South Africa’s Sasol half-year earnings fall 74% as U.S. project weighs

South African petrochemicals group Sasol reported on Monday a 74% drop in interim profit, weighed down by problems at its Lake Charles Chemicals project (LCCP) in the United States and softer chemical and Brent crude oil prices.

Difficulties at the Lake Charles project, which is costing billions of dollars more than initial estimates, have led to the resignation of the company’s joint chief executives late last year.

“The financial results were impacted mostly by a weak macroeconomic environment, which resulted in lower margins, and the LCCP being in a ramp-up phase,” Sasol said.

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Headline earnings per share, the main profit measure, for the six months ended Dec. 31 fell to 5.94 rand ($0.40) from 23.25 rand a year earlier.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) fell 27% to 19.6 billion rand.

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LCCP hurt EBITDA by 1.1 billion rand, and the plant resulted in 1.7 billion rand in depreciation charges.

Sasol said revenue from the Louisiana plant, which converts natural gas into plastics ingredient ethylene, did not yet match its project costs. However, the company expects the facility to generate positive EBITDA in the second half of the year.

The company said LCCP’s overall project completion was at 99% at the end of December. Investigations into a fire at one of the units at the LCCP plant in January revealed that a piping support structure within the emergency vent system failed during commissioning, causing a pipe to dislodge.

Sasol, the world’s top manufacturer of motor fuel from coal, said no major equipment was damaged, and the incident was isolated but beneficial operation of the unit would be delayed to the second half of 2020.

The overall cost estimate for LCCP is tracking $12.8 billion, within its previous guidance of $12.6 billion to $12.9 billion.

The LCCP was expected to cost $8.9 billion in a 2014 forecast.

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