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Pretoria - JSE-listed petrochemicals giant Sasol's black economic empowerment (BEE) share scheme, Inzalo, has made a loss for the six months to end-December 2008.
Shareholders' equity of R371m, a present from Sasol with which the scheme was started, has evaporated.
The empowerment company's first published financial statements show an equity deficit of R1bn.
This is not a good start for what was last year hailed as SA's largest empowerment transaction to date.
Inzalo suffered a comprehensive loss of R1.4bn. The operating loss - that is, the difference between finance expenses and income for the period - was R191m.
The fall in Sasol's share price from R366 to R280.02 at the end of December 2008 resulted in a provision of R1.2bn. After providing for deferred tax, the comprehensive loss for the period amounted to R1.4bn.
Fortunately Inzalo does not have major refinancing problems over the short term. The unsecured D preference shares, with issue value of R1 410, are held by Sasol.
The first repayment on its secured A preference shares are only due in October 2011.
Sasol will eventually have to write down the R1.4bn in D preference shares if there is no improvement in its profitability, or an increase of its share price to R366 or more.
The lesson: never buy shares with borrowed money, even in a popular company like Sasol and even more so for a BEE transaction.
- Fin24.com