SECUNDA – The Covid-19 pandemic and the lockdown forced Sasol to look at various options to cut costs.
Although for this financial year, Sasol is well on track to achieve the targets set, whilst for the financial year of 2021 plans to achieve the targets set have been developed to a high level of probability, Sasol workers might still be retrenched.
According to the senior manager of Sasol’s group external communication, Mr Alex Anderson, a key part of Sasol’s response plan is to look beyond the near-term measures and position the business for sustained profitability in a low oil price environment.
Sasol’s new strategy will focus on the company’s core portfolios of chemicals and energy.
Thus a focused and robust review of the business and the associated workforce structures is underway and a detailed update will be provided to stakeholders alongside the full year results.
According to Mr Anderson, a key decision as a result of this includes the discontinuation of all oil growth activities in West Africa while the rest of the strategy necessitates a revised operating model, which is still under development and will be announced in the second quarter of this financial year.
“The revision of our strategy aims to have a greater focus on enhanced cash generation, value realisation for shareholders and business sustainability,” said Mr Anderson.
“The chemicals business will focus on its activities in specialty chemicals where it has differentiated capabilities and strong market positions which can be expanded over time.
“The energy business will comprise the Southern African value chain and associated assets and will pursue greenhouse gas emission reduction through focus on gas as a key feedstock and renewables as a secondary energy source.
“This will be a key enabler to achieve the 2030 and longer term aspirations to shift to a lower carbon economy.
“Our two market-facing businesses will each be responsible for its own profit and loss, management of resources and capabilities.
“A lean corporate centre will enable the businesses by fostering synergies and integrating activities, setting strategic boundaries and allocating capital.
“The redesign of the organisation to enable our sustainability at lower oil prices will have an impact on our workforce structure.”
Sasol issued a notice to its trade unions in terms of Section 189 of the Labour Relations Act Number 66 of 1995 and invited the unions to enter into consultations with Sasol.
The fuel giant already reduced its fuel production rates in Secunda at Synfuels Operations and suspended production at the Natref Refinery in Sasolburg.
According to Mr Anderson, Sasol used this period of lower production to bring forward its planned September 2020 maintenance shutdown and the shutdown was successfully completed in May this year.
“This ensures that production will be uninterrupted for the remainder of the calendar year,” said Mr Anderson.
Since the lockdown restrictions were eased on 1 June, Sasol Secunda has ramped up production and Natref is expected to begin production again by the end of June.
Mr Anderson said Sasol previously guided the beneficial operation of the Ziegler and Guerbet units at the Lake Charles Chemicals Project in the USA by the end of June and is pleased to announce that the Ziegler unit achieved beneficial operation on 16 June and the Guerbet unit’s beneficial operation is imminent.
“Remediation work on the low density polyethylene unit is progressing according to plan, and we expect to bring this unit into production before the end of the third quarter of this year.”
Sasol discussed an increased balance sheet flexibility in the context of Covid-19 impacts and market volatility with lenders and Mr Anderson said these discussions were successful.
“Our lenders have agreed to waive the covenant at June and lift the December covenant from three times to four times net debt: earnings before interest, taxations, depreciation and amortisation,” said Mr Anderson.
“This additional flexibility is subject to conditions which are customary for such covenant amendments and consistent with Sasol’s broader capital allocation framework.
“These include provisions to prioritise debt reduction at this time, such as commitments that there will be no dividend payments nor acquisitions while Sasol’s leverage is above three times net debt.”
Sasol will also reduce the size of its facilities as debt levels are reduced, whilst continuing to maintain a strong liquidity position.
“In conjunction with these amendments and in the light of Sasol’s two notch credit rating downgrade earlier this year, the interest costs across Sasol’s debt facilities will increase by approximately USD40 million yearly, before any reduction in borrowings through any self-help measures or disposals.
Sasol will also change its management structure and the new senior leadership end-state structure will consist of the president and chief executive officer and six executive vice president portfolios.
An additional EVP Sasol 2.0 transformation role will be in place for up to 24 months to help execute Sasol’s restructuring initiative and mitigate risks to ongoing operations.
Changes in the roles of EVPs will be effective from 1 November this year.
“This new structure will also increase our gender and diversity representation at GEC level,” said Mr Anderson.
Sasol’s energy business unit will comprise of two EVP portfolios, Ms Priscillah Mabelane, whose appointment Sasol announced on 2 June, will lead Sasol’s liquid fuels marketing and sales ativities, upstream gas, sourcing and marketing and supporting functions associated with the energy value chain and Mr Bernard Klingenberg will lead the operations and technical functions within the energy chain as well as mining, to ensure continuity in Sasol’s ability to deliver across its integrated value chain.
Sasol’s chemicals business unit will be led by Mr Brad Griffith and he will be fully accountable for the full end-to-end chemicals business, from feedstock sourcing through operations, marketing and sales and associated supporting activities and functions.
Sasol’s corporate centre will be made up of three EVP portfolios, the chief financial officer, Mr Paul Victor, the human resources and stakeholder relations department, led by Ms Charlotte Mokoena and the strategy, sustainability and integrated services department, led by executive director, Mr Vuyo Kahla.
In addition to the mentioned roles, Mr Marius Brand will be appointed as EVP Sasol 2.0 tranformation to lead the group-wide transformation programme to Sasol 2.0 and to deliver the long-term sustainability targets by the third quarter of this financial year.
