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Sasol Delays Results for Review of $13 Billion Investment

Paul Burkhardt

(Bloomberg) -- Sasol Ltd. fell the most in 20 years in Johannesburg trading after postponing full-year results, saying it hadn’t yet completed a review of problems affecting a giant chemicals project in the U.S.

Sasol dropped as much as 16%, the biggest intraday decline since September 1998, as the beleaguered Lake Charles project continued to sap investor confidence. Costs at the flagship development have swelled 50% from initial estimates to almost $13 billion amid weather delays and construction setbacks.

“The board has decided to delay the announcement of Sasol’s 2019 financial results until the independent review and external audit has been completed,” the company said Friday. “The board therefore expects to announce the 2019 financial results on Sept. 19,” a month later than planned.

The troubles at Lake Charles, in Louisiana, have hampered Sasol’s plans to expand internationally and to increase chemicals manufacturing alongside its core fuel production business. In May, the company pushed up the cost estimate for the project by $1 billion, having previously raised the budget just three months earlier.

The board received a preliminary report earlier this week following an independent review of the obstacles that have hampered Lake Charles, which “contains observations which point to possible LCCP control weaknesses,” Sasol said in a statement. It also announced a fresh problem, saying the start of an ethane cracker had been delayed by a technical glitch. An update on the unit is expected by Aug. 26.

The degree of the issues plaguing the project, including what the company means by “control weaknesses,” is yet to be fully defined, Wade Napier, an analyst at Avior Capital Markets Pty Ltd. in London, said by phone. “It could be a case of management being prudent” or something more serious.

Sasol shares traded down 8% at 256.86 rand as of 12:18 p.m. in Johannesburg. The stock has declined more than 50% in the past 12 months.

The board said it was “confident” that the guidance on results remains unchanged. Earnings probably declined by between 4% and 14% in the year through June largely due to cost increases at Lake Charles, Sasol said July 25 in a trading update.

The project will, once finally completed, boost the portion of chemicals in Sasol’s sales mix to 70%. It’s one of two massive plants that it had planned in the U.S., but the second -- a gas-to-liquids operation -- was abandoned during the oil-price crash. The chemicals complex was approved in 2014.

(Updates with issues cited by board in fifth paragraph, analyst comment)

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Helen Robertson, Amanda Jordan

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