JOHANNESBURG (Reuters) – South Africa’s petrochemicals group Sasol signalled on Wednesday it will cut its dividend to save cash in the face of falling oil prices, sending its shares sliding over 10 percent.
The company said in a statement that it was changing its progressive dividend policy – which meant maintaining or growing dividends – for a cover range based on earnings.
This policy gives Sasol the flexibility to pay lower dividends rather than maintaining or growing them.
“We are underway with the accounting process to finalise our interim results ahead of our earnings announcement on 9 March. Accordingly, the board has yet to decide on the dividend,” spokesman Alex Anderson said.
Sasol would now use a dividend cover range of 2.2 to 2.8 – which it has used in the past, he said.
“By definition a change in dividend policy is a surprise to investors, so you are seeing a sell-off. We are expecting a big dividend cut,” one analyst, who has a buy recommendation on Sasol and declined to be named, told Reuters.
Oil dropped below $62 a barrel on Wednesday with prices hovering near six-year lows on worries of a glut caused primarily by unexpectedly high production of U.S. shale crude.
