Petrochemicals producer Sasol, the world’s top producer of motor fuel from coal, said on Tuesday its full year results could be hit by potential disruptions to production, supply chains and construction as the coronavirus continues to spread across the world.
The company, which has been hit by high debt levels and falling oil and chemical prices, also said its debt costs would rise by another $10 million a year following downward revisions to its credit ratings last month.
However, its shares jumped 22% in early trade as oil prices picked up. The shares had fallen more than 77% since March 9 as oil prices collapsed.
“The Covid-19 situation is highly dynamic and with infection rates continuing to increase in many countries, there is a risk of interruptions to production, construction and associated supply chains, along with a potential impact on demand and product pricing in some sectors,” the South African company said in a statement.
Sasol said it was evaluating the impact on the business, suppliers and customers and will provide an update in its third quarter business performance metrics report. Its financial year ends on June 30.
The company, the world’s largest producer of motor fuel from coal, said its South African operations would continue to run during the country’s lockdown, however some plants may be required to reduce throughput or shut down due to lower demand from customers due to the lockdown.
South Africa started a 21-day mandatory restriction on the movement of its population last Thursday in an effort to slow down infections from the coronavirus.
Sasol said most of its operations outside of South Africa were continuing with no significant impact on its North American operations or its supply chain, or to construction of the Lake Charles Chemicals Project (LCCP).
It said the cost of some of its floating rate debt is partly linked to its credit rating and will increase by around $10 million per annum following downward revisions to its credit rating assessments last month by S&P and Moody’s ratings agencies.
“We will continue to take decisive action to help safeguard the health and wellbeing of our employees and provide essential products to the many stakeholders that rely on us, while we reposition the business to enhance its long-term future,” said chief executive officer Fleetwood Grobler.
Earlier this month Sasol said that it could sell up to $2 billion of shares as it works to ensure it can pay its debt.
Investors have been concerned by the company’s debt, largely due to delays and cost overruns at the LCCP in Louisiana, which forced Sasol’s former joint CEOs to resign last October in a bid to restore shareholder confidence.