South Africa's Sasol to cut annual capex in turnaround strategy

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JOHANNESBURG, Dec 2 (Reuters) - South Africa's Sasol aims to cut annual capital expenditure by 30% and reduce costs over the next 3 to 4 years as part of its turnaround strategy, the petrochemicals giant said on Wednesday.

Sasol, which has been restructuring its operations to cut down debt, said it aimed to be more competitive, increase cash generation and remain resilient at $45 per barrel oil price.

Sasol, the world's top manufacturer of motor fuel from coal, has been battling high debt amid lower oil and chemicals prices and the impact of COVID-19.

"We need to transform the business so that it is highly cash generative, with a diversified asset base that yields competitive returns to our shareholders through commodity cycles and market volatility," Chief Financial Officer Paul Victor said.

Sasol said it planned to reduce annual capital expenditure to between 20 billion to 25 billion rand, cut fixed costs by as much as 20% and boost gross margins by up to 10%.

Investors have been concerned by the company's rising debt, which stood at 189.7 billion rand for the year to June 30, after cost overruns and delays in construction at its Lake Charles Chemical Project (LCCP).

To tide over a debt crisis and repair its balance sheet, Sasol embarked on a three-pronged strategy this year which included disposal of assets, cash conservation efforts and a potential rights issue of up to $2 billion.

As part of the process Sasol agreed to sell 50% of its Louisiana based chemicals business at Lake Charles for $2 billion and form a joint venture with chemical company LyondellBasell Industries.

The company said it expects $3.5 billion of asset divestments by the end of its 2020 financial year. (Reporting by Tanisha Heiberg; editing by Mfuneko Toyana and David Evans)

First Published: 2020-12-02 14:59:29
Updated 2020-12-02 16:12:28

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