SASOL SLASHES DEBT BY R63.4BN, AVOIDS DILUTIVE RIGHTS ISSUE

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Petrochemical multinational Sasol on Monday reiterated its decision not to pursue a rights issue, as the group made headway in slashing its debt burden by just more than a third (or R63.4 billion) for its half-year to the end of December.

Sasol published its latest results on the JSE, which showed that the group’s total debt at the end of its interim period stood at R126.3 billion, compared to R189.7 billion as at June 30, 2020 (it full-year).

This is a notable cut within just six months, which comes largely on the back of the 50% sale of its Lake Charles Chemicals (mega) Project (LCCP) in the US.

“During the period [interim to December 31, 2020], we utilised proceeds from our asset divestments to repay the US dollar syndicated loan, as well as a portion of our revolving credit facility, reducing our US dollar denominated debt by almost R28 billion [US$2 billion] to R121 billion [US$8.2 billion],” Sasol pointed out in its Sens results statement.

“Through our comprehensive response plan and planned asset divestments, we intend to further reduce our net debt to achieve a net debt: Ebitda [earnings before interest, taxes, depreciation, and amortisation] ratio of less than 2.0 times and gearing of 30% by 2023,” it added.

“Our gearing decreased from 114.5% at June 30, 2020 to 76% at December 31, 2020 mainly due to repayment of US dollar debt [20%] and a stronger closing rand/US dollar exchange rate [7%],” it said.

“The balance sheet deleveraging pathway will continue to be prioritised to ensure that we operate within our financial covenants and maintain adequate liquidity headroom, whilst delivering the Sasol 2.0 transformation programme,” it said.

Sasol’s share price was up as much as 4% in early morning trade (R211.25 at around 9:30am) on the news. It came despite the group not declaring an interim dividend.

The group said that it had “delivered a good set of results” for the six months ended December 31, 2020, with earnings increasing by more than 100% to R15.3 billion from R4.5 billion in the prior period.

“Despite a 23% decrease in the rand/barrel oil price, our adjusted Ebitda decreased by only 6%. This achievement is as a result of a strong cash cost, working capital and capital expenditure performance in response to the challenging environment,” it said.

Sasol noted that its earnings were positively impacted by the following non-cash adjustments:

Gains of R4.6 billion on the translation of monetary assets and liabilities due to a 15% strengthening of the closing rand/US dollar exchange rate compared to June 2020;

Gains of R5 billion on the valuation of financial instruments and derivative contracts; and

R3 billion gain on the realisation of the foreign currency translation reserve, mainly on the divestment of 50% interest in the US LCCP Base Chemicals business.

 

Article written by: Suren Naidoo

Photo credit: Waldo Swiegers/Bloomberg

Link: https://www.moneyweb.co.za/news/companies-and-deals/sasol-slashes-debt-by-r63-4bn-avoids-dilutive-rights-issue/

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