Sasol delays $8.9bn US chemical plant units as profits slump 63%

By Paul Burkhardt

(Bloomberg) — Sasol Ltd. will review the cost and timing of its $8.9 billion chemicals plant in the U.S. because of a sustained slump in oil and chemical prices as the world’s biggest producer of motor fuel from coal reported a 63 percent drop in profit.

The operation of “some smaller derivative units” at Lake Charles in Louisiana that will convert ethane into plastics and other products will start in 2019, the world’s biggest producer of liquid fuels from coal said in a statement Monday. The company expected to complete the facilities by 2018. Sasol’s review of the project’s schedule and cost will probably be completed in the middle of the year, it said.

Sasol_petrol_station
Sasol petrol station

Sasol saved 10.8 billion rand ($703 million) in cash in the six months through December as Brent crude, to which the producer’s revenue is linked, dropped an average 47 percent from a year earlier and a basket of commodity chemicals fell 23 percent. While the price declines were partly offset by the South African rand’s weakening against the dollar, Sasol also took a 7.4 billion-rand impairment charge on its interests in Canada’s Montney shale-gas basin.

The company has extended the scope of its plan to respond to weak crude prices through 2018 “in anticipation of a lower oil-price environment,” increasing the cash-savings range to between 65 billion rand and 75 billion rand from 30 billion to 50 billion rand before.

Read also: Cheap oil: The winners and losers.

Attributable profit dropped to 7.3 billion rand in the six months through December. Sasol declared an interim dividend of 5.70 rand a share, down from 7 rand in 2015.

Liquid-fuels production rose 4 percent from a year earlier while volumes of base chemicals declined. Earnings excluding one-time items fell to 14.8 billion rand, or 24.28 rand a share, from 19.5 billion rand, or 32 rand, a year earlier, it said.

Oil Outlook

“Oil prices are currently subjected to sentiment-driven volatility and while some fundamentals indicate that the oil-industry cycle is poised to turn, it remains difficult to determine when this will happen,” Sasol said in the statement.

The company expects Brent to stay in a range of $25 to $40 a barrel. Margins for base chemicals will also remain under pressure with lower sales volumes anticipated.

Visited 151 times, 1 visit(s) today