Treurnicht expects Sasol is now probably heading towards a “deleveraging cycle”: it will have to cut its dividends, sell assets or issue new shares. Agreed. As a result Rexsolom has sold down half of its investment in Sasol. Sasol Ltd. () Stock Market info Recommendations: Buy or sell Sasol stock? Sasol “has a significant U.S. dollar-denominated debt load that it needs to deal with,” Tsatsi said by email. Still, Körner adds, the share is now looking very cheap and “priced for disaster”. Ever since the advent of shale gas exploration and the U.S’s demand particularly, essentially being taken out of the global demand equation, the following has occurred. 2. Why abandon the short lived progressive dividend, my guess is the chemical side is not in a good space, it hasn’t been for quite some time and they used to trump up how the loss was being covered by great rises in oil prices and rand vulnerability. What it has not cut is local production (Secunda) and the investment into growth programmes, primarily in Southern Africa (Mozambique and SA) and the US (notably the Lake Charles chemical complex). By the end of the last financial year (June 2015), the company achieved annual cost savings of R4 billion. y = (e.clientY + 5) + 'px'; That would make sense, introducing a Canadian CEO they entered the Canada tr field in Alberta, came up dry in offshore drilling in Australia- all foreign and all paid for by a Rand denominated company. “Now people are suggesting that oil could reach $20 bbl, a price last seen in 2002. The U.S being out of the picture means OPEC has lost it’s biggest customer, which equates to significantly less demand, hence the sharp pull-back in oil prices. Sasol fell as much as 51% and traded 47% lower as of 4:19 p.m., heading for the weakest close since December 2003. [these are not qualified thoughts or advice, they are an attempt to voice my view on the company]. I’m not sure it’s world class and I’m concerned that management is looking at these huge ethanol crackers in an over-supplied market. }, false); 6 Wall Street analysts have issued twelve-month price objectives for Sasol's stock. Coupled with strong oil production from the US and Russia, the determining factor in November 2014, was OPEC’s decision to protect market share by maintaining and actually surpassing their output quota levels. This website is called Moneyweb my friend. Sasol Ltd. () Stock Market info Recommendations: Buy or sell Sasol stock? jQuery('html, body').animate({ “The market is concerned about the company’s balance sheet.”, Sasol plunges more than other major producers following crash in oil. Oil and its derivative products are feedstocks in this business. “The first two are most likely to happen first - unless the weak global economy sets in and option three also need to be called in.”. Driving share prices down is the oil price, which has collapsed to prices last seen in the 1990s. However, relying on the rand is precarious, and goes a little way to explaining why the share has been rangebound since December 2014. Get the best of our site delivered to your inbox every day. While the most recent management guidance indicated that the project was still expected to deliver a return reasonably above the cost of debt, further overruns could jeopardise this scenario. Apart from the postponement, there’s not much new in the statement – it certainly doesn’t forecast a shock in the results. This suggests a possible upside of 116.0% from the stock's current price. It later clawed back some of the initial 12% share price drop, to close the day down 5% at R265, but the market was clearly spooked by its warning that independent consultants found possible “control weaknesses” at its Lake Charles Chemicals Project (LCCP) in Louisiana. Largely due to point no. The report states the company earns roughly half from their chemical and polymer side, as one time, recent, share holder I found that interesting, that was receding in proportion to earnings. All of the oil majors have reduced their head counts and cut back on exploration and new production. imageLoading: "https://www.moneyweb.co.za/wp-content/themes/moneyweb-domination/images/spinner_moneyweb.gif", Join our mailing list to receive top business news every weekday morning. Over and above this, in January 2015, the group introduced a ‘Response Plan’ to ensure further cash conservation following the fall in the oil price. Have a confidential tip for our reporters? Prior to that, in the 80s and 90s, it was rangebound at this level.”. On average, they expect Sasol's share price to reach $13.50 in the next twelve months. Photo: Sasol, Sasol's market capitalisation. Their forecasts range from $13.50 to $13.50. }, 500); return undefined; Sasol shed almost R20 billion of its market value within fifteen minutes on Friday morning, after the company postponed the release of its results in a cryptic announcement. The oil majors, through their entrenched positions, all earned rich profits over the period, particularly between 2011 and 2014 when the Brent oil price was stable between US$95 and US$125/barrel. You can get more information about how we use cookies in our imageBtnNext: "https://www.moneyweb.co.za/wp-content/themes/moneyweb-domination/images/bg_direction_nav.png", Only a communist views profits as “unfair” while they happily enjoy the taxes these capitalists pay on these profits. Get yourself an education before making “noise” on this website. Sasol started the process in 2013 with an organisational redesign that focused on simplifying the organisational structure and cutting costs out of the group – cash fixed costs from 2007 to 2012 were increasing at a compound rate of 11% annually. “I’ve never understood the attraction to Sasol. Only my view, but it might help if you are at all interested and again, agreed, this has nothing to do with press, brains, education, pedigree. Might I try. “This oil price crash has come at the absolute worst time for Sasol,” said Seleho Tsatsi, an analyst at Anchor Capital in Johannesburg. Falling oil price affects local petrochemical giant and other majors. The biggest decision in this regard was to delay the final investment decision on its gas-to-liquids facility in the United States conserving more than $600 million in front-end design spend. Ultimately, he believes that it will probably result in the project missing more milestones, and that the total cost may well increase by a further $500 million. On Friday, Sasol also warned that there has been a technical challenge, which interrupted production at one of the facilities that have already been launched at LCCP. On Friday morning, Sasol shocked the market with an announcement that independent consults found "control weaknesses" at its embattled US project, and that it has to postpone its results. The thing now worrying many investors is simply whether the returns from LCCP will ultimately be positive given the massive budget overrun and the significant amounts of debt taken on in this process, said Körner. Investor relations. When might be the right time to reinvest in oil (and commodity) companies is the source of much speculation. var x = (e.clientX + 5) + 'px', Sasol’s board delayed its annual results by three weeks, to September 19th, when an independent review and external audit has been completed. Körner says the market, which is already jittery given the legacy of Steinhoff and Tongaat amongst others, seems to be taking the dimmest possible view on what the “control weaknesses” could mean. Escalating Debt Brawls Add to Headache for Distressed Compan... JPMorgan Calls Turnaround on Turkey as More Borrowers Return, Fuel and chemical producer has oil forecast range of $50-$70, Stock slump adds to Moody’s downgrade, U.S. project overruns. In addition the more efficient consumption of oil, as well as increasing use of gas and renewable energy, is changing the face of the industry. “This process makes the company unique and viable, so no we will not sell,” he notes. The yield on $750 million of notes due 2028 climbed for a fourth day, jumping 93 basis points to 6.61%, the highest since January 2019. I’d rather invest in BP or Shell at the right time.”, That said, he also notes that markets are exceptionally irrational and emotional. Yep … apparently Saudi oil cost about $10 to get out of the ground. Lot of stocks down to give decent gains, if you pick right. jQuery(document).on('click', 'a[href*="#to-comments"]', function (event) { “In fact, the external review will give the board ammunition to take action against those who neglected their duties. Webster newTweetLink.href = "https://twitter.com/intent/tweet?text=" + encodeURI(text) + "&url=https://www.moneyweb.co.za/news/companies-and-deals/how-low-can-they-go/&via=Moneyweb";