Sasol Ltd expects its Lake Charles Chemicals Project (LCCP) to make a loss this year and will cut the pay of its CEO and other management to protect its balance sheet, the South African petrochemicals maker said on Thursday, as reported by Reuters.
The company, which has been hit by high debt levels and falling oil and chemical prices, has seen around 80% wiped off its market capitalisation this year.
CEO Fleetwood Grobler will donate 33% of his salary for three months from May and take a 20% pay cut for five months to December, directors’ fees will be reduced by up to 40%, and executive committee senior leadership and junior management will take salary cuts for eight months, Sasol said.
“These measures are necessary to help protect the company’s balance sheet and liquidity until at least the end of financial
year 2021,” Sasol said, citing the impact of the coronavirus outbreak
The embattled chemicals producer said it would donate 33% of Grobler’s salary for three months to a fund that has been set up by the government to support the fight against COVID-19.
Shares in the company were up 7.80% to 63.43 rand after rising as much as 11% in early trade boosted by a rise in the price of Brent crude oil.
The company cut its core earnings expectations from the Lake Charles Chemicals Project (LCCP) following a drop in oil and chemicals prices and lower global demand due to the spread of the coronavirus.
It expects a loss in earnings before interest, taxes, depreciation, and amortisation (EBITDA) from LCCP of $50-$100 million for the financial year versus previous guidance of a profit of up to $100 million.
The project was 99% complete and capital expenditure amounted to $12.6 billion, Sasol said.
Investors have been concerned by the company’s debt, largely due to delays and cost overruns at the Louisiana-based LCCP.
The world’s top manufacturer of motor fuel from coal, implemented measures in March to improve its liquidity in a low oil price environment including finding a partner for LCCP, asset sales and a potential $2 billion rights issue.
Sasol said production volumes at its South African operations were 3% higher in the nine months ended March, 31 compared to the same period a year ago, while full year production is expected to decrease to between 7.3 to 7.4 million tonnes amid lower demand for fuels, based on an operating rate of 75% capacity for the remainder of the financial year.
Reporting by Tanisha Heiberg; editing by Himani Sarkar and Elaine Hardcastle
