With the onset of the Covid-19 pandemic, chemicals and energy group Sasol took urgent steps to stabilise the group in the short term.
Sasol released its integrated report and 2020 performance for the year ended June 2020, noting revenue at over R190-billion. It was noted that earnings were severely impacted by the sudden oil price collapse and the spread of the Covid-19 pandemic.
The 2020 revenue was a 6.86% decrease from 2019’s R204-billion revenue.
The Sasol South Africa board declared an interim dividend of R17.34 for each ordinary share to the benefit of Khanyisa shareholders. Meanwhile, preferential procurement was up by 37% from R19.2-billion last year, to R26.3-billion in 2020. Additionally, the Sasol socioeconomic development spend for 2020 was R1.2-billion.
Some of the urgent steps that the group took entailed conserving cash through self-help management actions in operational and capital expenditure, accelerating asset disposals delivering proceeds in excess of the targeted $2-billion, and pursuing a rights issue of up to $2-billion.
“I am pleased to report that by year-end, we exceeded our self-help target of $1-billion by curtailing discretionary capital and limiting sustenance capital to the minimum level required to maintain safe and reliable operations. Further, we optimised external spend and implemented cost saving measures across various human capital levers,” says Sasol CEO Fleetwood Globler in the group’s integrated report.
This culminated in Sasol’s best working capital performance yet and a robust cost performance.
On asset divestments, the group concluded the establishment of its joint venture explosives business with explosives company Enaex and sold its interest in the Escravos gas-to-liquids plant in Nigeria, to oil company Chevron.
“In July 2020, we signed an exclusive negotiation agreement with multinational industrial gas supplier Air Liquide to own and operate our 16 air separation units at our Secunda complex for proceeds of approximately R8.5-billion. The proceeds from these transactions make a substantial contribution to our targeted divestment.”
Progress on a partnering transaction in Sasol’s base chemical assets in the US is far advanced and announcements will be made at the appropriate time, says Grobler.
“All our actions have culminated in a net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of 4.3 times. “We successfully agreed with our lenders to waive the covenant at June 2020 and lift the December 2020 covenant from 3.0 times to 4.0 times.”
Grobler adds that Sasol will pursue a rights issue of up to $2-billion in the second half of financial year 2021. Cash flow generation and divesting of noncore assets will all contribute to reinstating the dividend at a time when net debt to Ebitda is below 2.0 times.