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Sasol, the biggest loser

And its silence is deafening.
Sasol’s market cap is now R33bn ... from R450bn. Image: Waldo Swiegers, Bloomberg

Sasol was the biggest loser on Wednesday, as a consequence of its high debt and delays in getting its Lake Charles Chemicals Project in the US operational.

The once-strong company’s share price fell 26.44% to R52.72, knocking it further down from its 61.92% drop in the past seven days.

Sasol share price in the past month

The decline was accelerated by the sharp drop in the oil price. Sunday’s crash spooked markets that were already panicked by the impact of the coronavirus outbreak on the global economy and the demand for oil. The price of Brent crude dropped nearly 30% after oil producers failed to reach agreement on cuts.

Read: Sasol is this week’s worst emerging-market stock, so far

Market watcher David Shapiro of Sasfin says it’s very difficult right now to get a grip on what is in investors’ minds. “Nobody understands why it has to be like this.”

“We can’t really get to the bottom of what is really driving people’s decision-making, and to really get a grip on what their actual fears are.

“We have never experienced anything in our lives like this before,” says Shapiro.

What he finds most concerning about Sasol however is its lack of communication to investors.

‘We have heard nothing’

“What worries me is that we have heard nothing from the company. We’ve heard nothing from the stock exchange.

“There has been no reporting or communication … the market capitalisation of Sasol today is R33 billion, which is insane. We’ve just come from R450 billion.

“It is creating a massive amount of destruction,” says Shapiro.

There is a lot of confusion about what impact the coronavirus is going to have on the global economy, and against that backdrop people are incredibly nervous. Restrictions on people’s movements and flight cancellations are a hindrance to the flow of goods and services globally. “It is something I think the world has never had to cope with.”

Shapiro adds: “The fundamentals have very little bearing and the policies that are being implemented by governments do not really make any difference. Because if you are going to lock up yourself in the room, what difference will it make if interest rates are reduced?” 

Earlier this month the US Federal Reserve had an emergency rate cut, slashing its benchmark interest rate by 50 basis points in response to growing fears around the coronavirus.

“It is really difficult, and I think the policies should be towards helping businesses cope with what is likely to happen in the next few months if the virus gets hold of us or grips the world,” says Shapiro.

He believes the rand is going to be a victim of global market fears, with more investors moving towards the dollar as a ‘safe haven’.



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The absence or debriefings (or deafening silence) from Sasol speaks volume about the importance of having a communications team. In the case of Sasol, it could have simply reassured the market and public that subsequent to the junk rating by Moody, that does not mean that the operations of the company are in any way affected. That, infact, apart from the issues identified and reported on in Lake Charles, which were on track of being sorted out, the fundamentals of this company are strong and management is committed to bring LCC on track to come fully on line soon. However the lack of clarification for the market, was compounded by this oil war between Russia and Saudi Arabia. I can’t see why they wait until the 17th for a shareholder conference call.

Headline mistake-the biggest losers are the private sector tax payers whose hard earned money are squandered by the corrupt ANC on Eskom SAA SABC etc. And SASOL was built with taxpayers money.

Sasol holds true to its corporate slogan…

“Reaching new frontiers”

I suspect management was hoping for a bounce in oil, which is why they elected to postpone the conference call. If the oil slump had been resolved and Sasol thusly rebounded, the call would be far more manageable.

It would be helpful to know how their debt is structured and what effect this huge share price drop has on their (not insignificant) commitments. What are the trigger points for breach?

I can’t imagine that they will collapse but it’s difficult to make a call with such little info available.

I’m still considering a speculative trade on this.

Is anybody expecting a dividend going forward?

I don’t have and have never had Sasol but at some point it has to be worth buying purely as a personal hedge against oil prices. Oil stays low, investment performs poorly. Oil bounces, well then at least the sasol shares compensate you a bit.

Rough envelope calculation puts their gp at positive but ebitda negative after the oil collapse. I suspect the shareholder call was pointless if they couldn’t answer on the way forward. They need to decide on course of action to avoid default on debt covenants. All speculation of course, but hence I suspect they’re staying quiet because giving conflicting answers will trigger an immediate call on the loams if handled poorly. Their concerns are bankers first, shareholders cant yet cause a loan default.

…will be interesting to see which (and how much) loan exposure SA commercial banks have on Sasol (unless I missed an article somewhere).

The real kicker I think is: do you believe the numbers SASOL publishes?

Personally I do not and have not for a while. Lake Charles was at best a risky bet using other peoples’ money, at worst a vanity project with no real economic assessment undertaken.

We shall see. I ain’t touching it.

Current share price of R39 is uncomfortably closing in on those of EOH & Tongaat!

Buying at such levels could either prove to be one of this decade’s best-timed stock pick, or it may end up as SA’ largest corporate failure in living memory.

If one anticipates that some US shale oil producers will go out of business at current oil prices, what makes our Sasol immune to such (unexpected & unhedged, ouch!) external shocks?

Question is also, how long will the Saudis be able to bear out the current oil price? (yes, they’ll still produce profitably at about $20pb…but it won’t balance the Saudi national budget. Maybe a small price for the Saudis to pay, if they can kill off some US shale competition in the long run…?)

Oil will rise again to record allways does

Yep, some major producers cannot break even at the current price, so there’s bound to be supply pressure at some stage. The question is what will demand do, but again, virusses come and go.

that is also the way I understand it…the SASOL share price will rise again. Unlike ESKOM, SASOL will survive. If I had a million bucks, I will pay of my debt and use the rest to by SASOL shares.

I love it …. Still R30 bucks to rock bottom …. Thank you Saudis and Russians…. you can show us the true price of Brent ….play your games….
Brents currently falling again….

I believe it costs the Saudis around $4 dollars….basically pumping it from the ground straight into the barrel…. For others (and I heard Sasol too) about $20 … will be interesting when Brent goes below $20

So it sounds like:

Lots of forced sellers in trackers.

Big concern over debt covenants in terms of debt service cover ratios. Weirdly their debt yield is still below 7%

Imagine how much money is being lost and made in the derivatives market so far in March!

Maybe 30 is worth a small punt and have more ready for the inevitable rights issue?

Hope its not a Lonmin type rights offer.

If you have life insurance, it will be more profitable and less risky to rather catch a piano that is falling from the tenth floor.

Well, 16% up since teatime. That is more than the typical fund manager achieves in a decade :/

The beauty of mathematics. The share price has halved 4 times already and it can half 5 more times and it will still be above zero. The share price can decline by 50% for 9 times and there will still be something left.

This proves that there are lots of opportunities for investors who like to double down or average out, not that I am suggesting that this is what you should do though. People who keep on voting for the ANC are basically following this strategy. They keep on supporting thieves, in the belief that thieves will turn into saints.

I’ll have a go at R32

you made 10% today

…10% gain wiped out. Down to R31 🙁

The share price is “reaching new frontiers”

Correction : you made 20%

So long as its coming from your “crazy gambling money” stash (that’s a small % of your overall assets) and not your “pension” stash, why not

I wonder how high the oil price will bounce when there is another drone attack at their facilities?

2020 will sure be Sasol’s “annus horribilis”. Or is that “anus horribilis”…

….probably “anus….” the closest description 😉

It will be SASOL’s year of Strontium (Sr / 38)

Have to start nibbling. Downside uncertain, upside potential huge. Reminds me of the Old Mutual collapse and recovery.

In 2008 those OM Pref were no brainers – 8% dollar yield buying at 35. Sold at 100 a year and half later

I have some gambling money on the side
Where can one take a long leveraged position ?

sasol is just like a SOE…eats up money to support white beneficieries that benefitted illegally

End of comments.



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