Chemicals and energy group Sasol says progress in its cost-control efforts result in a “strong set of results” in its half year to end-December, with operating profits only expected to decline as much as 10%, even as it was battered by hurricanes and a slump in the price of oil.

In a trading update on Friday Sasol said its adjusted earnings before interest, tax, depreciation and amortisation (ebtida) is expected to be in a range of R17.9bn-R19.8bn to end-December, either flat, or a decline of up to 10%.

Ebitda is a measure of operational profitability, with Sasol citing pressure from a 23% decrease in the rand per barrel price of Brent crude oil, coupled with lower sales volumes due to softer demand attributable to Covid-19 lockdowns, as well as the effects from hurricanes.

The group has recently been on a drive to save cash, including through asset sales, as it tries to avoid tapping shareholders after severe cost-overruns at its Lake Charles project in the US. In June, it said it was in talks with its workforce over job cuts.

The costs of the Lake Charles project has ballooned from an original estimate of $8.1bn for the ethane cracker and $800m more in infrastructure improvements in 2014, with the project ultimately costing the jobs of joint CEOs and presidents Stephen Cornell and Bongani Nqwababa.

The cost overruns were caused by the swampy terrain on which the 890ha plant is built, the location in a hurricane belt and technical issues. 

Sasol had total debt of R189.7bn in its year to end-June, which compares unfavourably with its market capitalisation of R95bn on Friday morning.

It has since announced the sale of part of Lake Charles for about R33bn, as well as other assets, including its air-separation units at Secunda.

Sasol is set to release its results on February 22.

In morning trade on Friday Sasol’s share had jumped 10.02% to R166.66, on track for its best day in more than two weeks, having fallen by just more than a third over the past 12 months.

Update: January 29 2020

This article has been updated with share price information.


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