Johannesburg - Sasol will pay the European Commission R3.7bn fine for cartel behaviour within three months but this will not affect its growth projects, said CEO Pat Davies, who added the company at this point intends appealing the fine.
Sasol was fined €318m by the EC for its role in a cartel in paraffin wax in Europe, in which nine firms were fined a a total of €676m for fixing prices and dividing up the market between themselves.
Sasol stands accused of leading the cartel - the EC's reason for the hefty fine, but it's something Davies denies, saying Sasol's business in Germany was merely the largest supplier of paraffin wax.
The commission was forthright in its condemnation of the behaviour of those in the cartel that operated from 1992 to 2005.
"There is probably not a household or company in Europe that has not bought products affected by this 'paraffin mafia' cartel, with all that implies in terms of paying over the odds, higher costs and economic damage," Competition Commissioner Neelie Kroes said in a statement.
Sasol, which is best known for converting coal into liquid fuel, made no provision for the fine because it didn't know how big the penalty would be, Davies said.
"We certainly did not anticipate the magnitude of the fine because we are not the legacy owners of this business," Davies told a media briefing in Johannesburg.
"As we see things now though, it is our intention to appeal," he said.
Sasol has yet to see a detailed document from the Commission on how it came to its decision and set the level of fine, which was initially 50% higher because of its leading role in the cartel, but then reduced by that amount because Sasol cooperated in the investigation.
"We admit there was a cartel and that some of our employees were involved in that cartel. Clearly we can't appeal against that fact," Davies said.
"The grounds of the appeal will be shaped by the detailed information we get from the commission. Clearly the magnitude of the fine is one of the things we want to understand. If we find we have no grounds of appeal to take on the fine then we won't appeal."
The funding of the fine could come from internally generated cash and other means, but Davies was not clear on this point.
Investors would understandably be concerned that the pipeline of projects Sasol has, including a proposed 80 000 barrels of fuel per day coal conversion plant in South Africa, might be put on hold because of the fine, which Sasol is obliged to pay within three months and then appeal if it wishes.
Sasol's debt to equity ratio is now 20% but it has an internal target of 30-50%. "Clearly we have substantial strength in our balance sheet to still fund projects and remain within our gearing range without going through other financing means. We don't foresee this will delay any of our projects," Davies said.
The decision by the Commission can form the basis of civil cases brought against those found guilty of operating within the cartel. So far, Sasol has received no approaches from clients that they will pursue legal action, Davies said.
"It's too early to tell. Our view is that this was an ineffective cartel. We don't believe there is scope for damages claims against us, but that won't stop customers approaching if they so desire."
- Miningmx.com
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