing the delays, the group said it took corrective action.

Sasol has also revised LCCP's estimated earnings before interest, tax, depreciation, and amortisation (EBITDA) down from between $110 million and $160 million to a loss of between $165 million and $195 million for its 2019 financial year. It maintains its guidance that LCCP will deliver a steady state EBITDA of $1.3 billion in 2022.

The group also released an updated trading statement for its total operations. For the first half of its 2019 financial year, it expects total EBITDA growth of between 8% and 16%. Headline earnings per share (HEPS) for the six months to end-December are likely to have risen by 30% to 34%, with core HEPS up by between 16% and 20%. It said HEPS benefited from valuation adjustments associated with its crude oil hedges and the rand/dollar exchange rate at the end of the period.

Its shares fell 6.5% to R384.78 on Friday.


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