Sasol cuts earnings forecast for Lake Charles project
Expected earnings at the companies embattled Lake Charles Chemicals Project in the US are now expected to be as low as $150m in its 2020 year
Chemicals giant Sasol warned on Monday that technical difficulties at its embattled Lake Charles plant in the US could halve its forecasted revenue from the project in 2020.
In the latest update on the project in Louisiana, Sasol, whose shares have lost more than half their value since the beginning of May, said earnings before interest, taxation, depreciation and amortisation (ebitda) were expected to be within a range of $150m and $300m in the year to end-June 2020, from a previous forecast of $300m to $350m.
Technical issues and schedule pressures had prompted the company to push back operational dates for a number of its units, the company said.
Sasol has been grappling with major cost overruns at the Louisiana project, saying in July it had written down its assets in North America and Africa by R18.1bn. The company has also commissioned an independent review of the Lake Charles project to explain the cost overruns and project delays, something that delayed its financial results by a month.
Sasol's share price has been battered by the series of announcements, and has lost 14.72% so far in August.
In afternoon trade on Monday, Sasol had lost 2.44% to R264.60.
The relatively mild reaction to the news was probably the result of the market already pricing in much of the bad news, Sasfin Wealth senior portfolio manager Nesan Nair said.
“The market is waiting to see how long it is actually going to take them to get the right product levels, and the output they are supposed to have,” Nair said. Much focus will be on these issues during Sasol's results announcement, scheduled for September 19.
Sasol said on Monday its cost-guidance for the project remained unchanged in a range of $12.6bn to $12.9bn.
“We remain confident that the incremental costs resulting from the delay can be absorbed within the existing base cost and contingency buffers,” the company said.