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Sasol moves to cut jobs ahead of organisational shake-up

FACING RETRENCHMENTS: Sasol's headquarters in Rosebank, Johannesburg
FACING RETRENCHMENTS: Sasol's headquarters in Rosebank, Johannesburg

Chemicals group Sasol, which has seen its share price more than halve so far in 2020, said on Thursday it would begin consulting its workforce on possible retrenchments after resolving on an organisational shake-up that will result in two core businesses.

Sasol “2.0” will be focused on chemicals and energy, with each responsible for their own profit and loss, the group said.

“The redesign of the organisation to enable our sustainability at lower oil prices will have an impact on our workforce structure,” the group said.

Sasol has been hit by cost overruns at its Lake Charles facility in the US, an explosion at that facility, as well as oil price volatility in 2020, putting severe strain on a group that had about R155bn in debt at the end of December. Sasol’s market capitalisation was just under R90bn on Thursday morning.

The chemicals business will focus on its activities in speciality chemicals, while the energy business will comprise the Southern African value chain and associated assets and will pursue greenhouse gas emission reduction through focus on gas as a key feedstock and renewables as a secondary energy source, the statement said.

The group said it had also agreed on a new debt framework with lenders, but waqs facing a rise in borrowing costs.

Lenders have agreed to waive the group’s debt covenant for June 2020, and lift the December covenant from three times to four times net debt to earnings before interest, taxation, depreciation and amortisation (ebitda).

“This additional flexibility is subject to conditions which are customary for such covenant amendments and consistent with Sasol’s broader capital allocation framework,” the group said.

In conjunction with these amendments and in light of Sasol’s credit rating downgrades earlier in 2020, the interest costs across Sasol’s debt facilities will increase by about $40m (R688.4m) a year, the group said. This is before any reduction in debt through disposals or other measures.

In morning trade, Sasol’s share price was up 1.73% to R146.75, having lost more than two-thirds of its value so far in 2020. — BusinessLIVE