Sasol is the biggest loser on a day where the JSE’s All Share (Alsi) shrunk over 6% in just the first few hours of trading.
The chemicals and petroleum group saw its share price drop 46% to R85.72, the lowest it has been since October 2003. It has fallen by about a R100 in just over week.
The group’s valuation received a double blow. Aside from the general negative market sentiment around the impact of the global spreading of coronavirus, the move by Saudi Arabia to flood the oil market, pushing the price of Brent crude oil down by as much as 30% to $33.20 a barrel, also contributed to the drop.
Saudi Arabia did this as a response to Russia rejecting its proposal to put in place production quotas.
Apart from the equity selloff and falling oil prices, Sasol has also been hamstrung by its own poor performance. Its earnings for the six months to end-December collapsed 72% to R4.5 billion. Earnings before interest and tax were down by more than half, from R20.8 billion to R9.9 billion.
The delays and cost overruns at the Lake Charles Chemicals Project [LCCP] in the US, led to an extensive reshuffling of its management team, and the resignation of its joint CEOs, Bongani Nqwababa and Stephen Cornell.
Sasol CEO Fleetwood Grobler, who took over in November, said that LCCP was on track and within the revised total cost estimates, at the group’s results presentation last month. It was expected to make a positive contribution to earnings before interest, tax, depreciation and amortisation in the second half of the financial year.
Its problems have been further compounded by credit rating agency downgraded Sasol’s long-term rating to Ba1 from Baa3 and its short-term rating to Not Prime from P-3, last week.