SECUNDA SYNFUELS OPERATIONS SHUTDOWN POSTPONEMENT
In March this year, Sasol launched a crisis response plan when significant
internal and external issues, both short and long-term in nature, compelled
the company to reset. In the short term, two critical factors spurred the
crisis response plan. First, as the COVID-19 storm emerged, collapsing oil
prices and product demand in its wake, Sasol’s financial position was
already under severe pressure. The company’s balance sheet is heavily
geared at the moment due to the additional spend that was required to
complete the LCCP (Lake Charles Chemical Plant). With high debt levels the
company cannot pay dividends or invest in new growth opportunities, and
the ability to withstand market shocks, like COVID-19, is weakened.
Second, the market is extremely volatile. In South Africa and other parts of the world, Sasol has seen a dramatic fall in product prices and witnessed a steep decline in demand due to lockdowns and stay-at-home orders in effect in many parts of the world. The need to restore Financial stability is what has driven Sasol to implement self-help measures over the past few months and review its strategy going forward.
One of the measures implemented was to postpone the Secunda Synfuels
Operations annual shutdown. All necessary statutory maintenance work was
completed during May this year which allows Secunda Synfuels Operations to
postpone the shutdown to September 2021. In Secunda Chemicals Operations,
only minor shutdown work will continue at the Monomers and Polymers plants
with the rest of the work also moving out to 2021.
It is important to note that the challenges confronting Sasol go well beyond
the short-term. As recently as last year, Sasol used to plan on a US$60 per
barrel oil price. Now, the company needs to plan for a sustainable Sasol in a
US$45 environment. This is a very significant change. Many of Sasol’s assets
are also at risk of diminishing returns. What this means is that with lower oil
prices and higher feedstock costs, the company faces the risk of lower
returns on invested capital. Sasol has therefore also implemented a new
strategy for long-term value creation which will fundamentally change its
operating model going forward.
As the company transitions into a new future, there will still be many
challenges to face, however, Sasol is progressing towards a simpler, more
agile company that is focused and well-positioned to deliver long-term
sustainable value to all its stakeholders