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Sasol share price halves. Drops R100 in a week

Chemicals and petroleum group knocked by coronavirus jitters and falling oil price.
Oil price tanks Sasol. Image: Moneyweb

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.

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The impressive SASOL Head Office building in Sandton refers.

Isn’t such a glamorous building a bit “over the top” for a company with a smallish current R56bn market cap? Like a show of arrogance?

Any office rental sub-letting may soon commence…

Is it paid for?

Not yet, but if its any solace, the Sasol Pension Fund owns 50% of it.

Correction to myself:

“…with a market cap of R47bn…” (ignore the R56bn mentioned a single day ago)

🙁

…apologies again to all. Again correction to myself (another day later):

“….with a market cap of R34bn..” (discard the R56bn & R47bn quoted)

Don’t do joint management. Don’t.

Just checking if the guy who was bragging a week or so back that he had bought at a bargain of R207 has sold yet.

…I made a (joke) comment to someone on MW last year, when we argued SASOL when it moved below R300, the other commentator gave me a snide remark that it will never get to R250/share.

I responded “OK in that case, I’ll wait to buy it at R125/share!”

Seems that I completely missed that R125 opportunity this morning! 😉

Added some to my portfolio at R90/share. Will have to “double up” when it goes to R45/share 🙁

Could SASOL be chasing Steinhof, EOH & Tongaat’s share prices? Hope not.

Never try to catch a falling knife.

If revenue doesnt meet their financial obligations, they might be in for a rights offer…

As part of my effort to get some perspective on my stressful personal and work situation, I tried this psychological self-help therapy. I visualised myself as being part of the Sasol board. As a board member, I had to share information about the share price disaster, the dividend payout disaster, the Lake Charles disaster and the declining price of oil with representatives from fund managers. I also had to explain to furious BEE beneficiaries where their money went. I visualised how they abused me, blamed me for their shrinking funds under management, and put me under pressure to “do something” about the share price.

This exercise in relativity did wonders to alleviate my work-related stress and helped me to see my personal challenges in perspective, but it worsened my investment stress when I realised that the representative of the pension fund is in a worse position than the Sasol board member and that the actual owner of Sasol, the investor who invests the pension fund, is worse off still. As an investor in Sasol, I have nothing to be thankful for, except for the fact that I am not an investor in Steinhoff……any more.

Now, I have come full circle and decided against this form of self-therapy. So I renewed my gym membership once again. I train three times a day when the price goes down and once a week when the price rises.

Sensei

I presume following recent market activity, and time spend at gym ( refer self help therapy) that you are leading the local triathlon club !!!!

Your fund manager maybe like mine, the uber team at Allan Gray, need me to add way more years to my life expectancy, so that they have time to play catch up.

Ah Sensei but remember as a SASOL board member you are getting paid millions to “run” a company that should almost run itself. This can buy a very thick skin; ask Peter Staude et al at Hulett or the Steinhoff gang.

Oil price under USD35… are we going to have petrol under R10 a litre if this level holds?

Hhahahahaha you mean the ANC tax margins will shoot through the roof… Last time we were destined for a major price cut, they shoved a massive tax increase in there… Never waste a crisis…

In other words. Moody’s downgraded Sasol to SA Rubbish.

I am the proud owner of:

Steinhoff shares
Sasol shares
Stadio shares

Between the three they have destroyed the possibility of a profitable share portfolio…..

Only up is I sold Woolies at R75 per share

If you held that would also be down. This is the opportunity of a lifetime!

May we be looking back at these times and laugh! Let’s enjoy the journey. At the end of the day we came into this world with nothing and you can’t take anything when you leave. Enjoy it! Let’s have fun and enjoy the ups and downs of the market. But do play to win and stick to your strategy! This is only a point on time.

Count yourself lucky; no Group 5, Aveng, Stefstocks, Esor, Hulett etc etc.

I said it should be a screaming buy at 197. Have not stopped screaming since then.

Which site has good operating income projections for Sasol?

I don’t own Sasol and never have, yet it amazes me how “the market” extrapolates a ruling price of oil or gold or whatever to a company as if it will rule forever.

At some point it would be worth a hedge punt: buy Sasol shares and if oil price goes up at least the share gain makes up for your fuel bill increase :/

Market prices on Spot… Fund managers price on consensus or their own price deck… You decide whats true, that is why for every seller there is a buyer….

Sasol – Allan Gary’s ‘’overprized turkey’’
I think Sasol has been selling most funds a ‘’porky’’ by claiming that they had the ‘’best intentions’’ when looking to expand by acquiring businesses offshore, but history now shows that reality can differ significantly from the attractive returns promised by a spreadsheet. What appears to be heaven can end up as hell for shareholders.
In late 2012, Sasol announced that it was progressing the front-end engineering and design of the Lake Charles Chemicals Project (LCCP), an ethane cracker and gas-to-liquids (GTL) project in Lake Charles, Louisiana, on the Gulf of Mexico. They went for broke as their losses now exceed ZAR 120 billion on this project
But I also think it’s only a matter of time before Allan Gray will come out with a statement that said it was not severely affected by Sasol’s collapse despite the fact that they for decades ‘’fell in love with Sasol’’ – as the banker in their ‘’energy’’ sector/portfolio!
Allan Gray last year said it was not severely affected by Steinhoff International’s collapse in December as it had initiated only a small investment in the troubled retailer. This time it could be different – and as a result of this, the pensioners, won’t have a lot of intrinsic value left in these shares and also as a result of time decay on their investments in Living Annuities, etc.

Allan Gray also played a dominant role together with Investec as methinks they shamelessly supported the ILA agreement during Kebblegate area, by manipulating the joint boards, in favor of Western Areas and JCI, but at the expense of Randgold.

We will have to ‘’wait and see’’ how Allan Gray and the likes of Coronation, Investec (Asset Management Group), PIC, Old Mutual, Momentum, PSG, ABSA, Nedgroup and Stanlib react to this collapse!

Interesting little side note: Sasol is (or used to be) the biggest tax payer in South Africa. No profit = no tax.

Indeed, a little side note with massive implications downstream, well said!

You have to be an idiot not to buy in at these levels ….surely?
Although one can’t underestimate investor fatigue at this stage after the last two years….
Worth the risk in my opinion….especially for a long term portfolio. No brainer.

Sasol’s underlying value is still there. 33% of the country’s petrol and diesel is made by Sasol (thats 1 out of every 3 cars!)
Major base chemicals production line with a new tanker procured to meet the increasing demand in the Asia markets.

Sasol reported a 9% increase of global sales and appart from the LCCP (which is starting to payback its own debt), the rest of the conditions is Macro Economic and out of Sasol’s control. I personally wouldnt compare them to Steinhoff or Tongaat.

In my humble opinion this is a freak combination of the Saudi-Russia Oil Dispute and the global Corona virus scare, which makes for a beautiful opportunity to buy at mad prices.

Hope you’re right, otherwise I have visions of the blue Sasol fuel-stations disappearing off the SA landscape (along with some ret fund monies), and bought out by the yellow (Shell), green (BP) or dark blue (Engen) or the red (Total) opposition.

That would be a scary prospect.(…even for Treasury/SARS, as one of SA’ largest corp taxpayers disappears)

Yet, the external/international factors anything could happen to remove “supply” side of equasion….another few cruise missiles into a refinery somewhere, will be another oil price shock (upwards). International situation is fluid. And when the world realises the actual deaths from Coronavirus was hyped out of fear….it (could) lead to a massive market bounce upwards.

End of comments.

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