Sasol Calls Off Proposed $2 Billion Share Sale, Profit More Than Triples

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Sasol Ltd., the South African chemicals and fuel maker, called off a potential $2 billion share sale and announced first-half profit more than tripled. The shares hit the highest in a year.

The company has raised enough cash through asset disposals and cost savings to reduce debt and avoid a rights offer.

“A decision was made not to pursue a rights issue given the current macroeconomic outlook, and the significant progress made on our response plan initiatives,” Sasol said in a statement Monday. “The balance sheet deleveraging pathway will continue to be prioritized to ensure that we operate within our financial covenants.”

Speculation over a share sale began about a year ago amid fallout from Sasol’s Lake Charles project in Louisiana, oil prices at half their current levels, and Moody’s Investors Service’s decision to cut the company’s credit rating to junk.

READ: Sasol Eyes More Cash From Asset Sales to Avoid Rights Offer

Sasol has been reducing debt through an accelerated sale of assets, most notably by offloading a 50% stake in its base-chemicals business at Lake Charles to LyondellBasell Industries NV for $2 billion. Divestment proceeds have reached $3.3 billion to date.

Earnings Triple

Total debt was 126.3 billion rand ($8.5 billion) at the end of December, compared with 189.7 billion rand six months earlier. Sasol said macroeconomic volatility may continue to have an impact on its covenant levels.

First-half attributable earnings more than tripled to 14.5 billion rand. The dividend remains suspended, Sasol said, citing a prolonged outlook of economic uncertainty.

Sasol Calls Off Proposed $2 Billion Share Sale, Profit More Than Triples

“We’ve turned the corner and now I’d like to see that we build our position back to blue-chip status,” Chief Executive Officer Fleetwood Grobler said in an interview. “It’s a different company.”

Sasol is transitioning to a business model that consists of a global chemicals business and a southern African energy business, designed to deliver good returns even in a $45-a-barrel oil-price environment. Targets include cost reductions and gross margin improvement.

It also started a process last year to sell its 50% share in the 865-kilometer (538-mile) Republic of Mozambique Pipeline Investment Co. natural gas line. Final contractual issues are being considered and an announcement on the sale is expected in two to three months, Grobler said.

The board approved a final investment decision on the production-sharing agreement for a gas power project in Mozambique. The agreement also allows for the fuel to be brought into South Africa.

Shares rose 0.7% to 204.46 rand by 11:14 a.m. in Johannesburg after climbing earlier to the highest level in a year. The yield on Sasol’s $750 million of 2028 bonds traded at 4.68% on Monday, the lowest level since July 2019.

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