Picture: BLOOMBERG / WALDO SWIEGERS
Picture: BLOOMBERG / WALDO SWIEGERS

Sasol reduced its production guidance for its Secunda coal-to-oil plant because maintenance was taking longer than expected, it said in its September quarter update on Thursday.

However, thanks to improved performance at its Natref refinery, Sasol said it was still on track to achieve its sales target of about 58-million barrels of fuel in its 2019 financial year, which ends in June.

In its 2018 financial results, Sasol reported that Secunda’s synfuel production fell 3% to 7.6-million tons.  

Trade union Solidarity maintains strike action at the plant had a direct effect in causing the drop in production due to delays, saying its members are  gearing up to increase pressure on the petrochemical producer.

The decline in shareholder confidence and production would eventually exceed the costs of including white workers in the group's employee share ownership plan, said Solidarity CE Dirk Hermann.

Sasol, however, denied that industrial action was at the root of the delay, saying this was due to technical issues with the steam-line project and not related to the planned shutdown.

“The planned full shutdown at our Sasol Secunda Operations (SSO) West factory was longer than estimated, mainly due to technical issues with the Steam Header 2 project and challenges with startup, which further delayed the commissioning date,” the chemicals group said.

Sasol said it had lowered expectations that Secunda would pick up production in the financial year under way, now expecting it to only match the prior year's 7.6-million tons. 

The group's gas joint-venture in Mozambique is expected to meet its target of between 114-billion and 118-billion standard cubic feet for its 2019 financial year.

"Mining will achieve the targeted production levels of 40-million tonnes for the full year. At our Mozambican upstream operations, we delivered a robust production performance, in line with expectations."

Sasol said it benefited from higher Brent crude oil and product prices during the quarter and a weaker average rand exchange rate against major currencies.

The company’s share price was given a fillip this year by rising oil prices, with Brent crude reaching a four-year high earlier in October, as a result of increasing tensions in the Middle East.

The US is gearing up to impose further sanctions against Iranian oil in November, but oil prices subsided this week amid reports from the US showing rising production.

Data showing rising inventory levels in the US, as well as fear  about rising trade tension, had taken the appetite out of the trade for oil, which was bracing for further negative headlines, said Oanda analyst Stephen Innes. “It’s incredible how quickly prices can plummet when everyone’s running for the same door,” he said in a note.

Sasol’s share price was 1.9% lower at the close at R509.90 but up 19.09% so far in 2018.

Shortly after the JSE closed, Brent oil was 1.05% lower at $79.43 a barrel.

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