Can Sasol Pass The Acid Test?

To understand Sasol’s recent travails, it is important to consider the company’s 70-year history. With the Industrial Behemoth’s results due in August, Jaco Visser takes a deep dive into the company from its birth as a parastatal and considers the outlook for the share as the group tries to move beyond the Lake Charles fiasco.

- Jaco Visser

Back in the infancy of chemistry, chain reactions were unstable and sometimes deadly. For chemical producers today, the stakes are still high, and they need to focus not only on the stability of their operations on the ground but also on the stability of their finances to ensure shareholders are rewarded for placing trust in them. And, as with any listed company, management must clearly demonstrate this duty and commitment to its shareholders.

The severe consequences of a disconnect between company management and shareholders couldn’t be more clearly illustrated than by the sorry saga of Sasol over the past decade. In embarking on new ventures, such as the much-analyzed and criticized Lake Charles Chemicals Project (LCCP) in the US state of Louisiana, the energy and chemical company management’s aspirations lacked due regard for shareholders. And Sasol shareholders can attest to the resulting monetary losses and subsequent near-complete erosion of trust in one of South Africa’s industrial behemoths.

Fortunately, the outlook for this legacy company (remember that it was started with taxpayer money in 1950) seems brighter with Fleetwood Grobler having taken up the reins as CEO in November last year.

Sasol has had to endure harsh criticism in the past. When the company was created as a parastatal – to industrialise the pioneering technology whereby coal was turned into fuel – critics questioned why taxpayers should foot the bill of constructing the Sasol One plant in Sasolburg in the 1950s.