Lower sales volumes and a decline in the average rand per barrel price of Brent crude are among the factors weighing on earnings
05 February 2025 - 07:56
by Jacqueline Mackenzie
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sasol's headquarters in Sandton, Johannesburg. Picture: FINANCIAL MAIL/FREDDY MAVUNDA
Sasol’s headline earnings are expected to fall as much as a third at the halfway stage due to lower sales volumes, a decline in the average rand per barrel price of Brent crude and a decrease in refining margins and fuel price differentials.
The group said in a statement on Wednesday that headline earnings per share (HEPS) for the six months to end-December are expected to be between R13 and R15 compared with R20.37 a year ago, representing a decrease of 26%-36%.
Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) is expected to be between R22bn and R25bn compared with the previous half year adjusted ebitda of R28bn — or 11%-22% lower.
Earnings per share (EPS) are expected to fall 47%-61% to R6-R8.
The decrease in earnings was primarily due to a 13% decline in the average rand per barrel price of Brent crude oil and a “significant” decline in refining margins and fuel price differentials, it said.
There was also a 5% decline in sales volumes associated with lower production and lower market demand.
Notable non-cash adjustments before tax included a net loss of R6.2bn from remeasurement items compared to a net loss of R5.8bn in the prior half year, mainly due to the Secunda and Sasolburg liquid fuels refinery cash generating units remaining fully impaired. The full amount of costs capitalised during the current period of R5.6bn were impaired, it said.
Sasol also recorded unrealised losses of R0.1bn on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts compared to unrealised gains of R2.7bn in the prior half year.
“These negative financial impacts were partially offset by an increase in average chemicals basket prices, stringent cost management and efficient capital expenditure,” it said.
“Sasol remains focused on improving the performance of the business,” it said.
The group will release its interim financial results on February 24.
In January, the group revised downwards the volume guidance for its Secunda and Natref operations due tooperational challenges in the six months to end-December.
The operational problems included coal quality issues at the Secunda business, civil unrest in Mozambique and a fire at the Natref refinery.
The energy and chemicals group said its Secunda operationsexperienced problemsrelated tocoal quality complications, which affected gasifier and equipment availability.
In Mozambique, civil unrest affected the central processing facility, reducing production rates in December. The company said the situation had improved and the unit wasoperating at full capacity, albeit with heightened near-term risk still prevalent.
A fire occurred at the Natref refinery on January 4, causing damage to supporting piping and infrastructure around the crude distillation unit. The company said repairs were expected to be completed before the end of February, and plans were being implemented to address supply shortfalls.
Despite these operational challenges, Sasol’s international chemicals revenue improved compared to the first half of 2024. However, the company’s overall business environment remains challenging, with sales volumes negatively affected by the East Cracker outage in the US. The unit started up successfully in November.
Sasol’s market guidance for mining and gas remains unchanged.
Sales volumes for fuels and chemicals in Africa are expected to be largely in line with the financial year 2024 guidance.
Sasol has revised production volume guidance upward for its gas-to-liquids plant,Oryx, while sales volume guidance for international chemicals has been adjusted downward, driven by weaker-than-expected demand and unplanned operational outages.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sasol’s first-half HEPS expected to fall
Lower sales volumes and a decline in the average rand per barrel price of Brent crude are among the factors weighing on earnings
Sasol’s headline earnings are expected to fall as much as a third at the halfway stage due to lower sales volumes, a decline in the average rand per barrel price of Brent crude and a decrease in refining margins and fuel price differentials.
The group said in a statement on Wednesday that headline earnings per share (HEPS) for the six months to end-December are expected to be between R13 and R15 compared with R20.37 a year ago, representing a decrease of 26%-36%.
Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) is expected to be between R22bn and R25bn compared with the previous half year adjusted ebitda of R28bn — or 11%-22% lower.
Earnings per share (EPS) are expected to fall 47%-61% to R6-R8.
The decrease in earnings was primarily due to a 13% decline in the average rand per barrel price of Brent crude oil and a “significant” decline in refining margins and fuel price differentials, it said.
There was also a 5% decline in sales volumes associated with lower production and lower market demand.
Notable non-cash adjustments before tax included a net loss of R6.2bn from remeasurement items compared to a net loss of R5.8bn in the prior half year, mainly due to the Secunda and Sasolburg liquid fuels refinery cash generating units remaining fully impaired. The full amount of costs capitalised during the current period of R5.6bn were impaired, it said.
Sasol also recorded unrealised losses of R0.1bn on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts compared to unrealised gains of R2.7bn in the prior half year.
“These negative financial impacts were partially offset by an increase in average chemicals basket prices, stringent cost management and efficient capital expenditure,” it said.
“Sasol remains focused on improving the performance of the business,” it said.
The group will release its interim financial results on February 24.
In January, the group revised downwards the volume guidance for its Secunda and Natref operations due to operational challenges in the six months to end-December.
The operational problems included coal quality issues at the Secunda business, civil unrest in Mozambique and a fire at the Natref refinery.
The energy and chemicals group said its Secunda operations experienced problems related to coal quality complications, which affected gasifier and equipment availability.
In Mozambique, civil unrest affected the central processing facility, reducing production rates in December. The company said the situation had improved and the unit was operating at full capacity, albeit with heightened near-term risk still prevalent.
A fire occurred at the Natref refinery on January 4, causing damage to supporting piping and infrastructure around the crude distillation unit. The company said repairs were expected to be completed before the end of February, and plans were being implemented to address supply shortfalls.
Despite these operational challenges, Sasol’s international chemicals revenue improved compared to the first half of 2024. However, the company’s overall business environment remains challenging, with sales volumes negatively affected by the East Cracker outage in the US. The unit started up successfully in November.
Sasol’s market guidance for mining and gas remains unchanged.
Sales volumes for fuels and chemicals in Africa are expected to be largely in line with the financial year 2024 guidance.
Sasol has revised production volume guidance upward for its gas-to-liquids plant, Oryx, while sales volume guidance for international chemicals has been adjusted downward, driven by weaker-than-expected demand and unplanned operational outages.
With Kabelo Khumalo and Lindiwe Tsobo
mackenziej@arena.africa
Sasol, Anglo and De Beers team up on renewables
Sasol revises down Secunda and Natref guidance over operational issues
UK study finds Sasol well placed to drive SA’s green hydrogen sector
Activists fume as Sasol says it will ‘relook’ emission targets
Companies in this Story
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.