South Africa’s Sasol delays results due to US project glitch

Updated 16 August 2019

South Africa’s Sasol delays results due to US project glitch

  • “Management and the board will assess such control weaknesses and identify whether any further remedial actions are required,” the company said
  • In May, Sasol had increased the expected cost of the US project by around $1 billion

JOHANNESBURG: Sasol Ltd. delayed the release of its annual financial results on Friday due to possible “control weaknesses” at its US 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 US 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 organization 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.


UK to purge Huawei from 5G by 2027, angering China and pleasing Trump

Updated 14 July 2020

UK to purge Huawei from 5G by 2027, angering China and pleasing Trump

  • UK to purge Huawei from 5G by 2027
  • No new 5G components to be bought from end of 2020

LONDON: Prime Minister Boris Johnson ordered Huawei equipment to be purged completely from Britain’s 5G network by 2027, risking the ire of China by signalling that the world’s biggest telecoms equipment maker is no longer welcome in the West.
The seven-year lag will please British telecoms operators such as BT, Vodafone and Three, which had feared they would be forced to spend billions of pounds to rip out Huawei equipment much faster. But it will delay the roll out of 5G.
The United States had long pushed Johnson to reverse a decision he made in January to grant Huawei a limited role in 5G. London has also been dismayed by a crackdown in Hong Kong and the perception China did not tell the whole truth over the coronavirus.
Britain’s National Security Council (NSC), chaired by Johnson, decided on Tuesday to ban the purchase 5G components from the end of this year and to order the removal of all existing Huawei gear from the 5G network by 2027.
The cyber arm of Britain’s GCHQ eavesdropping agency, the National Cyber Security Center, told ministers it could no longer guarantee the stable supply of Huawei gear after the United States imposed new sanctions on chip technology.
Telecoms companies will also be told to stop using Huawei in fixed-line fiber broadband within the next two years.
“This has not been an easy decision, but it is the right one for the UK telecoms networks, for our national security and our economy, both now and indeed in the long run,” Britain’s Digital, Culture, Media and Sport Secretary Oliver Dowden told parliament.
“By the time of the next election, we will have implemented in law, an irreversible path for the complete removal of Huawei equipment from our 5G networks.”
In what some have compared to the Cold War antagonism with the Soviet Union, the United States is worried that 5G dominance is a milestone toward Chinese technological supremacy that could define the geopolitics of the 21st century.
With faster data and increased capacity, 5G will become the nervous system of the future economy — carrying data on everything from global financial flows to critical infrastructure such as energy, defense and transport.
After Australia first recognized the destructive power of 5G if hijacked by a hostile state, the West has become steadily more worried about Huawei.
White House national security adviser Robert O’Brien is meeting representatives of France, the UK, Germany and Italy in Paris this week to discuss security, including 5G.
The West is trying to create a group of rivals to Huawei to build 5G networks. Other large-scale telecoms equipment suppliers are Sweden’s Ericsson and Finland’s Nokia .

End of ‘Golden Era’?
Hanging up on Huawei, founded by a former People’s Liberation Army engineer, marks the end of what former Prime Minister David Cameron cast as a “golden era” in ties, promoting Britain as Europe’s top destination for Chinese capital. Cameron toasted the relationship over a beer with President Xi Jinping in an English pub, which was later bought by a Chinese firm.
Trump, though, has repeatedly asked London to ban Huawei which Washington calls an agent of the Chinese Communist state — an argument that has support in Johnson’s Conservative Party.
Huawei denies it spies for China and has said the United States wants to frustrate its growth because no US company could offer the same range of technology at a competitive price.
China says banning one of its flagship global technology companies would have far-reaching ramifications.
In January, Johnson defied Trump by allowing what he called high-risk companies’ involvement in 5G, capped at 35%.