Petrochemical major Sasol says it might take a $90m (R1.6bn) hit in its Southern Africa chemicals business should US President Donald Trump follow through on his reciprocal tariffs announced on “liberation day”, which rattled global markets.
The US government announced changes to its import tariffs on April 3 followed by a suspension of the tariffs for most countries for 90 days, announced on April 9.
As global markets continue to adjust to the changes, Sasol has said it is engaging with stakeholders and it remains focused on ensuring continuity, mitigating potential disruptions and identifying upside opportunities for the group.
Christian Herrmann, executive vice-president for marketing and sales, energy and chemicals Southern Africa, said the group was seized with the tariffs’ implications daily.
“To put this into perspective, we produce roughly three-and-half million tonnes [of products] and about a third of that is exported into global markets. Less than 10% of turnover we produce goes to the US. If we have an unmitigated event and tariffs at 30%, our risk on the portfolio and price will be roughly $90m,” Herrmann said.
“There are several ways to counter that. At the moment we have a 10% flat tariff, so there is a level playing field. Customers are at this time quite willing to at least share that additional burden. If we go to 30%, that appetite will be less,” he said.
“What we do is look at passing on [the price increases] where we have pricing power in the market. There are many avenues our teams are looking at to avoid the tariff implications … if the American market is less attractive, is there a way to now steer more to Europe or Asia?”
Sasol’s international business, which has a presence in the US, is unfazed about the tariffs.
Antje Gerber, the head of Sasol’s international chemicals business, said they were watching to see how the tariffs play out.
“But we have installed a team, which is working diligently on what possible impact [they could have] on a global basis as Sasol,” she said.
“For international chemicals, the impact will be low because we produce regionally. We may have some benefits as well from changing trade flows. If we had to at the moment pay flat 20% tariffs, this would have a minimal impact of less than 3% of our turnover.”
Sasol’s growth blueprint for the next three years has put great emphasis on growing its international business.
To this end, the group has set a target of adjusted earnings before interest, tax, depreciation and amortisation (ebitda) of $750m-$850m by the 2028 financial year. The group’s international chemicals business spans 12 countries, with a customer base of more than 4,000.
“To maximise margins over scale, International Chemicals has adopted a ‘value-driven’ approach instead of a ‘volume-driven’ approach. The asset portfolio continues to be under review to maximise value with decisions made to close or mothball four assets across Italy, Germany and the US to date,” the company said, adding that stronger cash flow would enable the business to service the dollar-denominated debt.
“These have been as a result of weak market demand, global market overcapacity or some assets not aligned to strategic priorities. Sasol’s International Chemicals business has assets geographically close to key markets and is positioned to meet the needs of multiple markets.”
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