June 18, 2020 / 6:50 AM / 22 days ago

UPDATE 2-Sasol revamp to cut jobs, focus on core businesses

* Sasol to focus on chemicals, energy business

* Sasol exits all oil growth activities in West Africa

* June debt covenant waived, Dec covenant relaxed (Adds details, context)

By Nqobile Dludla

JOHANNESBURG, June 18 (Reuters) - Sasol Ltd plans to cut jobs and end West African oil operations as part of a business revamp, the petrochemicals producer said on Thursday, and has also agreed a deal with lenders to relax borrowing rules.

Sasol has been reviewing its business as it grapples with high debt levels, falling oil and chemical prices and lower demand due to the COVID-19 pandemic.

Its shares, which are down 54% since the start of this year, were trading flat by 0850 GMT.

The world’s top producer of motor fuel from coal, Sasol said it would refocus on chemicals and energy as it seeks to win back investors’ trust after delays at the Lake Charles Chemicals project hit profits and led to the company’s joint CEOs stepping down last October.

Sasol’s interests in West African oil include a 27.75% stake in the Etame Marin Permit offshore Gabon, operated by VAALCO Energy, and a 10% interest in a 33,000 barrel per day gas-to-liquids project in Nigeria.

Sasol said the revamp would affect its workforce, but did not say how many jobs might be lost. It is seeking consultations with trade unions in South Africa and aims to do the same in other countries.

Sasol also said lenders agreed to waive its June debt covenant due and relax the December covenant.

That test will now allow Sasol to have net debt of four times earnings before interest, tax, depreciation and amortisation (EBITDA), up from three times previously, on the condition that Sasol prioritise debt reduction.

Under the agreement with lenders, Sasol will pay no dividends and pursue no acquisitions while its leverage is above three times net debt to EBITDA.

Liquidity headroom would remain well above $1 billion, Sasol said.

Sasol will focus on gas as a key feedstock and renewables as a secondary energy source in its Southern African energy business, with an aim to reduce emissions, the company also said. (Reporting by Nqobile Dludla and Helen Reid; Editing by Clarence Fernandez/ Mark Potter/Jane Merriman)

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