Chemicals and energy group Sasol confirmed on Monday that it would no longer pursue a rights issue in light of progress made, through assets sales and cost savings, to shore up its debt-laden balance sheet.
In a recorded results presentation, president and CEO Fleetwood Grobler said that the decision not to implement a rights issues, which had been capped at a possible $2-billion, was made after securing $3.3-billion from asset disposals since March last year.
He indicated that further asset disposals were being pursued, including the sale of its stake in the Rompco gas pipeline from Mozambique to South Africa, which should lift the value of disposals to $3.8-billion by December 2021.
Thereafter, proceeds from asset sales should fall sharply.
Grobler said the group was also on track to delivered a further $1-billion in permanent cost savings during its 2021 financial year, having already reported savings of $1-billion in 2020.
“This significant progress, together with a more encouraging macroeconomic outlook has mitigated the need for us to do a rights issue,” Grobler announced.
At December 31, Sasol’s total debt had fallen to R126.3-billion compared with R189.7-billion as at June 30, with proceeds from asset sales used to repay the US dollar syndicated loan, as well as a portion of a revolving credit facility. These action reduced Sasol’s US dollar denominated debt by $2-billion to $8.2-billion.
Gearing decreased from 114.5% at June 30, 2020 to 76% at the end of December 2020.
Speaking against the backdrop of a strong recovery in the group’s financial results, with earnings increasing by more than 100% to R15.3-billion from R4.5-billion in the prior period, Grobler asserted that Sasol “had turned that corner” and that its current focus was, thus, on delivering on its ‘Sasol 2.0’ strategy.
The JSE-listed group was deploying the strategy to streamline operations and make its chemicals and energy units less reliant on a recovery in chemicals and oil prices.
It also intended to accelerate efforts to decrease its carbon footprint, with Grobler announcing an upscaled renewable-energy roll-out target of 900 MW, from 600 MW previously, and a proof-of-concept green hydrogen initiative.
He said Sasol intended to be a leader in South Africa’s hydrogen economy and that it intended leveraging its Fischer-Tropsch assets and technology in support of the energy transition.
The group would make further announcements on its decarbonisation strategy at a Capital Markets Day later this year, by stressed that it would not have all the answers by that date.