Oct 03, 2008
R3,8bn fine won't impact our growth pipeline, Davies assuresBack
Sasol CEO Pat Davies expressed "profound regret" at the weekend that its European paraffin wax subsidiary, Sasol Wax GmbH, had violated European Union (EU) competition law, but said the group was robust enough to withstand the R3,8-billion (€318-million) fine and still continue with its ambitious growth pipeline.
Speaking to the South African media for the first time since the group was fined for its leadership role in what has been dubbed the ‘paraffin mafia' - a wax cartel, involving the who's who of the oil industry, that operated for 13 years from 1992 to 2005 - Davies said it had made immediate provision for the fine, but he also provided a strong indication that the group was likely to appeal the ruling.
A final decision on whether or not Sasol would appeal, however, would only be made once the group had had sight of the full ruling.
Nevertheless, based on current information, the appeal would probably focus primarily on seeking a reduction in the penalty, based on the fact that Sasol had not only cooperated fully with the European Commission's (EC's) probe, but also given that it had unwittingly inherited the anticompetitive behaviour from the previous owner of the business. Davies stressed that none of the individuals implicated in the cartel currently worked for the 31 000-employee group.
However, regardless of the decision to appeal or not, the JSE-listed group would still have to deposit the full €318-million amount into an EC account within three months. Should it lodge an appeal, the money would be set aside in a locked, but interest-bearing, bank account for the duration of the appeal.
Therefore, even if Sasol were to be successful in overturning or reducing the fine, Davies acknowledged that the money would not be available to it for many years to come, especially given that appeal periods at the European Court of First Instance, in Luxembourg, could last for anywhere between 18 months and five years.
But Davies, who had returned from an investor road show in the US on Friday morning, insisted that the fine would not impact on its growth programme, although he said it had given the group renewed cause to tighten its due diligence and compliance-monitoring procedures.
"Fortunately, Sasol is a successful company. It has a strong balance sheet and generates a lot of cash flow," Davies said, adding that he did not, therefore, believe the "very substantial" fine would affect its growth programmes.
Shareholders Don't Like Bad News
He also indicated that, in his interaction with North American shareholders, an understand had been expressed about the outcome of the EC's case.
"Shareholders obviously don't like it - why would they like bad news. But they understanding it," Davies said, adding that the key concern has been whether there were further compliance concerns and whether the fallout was contained.
"We were able to confirm that this fine ends the investigation," Davies said.
However, Davies said it was premature to comment on whether Sasol would face any civil claims as a result of the ruling, adding only that it was communicating with its customers that might have been affected and was keen to do whatever it took to repair its damaged reputation.
But given that EU's Competition Commissioner Neelie Kroes argued that there was "probably not a household or company in Europe that has not bought products affected by this ‘paraffin mafia' cartel", civil cases could well arise.
Davies stressed that the infringement was reflective of a previous era in Sasol, but did not reflect on its contemporary policies and values. Sasol, he added, had always tried to learn from some of the "tough knocks" it had taken over the years and that this case would be no exception.
Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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