Sasol half-year trading statement paints bleak picture

By Georgina Crouth

8 Feb 2023

The oil producer’s stock slipped almost 7% after the announcement but recovered in early day trade.

Sasol shareholders experienced bitter disappointment on Tuesday, after Sasol issued a bleak trading statement for the six months that ended on 31 December, but on Wednesday, the sun shone once again on SA’s producer of synthetic fuels, as it clawed back some of its lost value.

The latest profit guidance wasn’t good news, as the Sens announcement saw the stock slipping by 6.9%, which wiped more than R13-billion off its market value.

However, on Wednesday, Sasol stock was a top gainer on the JSE, climbing 3.2% by midday.

Despite benefiting from the stronger oil price, refining margins and weaker rand-dollar exchange rate, the energy producer said it had been hit by weaker global economic growth, depressed chemicals prices and higher feedstock and energy costs.

Rail, ports and power hurdles

It said it had experienced several “operational challenges”, most notably in the mining business, where coal productivity and quality have been below par, which was exacerbated by supply chain constraints related to poor rail performance, the unavailability of port infrastructure affecting sales volumes, and power outages affecting suppliers and customers.

In the trading update, Sasol said its earnings per share (EPS) are expected to be between R21.55 and R23.98, compared with the prior half-year EPS of R23.98 (a decrease of between 0% and 10%). Core headline earnings per share are expected to be between R22.97 and R25.23 compared with the prior half-year of R22.52 (an increase of between 2% and 12%).

Adjusted earnings before interest, tax, depreciation and amortisation are expected to remain flat, in line with the R31.8-billion it reported last year.

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Net impairments were R6.4-billion over this period, with the largest write-down being R8.1-billion in the Secunda liquid fuels refinery, based on macroeconomic price assumptions and input price pressures, which include higher electricity price forecasts and lower gas selling prices, and a reversal of R3.6-billion processed in 2019 against its Lake Charles project in Louisana, US.

On 1 September 2022, Reuters reported that Sasol had agreed to pay $24-million to settle a class action lawsuit brought by US investors claiming it deliberately understated the cost of its Louisiana chemical plant project. In October 2019, Sasol’s joint chief executives, Bongani Nqwababa and Stephen Cornell, were forced to resign as the company tried to repair the damage caused by the poor execution of the project.

Sasol will release its 2023 interim financial results on Tuesday, 21 February. DM/BM

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Rail, ports and power hurdles