A further delay in the release of South Africa-based integrated chemicals and energy group Sasol’s year-end results indicates greater management and governance risk, and suggests potential disclosure restatements in last year’s financial statements, says S&P Global Ratings.
The company rates Sasol (BBB-/Stable/A-3) two notches above South Africa (BB/Stable/B).
The release of Sasol’s 2019 financial year results was initially delayed from August 19 to September 19, but was, on Friday, delayed again until October.
The further delay follows the board’s decision to commission additional work and to give time for further investigation into particular points raised in the original board-commissioned independent review of recent cost and schedule changes for the Lake Charles chemicals project (LCCP).
The investigation began after Sasol in May announced further increases to the capital cost estimate. A preliminary report was provided to the board on August 14.
The additional investigation includes assessing if any potential control weakness identified in the preliminary report, as well as the root cause for the changes in the cost and schedule estimate, were present in the previous fiscal year.
In the August and September announcements, Sasol’s board indicated that it expected no change to the earnings guidance in the company's trading statement of July 25, and also confirmed its previous LCCP capital cost guidance of $12.6-billion to $12.9-billion.
The LCCP ethane cracker unit achieved beneficial operation at the end of August.
S&P expects the financial results will include information on the qualitative aspects of LCCP cost estimation/projection controls, specifically reporting and oversight, further informing its view on Sasol's management and governance risk.
The company will continue to monitor developments in this regard closely.