In the face of the oil price collapse and unprecedented challenges, chemicals and energy group Sasol took immediate steps to implement a comprehensive response plan to stabilise the business in the short term and raise cash of at least $6-billion by the end of financial year 2021 to repay debt, says CFO Paul Victor.
This is being achieved through a combination of self-help measures, an expanded and accelerated asset divestment programme and a pending rights issue of up to $2-billion.
“We implemented a cash conservation programme focused on enhancing cash flow and cost competitiveness in a low oil price environment, with a $2-billion cash delivery by 30 June 2021.”
He mentions that, by year end, Sasol exceeded its $1-billion target for 2020 owing to the diligent efforts of its teams, significant cost reduction, implementation of a cash 'war room' and careful management of capital expenditure.
“We reported a record 12.5% working capital measure – the lowest level to date,” Victor points out.
Moreover, he notes that Sasol is pursuing a rights issue of up to $2-billion which will be executed in the second half of the 2021 financial year, subject to shareholders approval.
This, Victor mentions, is a final step in the process to reset its capital structure. The exact amount of the rights issue and its timing is subject to prevailing operating and market conditions as well as other initiatives, such as further disposals and implementation of its Future Sasol project that is aimed at enhancing cash flows and improving its cost competitive position.
The planned asset disposals combined with a rights issue and implementation of Future Sasol is expected to reset the debt structure of the company to become more sustainable in the future.
Victor highlights that, in 2017, Sasol announced a review of its assets and the commencement of a disposal process to streamline the portfolio. As part of its 2020 comprehensive response plan, Sasol is accelerating and expanding this programme that is aligned with balance sheet, shareholder value and strategic objectives. “We aim to deliver proceeds in excess of $2-billion by 2021. To date, we have secured proceeds of $0.6-billion, including the sale of our 16 air separation units in Secunda.”
He mentions that Sasol is clear that it will only dispose of assets at value and will not destroy long-term shareholder value.
Moreover, Sasol is undertaking a purposeful and systematic review of its global cost competitiveness and business structure. This strategic reset is to deliver a focused and sustainable business for the future, so that we are a profitable business in an environment of sustained low oil prices.
With sharpened focus on its two core chemicals and energy businesses, this creates scope for sustainable shareholder value creation through shareholder returns and strategic investment, Victor notes.