August 16, 2019 / 8:01 AM / 9 days ago

UPDATE 2-South Africa's Sasol delays results due to U.S. project glitch

* Sasol delays 2019 annual results

* Identifies possible “control weaknesses” at U.S. project

* Shares fall to more than 10 year low (Adds Sasol comment, updates share price)

By Tanisha Heiberg

JOHANNESBURG, Aug 16 (Reuters) - Sasol Ltd delayed the release of its annual financial results on Friday due to possible “control weaknesses” at its U.S. ethane cracker project, sending shares in the chemicals and energy company down by more than 15%.

Sasol said its auditors would need to consider an independent report the board had commissioned into its Lake Charles Chemicals Project (LCCP) and therefore expected to announce fiscal 2019 results on Sept. 19 instead of Aug. 19.

“Management and the board will assess such control weaknesses and identify whether any further remedial actions are required,” the company said, without providing further details.

In May, Sasol had increased the expected cost of the U.S. project by around $1 billion following a review by new management that revealed oversights such as duplicate credits and overlooked contracts, adjustments for potential insurance claims, procurement back-charges and remaining work and repairs.

Sasol spokesman Alex Anderson said the group’s financial controls were sound and it had no concerns about its financial reporting.

“This is a situation where a relatively small team, the LCCP project management team, although working very hard, did not have adequate segregation of duties and failed to engage the wider financial organisation to verify the accuracy of their forecast,” Anderson said referring to the cost forecast for the project.

The company said it had implemented initiatives to improve decision making, transparency and documentation within the project management team.

It has also segregated duties between project controls and finance functions and assigned a senior vice president who is responsible for the project’s controls.

The company said it still expected cost guidance for LCCP to between $12.6 billion and $12.9 billion but that it now expected full production at the project to be delayed to around Aug. 26 from the previous guidance of the end of July after a technical challenge relating to a large heat exchanger.

The project in Louisiana, which will convert natural gas into plastics ingredient ethylene, was initially expected to cost $8.9 billion in 2014 and has seen delays and cost increases.

Sasol, which is delaying its results for the first time, said it expected guidance given in July - for a rise in annual core headline earnings per share of between 1% and 11% - to remain the same.

Headline earnings is the main profit measure used in South Africa that strips out certain one-off items.

Shares in Sasol, the world’s biggest maker of motor fuel from coal, were down 4.23% to 266.38 rand at 1444 GMT, after trading as low as 233.93 rand, their lowest since November 2008.

Reporting by Tanisha Heiberg; Editing by Mark Potter and Jane Merriman

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