Sasol shareholders enjoyed some respite from an unusual source yesterday after the attacks on Saudi production facilities. The oil price surged 20% before reassurances from the Saudis, Donald Trump and OPEC tempered the rise to 8.5%. Sasol’s profitability is heavily geared to crude oil prices and its stock jumped 10%.
While yesterday’s respite was welcome, Sasol’s share price still trades at half the level of a year ago. It was hit most recently by twice delayed release of annual financial results. The directors blame this in not having answers for massive cost overruns in the construction of Sasol’s ethane cracker in the US state of Louisiana.
Next month is the fifth anniversary of the “green light” event in Lake Charles where Sasol’s then CEO David Constable basked in the spotlight. Introduced by Louisiana’s Governor Bobby Jindal, the Canadian engineer gushed about the “second to none” expertise of Sasol and its contracting partners in the large scale project of this nature.
But all was not what it seemed. Before joining the SA group, Constable spent his entire 29-year career at multinational Fluor. His selection of Fluor Technip as the project’s primary engineering, procurement and construction management contractor should have raised serious questions. It clearly didn’t. Not exactly the Sasol board’s finest moment. What was it Buffett advised about appointing dobermans not lapdogs?
