Sasol Ltd. will review the cost and timing of its $8.9 billion chemicals plant in the U.S. as slumping prices caused first-half profit at the world’s biggest producer of motor fuel from coal to drop 63%, Bloomberg reports.
Some units converting ethane into plastics and other products at Lake Charles in Louisiana will start in 2019 instead of 2018, says Johannesburg-based Sasol, which aims to complete a review of the project by the middle of this year.
“There shouldn’t be a further slip unless we need to conserve more cash on the project and I don’t foresee that,” Sasol CEO David Constable says.
Sasol increased cost-savings targets for the next three years after making cuts of 10.8 billion rand ($703 million) in the six months to Dec. 31. The company also took a 7.4 billion-rand impairment charge on its interests in Canada’s Montney shale-gas basin as it adjusts to lower crude and chemical prices.
“We’re being very conservative, so that allows us to protect the gearing, pay the dividend and make sure the credit rating stays where it is,” Constable says. Long term, Montney is a “great asset,” he says.
Sasol increased its cash-savings range to 65 billion rand to 75 billion rand by 2018, up from 30 billion to 50 billion rand, as Brent crude dropped by an average of 47% in the first half from a year earlier and a basket of commodity chemicals fell 23%.
While the price declines were partly offset by the South African rand’s weakening against the dollar, net income declined by almost two-thirds to 7.3 billion rand in the six-month period. Sasol declared an interim dividend of 5.70 rand a share, down from 7 rand a year earlier.
Sasol shares climbed 1% to 482.98 rand as of 2:33 p.m. in Johannesburg, bringing this year’s gain to 15%.
Liquid-fuels production rose 4% from a year earlier while volumes of base chemicals declined. Earnings excluding one-time items fell 24% to 14.8 billion rand.
Sasol expects Brent to stay in a range of $25 to $40 a barrel, while margins for base chemicals will remain under pressure with lower sales volumes anticipated.
