Shares in Sasol rose more than 12% after the resignation of the company’s joint chief executives, Bongani Nqwababa and Stephen Cornell, on Monday.
Nqwababa and Cornell called it quits following an external investigation into Sasol’s disastrous venture into a US chemical plant, which the company described as having “tarnished the entire company” following skyrocketing costs and delays.
The South African petrochemicals giant published its twice-delayed financial statements on Monday, which showed that the company’s adjusted earnings before interest, tax, depreciation and amortisation (ebitda) decreased 9% compared to the previous year, due to the rising operating costs associated with developing the Lake Charles Chemicals Project (LCCP).
Sasol estimates that the project will have cost between $12.6-billion and $12,9-billion on completion, compared with its February estimate of $11.6-billion to $11.8-billion.
The project was initially expected to cost $8.9-billion.
An investigation concluded that the company’s internal control over financial reporting was “ineffective” regarding its estimation of the capital costs connected to the project, “which resulted from the aggregation of a series of individual control and project-related control environment deficiencies”.
Sasol cleared both Nqwababa and Cornell of misconduct or incompetence but said that the former chief executives are stepping down to restore trust in the company.
“It is a matter of profound regret for the board that shortcomings in the execution of the LCCP have negatively impacted our overall reputation, led to a serious erosion of confidence in the leadership of the company and weakened the company financially,” Sasol said in a statement.
Fleetwood Grobler, Sasol’s executive vice-president of chemicals business, will take over the role of chief executive from November.
The investigation blamed the Lake Charles Chemicals Project’s skyrocketing costs on the project’s former management team, which the company described as having engaged in conduct that was “inappropriate, demonstrated a lack of competence and was not transparent”.
“However, on balance, the board finds that there is not sufficient evidence to conclude that these individuals acted with an intent to defraud,” Sasol said in a statement.
Other actions taken by the company following the investigation include not awarding incentives, both to chief executives and members of the group executive committee; the retraining of employees who were involved in the project, and revising the company’s procedures regarding the escalation of ethics complaints and internal investigation findings.
South Africa’s biggest chemical company, which has seen its share price drop 37.12% in 2019 so far due to a weakened financial position, has decided to shelve its final dividend in order to “to protect and strengthen [its] balance sheet”.