Johannesburg - Integrated energy and chemicals company
Sasol [JSE:SOL] on Monday said the restructuring of its fertiliser business would affect 50% of Sasol Nitro employees.
This follows an announcement by the Competition Commission that Sasol Nitro, a division of Sasol Chemical Industries (SCI), had agreed to divest five of its fertiliser blending facilities located across the country with the exception of its Secunda plant as part of a settlement agreement.
Sasol Nitro and the Commission have been engaged in settlement discussions, regarding alleged contraventions of the Competition Act, pertaining to excessive pricing and exclusionary practices.
Discussions have been focused on addressing outstanding matters raised by Nutri-Flo and Profert, from the mid-2000s.
The Competition Commission said the settlement related to SCI's abuse of dominance, exclusionary conduct and price discrimination in the supply of ammonia and derivative fertiliser products.
The agreement, which finalises the abuse aspect of the fertiliser case, follows the settlement reached on the collusion part of the case in which Sasol was fined R250m.
"Sasol Nitro does not believe it engaged in excessive pricing and exclusionary practices," said Sasol in a statement.
"Sasol believes the restructuring will address the Commission's concerns regarding Sasol's position within the nitrogen based fertiliser value chain, while also opening the industry to more competition. Sasol Nitro will withdraw from certain downstream activities with increased focus on the core activities of its fertiliser business," Sasol said.
The petrochemicals giant said it would divest its regional blending capacity in Bellville, Durban, Kimberley, Potchefstroom and Endicott while retaining its full production activities in Secunda.
As part of the settlement, it has also agreed to alter Sasol Nitro's fertiliser sales approach to a Secunda ex-works model where all fertiliser retail agent contracts will be phased out and a new fertiliser sales operating model formulated.
Future market supply will come from Sasol Nitro Secunda and three distribution centres within a 100km radius of Secunda and Sasolburg.
In addition all ammonium nitrate based fertilisers will be priced on an ex-Secunda basis and Sasol will phase out ammonia imports on behalf of customers in South Africa.
"Not only will this settlement see us restructure our fertiliser business within Sasol, we believe it will open the downstream fertiliser industry to more players, encouraging competition and potentially create new distribution business opportunities, as this sector redesigns itself," said Sasol Nitro managing director Marius Brand.
The agreement will be a full and final settlement of the alleged contraventions of excessive pricing and exclusionary practices, which are the subject of the Nutri-Flo and Profert referrals, but requires confirmation by the Tribunal.
This agreement is scheduled to be considered by the Competition Tribunal on July 14.
"The proposed settlement together with the changes to the Sasol Nitro business will not have a material adverse impact on the Sasol Group," Sasol said.
Shares in Sasol closed 55 cents lower at R276.20 on Monday.
- I-Net Bridge