Sasol CEO Fleetwood Grobler explains why company abandoned rights issue

Sasol, the oil giant, has recently reported impressive results for the half-year ending on December 31, 2020. The company has seen a significant increase in headline earnings per share, more than 100 percent, and has successfully reduced its debt by approximately R63 billion. The CEO of Sasol, Fleetwood Grobler, sat down with CNBC Africa to elaborate on the strategic decisions that led to the company opting out of a rights issue. Fleetwood Grobler emphasized the careful consideration that the management team took before making this crucial decision. He highlighted various factors that were evaluated, including the company's covenant position, liquidity, the progress of Sasol 2.0 initiative, as well as the hedging of oil prices. Through a combination of debt repayments and asset divestments, Sasol has managed to strengthen its financial position and navigate through the challenging macroeconomic environment. The management's confidence in meeting the covenant levels by the end of the financial year has ultimately led to the abandonment of the rights issue. This bold move has been well-received by investors, evident in the company's share price performance. Moving forward, Sasol is focused on sustaining its profitability through the Sasol 2.0 program, which aims to drive cash cost reduction, gross margin improvement, and prudent capital spending. Grobler highlighted the importance of this transformational journey, spanning over four to five years, to ensure the long-term sustainability and profitability of the company. In terms of hedging, Sasol has already secured its position for the next 12 months, with a focus on protecting against the downside risk at around $40-41 per barrel. Despite the current uptrend in oil prices, Sasol remains cautious and prepares its business operations to withstand oil prices as low as $25 per barrel. The demand outlook for Sasol's key products, such as petrol, diesel, and chemicals, appears promising. The sales of petrol and diesel are showing signs of recovery, nearly reaching pre-pandemic levels. However, Grobler noted that the normalization of jet fuel demand would depend on the resumption of international travel. On the chemicals front, Sasol's industrial chemicals, including solvents and hand sanitizer products, have demonstrated resilience, indicating a healthy demand for these essential products in the market. Overall, Fleetwood Grobler's strategic vision and proactive measures have positioned Sasol on a path to sustainable growth and resilience in the face of a dynamic market landscape.