Sasol calls off rights issue


Sasol calls off rights issue

Published Date: 2021-02-23 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sasol calls off rights issue

© Sasol - used with permission 

The energy and chemicals group has managed to cut debt by conserving cash and selling non-core businesses.

Sasol has called off a $2 billion rights issue after it managed to slash debt by selling non-core businesses and conserving cash. Although oil prices have recovered and the macroeconomic outlook has improved, it's not paying an interim dividend as it continues to degear.

The energy and chemicals group reported a big improvement in first-half earnings as it continued to implement its response plan to Covid-19 and last year's weak oil price. Turnover rose 7.3% to R112 billion for the six months to end-December. Earnings before interest and tax more than doubled to R21.7 billion but adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 6% to R18.6 billion. While headline earnings per share (HEPS) tripled to R19.16, core HEPS fell 15% to R7.86 after taking a number of factors including gains on exchange rates, derivatives and hedging instruments into account.

The company benefited from a number of positive non-cash adjustments for the period, including unrealised gains of R5.4 billion on the translation of monetary assets and liabilities due to the strong rand; unrealised gains of R4.7 billion on the valuation of financial instruments and derivative contracts; and a R3.3 billion gain on the realisation of its foreign currency translation reserve, mainly on the divestment of a 50% interest in its base chemicals business at Lake Charles. Late last year, Sasol sold the stake to LyondellBasell Industries, which will operate the joint-venture assets and market the polyethylene products on behalf of the two shareholders.

Sasol said reducing debt on its balance sheet would continue to be a priority to ensure that it operated within its financial covenants. Although last year's weak crude oil and chemical prices, as well as Covid-19, impacted its cash flows, it said it was still able to repay about R28 billion of debt as it conserved cash and sold non-core businesses. At the end of December, total debt was down to R126 billion from R190 billion in June.

Sasol said it was going ahead with a $760 million project in partnership with Mozambique's government to build a 450-megawatt gas-fired power plant and a liquefied petroleum gas (LPG) facility. The balance of the gas produced would be exported to South Africa to sustain its operations.

Sasol's shares fell 0.8% to R201.39 yesterday. They've gained 50% this year.


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