JOHANNESBURG - Credit ratings agency Moody’s Investors Service has decoupled chemicals and energy group Sasol from the sovereign rating, Sasol chief financial officer Paul Victor said yesterday.
The move shields Sasol from a weakening sovereign credit rating profile and would enable the company to have a higher credit rating than the South African government. Victor was speaking at the release of Sasol’s interim results in which the company announced a 17percent increase in headline earnings per share.
In the six months ended December 31 last year, earnings attributable to shareholders decreased by 20percent to R6.9billion from R8.7bn. Earnings per share decreased by 21percent to R11.29 a share, compared to the prior corresponding period. Sasol attributed the fall in earnings a share to its decision to scrap its US gas-to-liquids project mounting to R1.1bn as well as the partial impairment of the Canadian shale gas assets of R2.8bn.
Victor counted a strong rand among the “headwinds” facing the company.
“A strong rand impacts on (Sasol’s) profitability,” he said. Through its hedging programme, which it finalised last year, the company sought to protect itself against a stronger currency and weak oil prices, said Victor.
The company has declared an interim gross cash dividend of R5 per share based on core earnings per share, from R4.80 per share in the prior period.
Sasol said yesterday that the company was progressing with the implementation of its flagship Lake Charles Chemicals Project (LCCP) in Louisiana, US. Cornell said the project was 81percent, with construction execution at 54percent. He said Sasol has spent $8bn of the $11bn.
He said, based on Sasol’s assumptions, the LCCP would add up to 20percent to the company’s earnings before interest, tax, depreciation and amortisation by the 2022 financial year.
Sasol said its low oil response plan - comprehensive plan to conserve cash in response to lower international oil prices - had achieved capital conservation and cash savings of R6.2bn in the six months.
“This brings the total capital and cash conserved since January 2015 to R75.6bn, which exceeds the target of R65 to R75bn,” Sasol said.
Sasol also announced that it expected to get $1bn (R11.53bn) from the disposal of non-core assets.
“We will retain or fix those assets that will increase our returns, while exiting those that are not in line with our strategy and have lower-than-desired returns,” said Sasol joint chief executive Bongani Nqwababa. Sasol first announced the sale of non-core assets in November last year following a review of its corporate strategy.
Nqwababa was optimistic about the prospects of Sasol’s new black economic empowerment scheme, Sasol Khanyisa, which replaces Sasol Inzalo. Sasol Inzalo matures in June this year.
Nqwababa said when Sasol Inzalo was launched in 2008, the assumption was that if Sasol would execute all its projects and that the oil price would be on a growth trajectory, the share price would soar in the 10 years between 2008 and this year. “We were going to use the proceeds from the share price to pay off debt.
"But that is relying on something that is not always within your control. As a result, (Inzalo) is out of the money by approximately R12bn. But that R12bn is funded by Sasol, not investors, because we have guaranteed the debt,” said Nqwababa.
He said Sasol Khanyisa only affected Sasol South Africa which includes the synfuels and chemicals businesses. He said Sasol South Africa, which excludes Sasol’s mining and oil businesses, was cash generative and a mature asset.
Sasol was confident that the debt would be fully settled in the next 10 years.
Sasol shares yesterday closed 1.43percent higher on the JSE at R400.16.