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Sasol delays results due to US project glitch

Share down more than 15%.

South Africa‘s Sasol delayed the release of its annual financial results on Friday due to possible “control weaknesses” at its US ethane cracker project, sending shares in the chemicals and energy company down by more than 15%.

Sasol said its auditors would need to consider an independent report the board had commissioned into its Lake Charles Chemicals Project (LCCP) and therefore expected to announce fiscal 2019 results on September 19 instead of August 19.

“Management and the board will assess such control weaknesses and identify whether any further remedial actions are required,” the firm said in a statement, without providing further detail.

Read: Sasol shares down 12% as Lake Charles project costs balloon

The firm raised expected costs in May by around $1 billion following a review by the project’s new management that revealed oversights such as duplicate credits and overlooked contracts, adjustments for potential insurance claims, procurement back-charges and remaining work and repairs.

The company said it still expected cost guidance for LCCP to between $12.6 billion and $12.9 billion but that it now expected full production at the project to be delayed to around August 26 from the previous guidance of end of July after a technical challenge relating to a large heat exchanger.

The project in Louisiana, which will convert natural gas into plastics ingredient ethylene, was initially expected to cost $8.9 billion and has seen delays and hikes in costs.

Sasol, which is delaying its results for the first time, said it expected guidance given in July – for a rise in annual core headline earnings per share (Heps) of between 1% and 11% – to remain the same.

Heps is the main profit measure used in South Africa that strips out certain one-off items.

Shares in Sasol, the world’s biggest maker of motor fuel from coal, were down 12.3% to R244 at 0740 GMT, after trading as low as R233.93. 

At 12:28 Sasol was trading at R259.01, down 6.88%. 

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As usual they are being ripped off by Fluor. So predictable.

Buy, hold, or sell?

Large investment managers have 3,5 to 5,0 % in their equity funds. They will take a knock by selling now.

Authorised shares: 1,127,690,590
Issued shares: 624,712,949

I say buy if you are thinking long term. After construction, Sasol will manage the operations and we know they can manage operations.

A month or so ago, I recalled asset managers’ view (DSTV channel 412 Business Day) that Sasol at around R340/share would certainly look ‘interesting” and may signal a long-term buy. (….taken into context where the share-price came from, being above R400+/share was held as the fair value norm…)

Is my eye-sight deceiving me, or is it now TWO hundred & fourty-two per share? (and not THREE hundred & fourty)

Value destruction not only limited SASOL, but is scary where many (considered blue chip) SA Inc shares have been heading.
I don’t know….perhaps one must accept this is the way SA’s longterm structural decline towards a 3rd world country is playing out, aiming to revert to the mean-average of Africa? Of “gaan alles regkom”?

Negativity vs a realist?

@MichaelfromKlerksdorp I saw it on Business Day TV last night an analyst saying they would Sasol!

Interesting fact Michael, the South African share market is not looking good at all but is no worse than the Brittish FTSE 100. In terms of the Pound sterling, the FTSE and the JSE All Share have shown similar performance over the last decade. I don’t know what to make of it.

The deflationary contraction on the international markets over the past decade does have a huge influence on us, but the negative effects are amplified by the lack of competence in Luthuli House. Einstein said that compound growth is the 8th wonder of the world. The strategies that come from Luthuli House result in compound contraction of the economy, the opposite of compound growth.

Where does the contraction on the JSE leave BEE schemes? The equity evaporates along with the dividends that are supposed to service the loan that financed the scheme, while the debt is the only thing that remains. I can tell you this much, the BEE “beneficiaries” will simply walk away and leave the company with the BEE debt, and without BEE partners. Lonmin showed us the way.

BEE beneficiaries and socialist politicians are now learning about the meaning of “risk”. You can make a law that legalises the plunder of equity, but you cannot pass a law to force the value of that equity to increase. The rules of the free market always win in the end, and this is the end.

Well set out. Problem is they have less than zero insight

Mike…now tell us what your opinion was at 360..if you had none dont blame analyst…I had mine based on certains stats…buy at 250

Deon, a broken clock is correct 2 times a day. What is your daily hit rate?

@DeonK. I think buyong Sasol at R250/share could lead to further loss.

Would say Sasol will look enticing around R125(!)

The joke will be on investors WHEN we get at such levels.

One thing is certain. This dip is not a buy. Halve, halve and halve again.

This project is out of control and clearly no end in sight.

This could be ZAR150/share by year-end and still not a buy. Similar to Aspen and EOH.

Naspers is going to ZAR3200 soon which will be a great buying opportunity.

I love to hear people’s views!
So interesting.
I disagree with you (strongly) on each one of those points.
Good luck to us both … ummm, wait.

Looking at your reasoning, so interesting, goodluck to you! (You need it).

Lame comment with no input or Predictions. Typical
Of the MW trolls.

Naspers at 2250 is better…and dont say impossible…what did people say about Sasol at R430

My deep appreciation for the infinite wisdom and fees that is ALLAN GRAY , gonna call on my doctor this am, need at least another 20 years of “lifE” to allow my provident fund manager to play catch up !!

Ah, someone who’ll appreciate the coming hyperinflation… just what the doctor ordered.

At least Sasol is sustainable. They sustain a track record of 50% over-runs on big projects and underestimating project duration by 50%

A few years back an older engineer confided to me that the current management would never have been able to build the coal to liquid plants.

IMO the core reason is exactly the same as Eskom : South African large engineering firms have an inflated opinion of their ability of their ability to DIY owner program management. They should be more humble and mitigate risk through Turnkey EPCM.

I sometimes worry about the safety risk of the old plants that these people are keeping going.

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