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Sasol expects R4bn in restructuring savings, sans ‘forced’ job cuts

Acting CFO Paul Victor

Sasol President and CEO David Constable on the group’s business performance enhancement programme. Camera Work & Editing: Darlene Creamer. Recorded: 8.9.2014.

Acting CFO Paul Victor

Photo by Duane Daws

8th September 2014

By: Terence Creamer

Creamer Media Editor

  

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Sasol CEO David Constable announced on Monday that the group expected to deliver sustainable savings of more than R4-billion a year from 2016 as a result of a far-reaching business performance enhancement programme. The savings figure was a material improvement on the R3-billion initially forecast.

He also said that, while the restructuring initiative was still in progress, there was unlikely to be any “forced retrenchments” of its unionised employees.

However, around 200 senior managers had already taken severance packages and it was anticipated that other employees could follow suite by opting for early retirement or voluntary retrenchment packages. Prior to the restructuring, Sasol employed around 34 000 people.

“When you talk about our union colleagues, we do not see forced retrenchments being required at this time. The unions are very supportive of our workforce transition process, we have had them with us every step of the way – they have signed off on the process itself,” Constable said.

The group, which reported record earnings of R29.6-billion for the year ended June 30, 2014, expected to conclude the restructuring exercise during its 2015 financial year, which was currently under way.

It had also introduced, from July 1, a new value-chain-based operating model, which had reportedly simplified corporate and legal structures and improved the efficiency of decision-making and governance frameworks.

Acting CFO Paul Victor said that savings of R469-million had been achieved in 2014 and that he expected savings of R1.5-billion to be realised in 2015.

Restructuring costs of R1.3-billion were incurred, with the entire programme expected to involve costs of around R2.5-billion.

Delivering a presentation under the theme ‘A new era for Sasol’, Constable said the group would pursue gas-based growth primarily in Southern Africa and North America, with two mega-projects being finalised for the Lake Charles complex in Louisiana.

But he stressed that Southern Africa remained a key focus area for the group with ‘Project 2050’ having been launched to prolong, enhance and expand operations in the region.

The group invested R40-billion in sustaining and expansion capital in 2014 and was expecting to invest R50-billion and R65-billion in 2015 and 2016 respectively.

The Southern African component, however, was expected to decline from the 57% recorded in 2014, but Constable promised that it would recover as a percentage once the two large US projects had been implemented.

Sasol expected to make a final investment decision on a 1.5-million-ton-a-year ethane cracker in Lake Charles before the end of the 2014 calendar year. The project could involve an investment of between $5-billion and $7-billion.

A decision on a 96 000 bl/d gas-to-liquids facility – which would be developed in two phases and which could involve an investment of between $11-billion to $14-billion – would be made 18 to 24 months thereafter.

The JSE-listed group, which reported an operating profit of R41.7-billion on revenue of R202.7-billion, attributed the performance to better operational results, the weaker rand and an improvement in chemical prices.

Synfuels production volumes rose to 7.6-million tons, which the JSE-listed group said was the highest output in a decade. The rand:dollar exchange rate was 17% weaker during the period, while the average Brent crude oil price was flat.

Sasol expected to produce between 7.5-million and 7.6-million tons of synfuels in 2015 and had not adjusted its exchange rate and oil-price assumptions. For every 10c move in the rand:dollar exchange rate, Sasol earnings moved R860-million, while a $1/barrel change in the Brent crude oil price resulted in a R750-million change.

Edited by Creamer Media Reporter

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