March 12, 2020 / 2:19 PM / 17 days ago

South Africa's Sasol set for worst week yet as oil crash speeds investor flight

    * Sasol shares down 80% this week 
    * Stock set for worst week since listing in 1989
    * Market cap falls by $4.8 bln 
    * Oil crash compounds worries over debt, project delay

    By Helen Reid
    JOHANNESBURG, March 12 (Reuters) - An oil price crash has
wiped 79 billion Rand ($4.8 billion) off the market value of
South African petrochemicals group Sasol, adding to the
government's difficulties in shoring up business confidence as
giant state-backed companies flounder.  
    Sasol shares hit a 21-year low on Thursday - falling 42% by
1400 GMT and bringing losses this week to 80% - as oil prices
plunged.
    Barring a significant recovery, this will be Sasol's worst
week since listing in September 1989. 
    The destruction of value at one of South Africa's biggest
companies is another problem for a government grappling with a
heavily-indebted state power company and airline. 
    Sasol is not a state-run company, but its top two
shareholders are state agencies, which jointly hold a nearly
quarter share.
    The top shareholder, state asset manager the Public
Investment Corporation has, a 15.05% stake, while local
development finance institution Industrial Development
Corporation holds 8.53%, according to Refinitiv Eikon. 
    Stocks with exposure to oil markets dived everywhere on
Monday as crude prices suffered their biggest daily sell-off
since the 1991 Gulf War, dropping 25% after top producers Saudi
Arabia and Russia began a price war that threatened to leave oil
markets overwhelmed with supply.
    Sasol shares were already fragile after the company reported
late last month that half-year profits plunged because of
problems at its Lake Charles Chemicals project (LCCP), an ethane
cracker project in Louisiana.
    The U.S. facility is costing billions of dollars more than
initial estimates.
    The oil price crash added momentum to the selling as
investors grew concerned about the company's debt burden. Oil
prices slid another 5% on Thursday.
    "If this environment persists for an extended period of
time, it is likely that Sasol will need to both raise new equity
and accelerate its asset sales programme to repay debt,"
Prudential, the fourth biggest shareholder, wrote in a market
comment dated March 9.
    A Sasol spokesman did not immediately respond to Reuters'
request for comment.
    Sasol, which is the world's biggest maker of motor fuel from
coal, said in Februrary that its gearing - net debt to EBITDA -
stood at 2.9 times, below the maximum of 3.5 times allowed under
its bank covenants. 
    "With the oil price collapsing, it's eroded the margin they
were expecting on the        project," said an investor who sold
his Sasol shares on Monday. 
    Shares in the company were last trading at 30.9 Rand - a 95%
decline from their level just 18 months ago. 
 
 
 
    
 (Reporting by Helen Reid; Additional reporting by Tanisha
Heiberg and Emma Rumney; editing by Olivia Kumwenda-Mtambo and
Barbara Lewis)
  
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