Sasol lost R16bn in market value on Thursday after the chemicals and energy group declared force majeure and said it is working to quantify the effect of the recent disruptions to rail and port services across its value chain.
The value of its shares fell as much as 11%, the worst intraday drop in two years, before pulling back to close 8% lower at R289.53 on the JSE.
Sasol is the latest among big companies to be hobbled by the recent strike over wages at state-owned entity Transnet, which has cost bulk commodity companies in particular billions of rand in lost export revenues.
However, Transnet and majority union United National Transport Union (Untu) reached a three-year wage deal earlier in the week, leaving minority unions with little to no option but to oblige as the deal applies to all bargaining unit employees. Minority union Satawu called off the strike on Wednesday, backing off from earlier pledges to continue with it.
But the after-effects of the disruptions were still apparent, with Sasol saying it was unable quantify the effects on its value chains due to uncertainty over their extent and the time frame for clearing backlogs across the port and rail system.
Sasol declared force majeure because the disruptions hampered the movement of certain feedstocks and products between its operations in the interior and the Durban and Richards Bay ports.
Force majeure is a common clause in contracts that excuses an entity from fulfilling its obligations in the event of a natural or unavoidable catastrophe.
Meanwhile, Sasol said its Lake Charles chemical plant in Louisiana in the US suffered another setback after a fire broke out at one of its units.
“This is concerning, especially because this is a plant that had timeline and cost overruns when it was being built, so one can’t help but wonder if there may be any issues pertaining to the plant’s efficiency embedded in its construction process,” said Lwando Ngwane, resource equity analyst at Sasfin Securities.
Sasol mining production was down 8% after operational challenges at two collieries and unplanned safety stoppages. Coal purchases are supplementing its own production as part of its stabilisation plan for maintaining a healthy coal stockpile for its Secunda operations.
The operational challenges at Transnet led to a drop of 29% year on year in export sales.
Gas production is down 7% year on year because of reduced downstream demand, but the company, which is valued at about R178bn, expects gas production volumes from the Petroleum Production Agreement in Mozambique to remain within its market guidance.
Liquid fuel sales fell 6% year on year because of the combined effect of the unplanned shutdown at the Natref refinery and a total shutdown of its operations in Secunda.
“The Transnet impact is still unknown but also the fire at Oryx and the impact on the first quarter’s production out of Qatar is weighing on the share price,” said Abdul Davids, head of research at Camissa Asset Management.
Ngwane said Sasol appears to be struggling to get productivity up to desirable levels for its coal and mining operations, a quest that has been a persistent issue for the company.
In addition, Sasol disclosed “numerous unplanned production interruptions, with Eskom power outages adding to the pain”, Ngwane said.
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