Energy and chemicals group Sasol announced on Wednesday that it was officially reviewing and reprioritising its planned R70-billion, three-year capital expenditure programme in the light of dramatically altered and weakening market conditions.

The company, South Africa’s largest private fixed investor, also downgraded its earnings guidance for 2009 from an earlier forecast of “robust growth”, issued in September, to a new expectation of “a moderate reduction in earnings” for the year.

In a statement to shareholders, issued at the close of trading in Johannesburg, the JSE-listed group said it had entered a “cash conservation mode” and would seek to sustain a strong balance sheet by lowering its targeted gearing from the previous range of 30% to 50%, to a new range of between 20% and 40%.

The company added that, while the overarching objective of its growth plans remained unchanged, it would seek to ensure “prudent management” of resources and projects.

“Therefore, we are reviewing and reprioritising our planned capital expenditure of R16-billion for 2009 (R70-billion for the three years from 2009 to 2011) in the light of the changed market conditions,” Sasol stated.

The group would publish an update on its South African and international projects “in the near future”.

But the coal-to-liquids pioneer also emphasised its strong cash position and the fact that it continued to be cash generative and added that it would also assess “the opportunities that the current environment presents” when doing its project review.

The company also gave notice that, given volatile market conditions, it would continue to study the implications of changes to its earnings, which might result in further adjustments to its guidance as the year progressed.

“Market conditions have deteriorated in recent months due to the global economic downturn, with lower than expected crude oil and product prices as well as lower product demand.

“These impacts are partially mitigated by the weakening of the rand against the US dollar and the positive impact of the synfuels hedge to end May 2009,” Sasol said in a statement to shareholders issued as the market closed.

Most of the pain would be reserved for the second half of the year, given that Sasol simultaneously issued a positive trading update for the first half of its 2009 financial year.

In fact, for the six months to December 31, 2008, Sasol expected attributable earnings a share to rise by between 55% and 65% over the comparable period in 2007/8, on the back of a weaker rand and higher oil prices.

Production volumes were also higher as a result of capacity additions and improved operations.