Sasol’s share price slid 6% as the market digested a mixed set of half-year results to December 3, 2022, as its CEO Fleetwood Grobler detailed several challenges facing the firm, including a disrupted supply chains and higher feedstock and energy cost
By 5pm the share price was 4.41% lower at R282. Earlier it fell to an intraday low of R276.20.
Despite this, Sasol declared an interim cash dividend of R7 per share, compared to nil cents in 2021 and reported a 100% increase in its headline earning per share to R30.90, compared to R15.21 in the previous period.
Grobler said: “We navigated several challenges during the period, including safety and operational stoppages at our mining operations, power supply interruptions which also impacted our suppliers and customers, weaker global economic growth, disrupted supply chains and higher feedstock and energy costs. The last two factors had a particularly severe impact on the profitability of the Chemicals Eurasia and Chemicals America segments.“
“We delivered a mixed financial result for the first six months of 2023, supported by higher oil prices and benefits from our continued cost and capital discipline, with operational difficulties in our mining and synfuels operations.”
Grobler said Sasol’s international operations were impacted mainly by challenging market conditions, and it continues to work closely with its customers to mitigate these impacts.
“I am excited about the progress we have made towards achieving our 30% greenhouse gas emission reduction target. We have concluded power purchase agreements (PPAs) for the purchase of a significant quantity of renewable energy in South Africa totalling approximately 550 MW,” Grobler said.
Earnings before interest and tax (Ebit) of R24.2 billion was in line with the prior reporting period, mainly due to a strong pricing environment, which was offset by lower volumes and increasing input cost pressures, with declining demand for chemicals globally.
“Earnings benefited from gains of R5.1bn on the valuation of financial instruments and derivative contracts offset by remeasurement items of R6.4bn,” the group said.
The average rand per barrel price of Brent crude oil increased by 43% and the average chemical sales basket price rose by 3%.
Chemicals business continued to face challenging market conditions as well as production and supply chain constraints in South Africa, which impacted its ability to produce and transport products to customers.
Looking ahead, Sasol said it expected during the second half of 2023 to have mining productivity of 900 – 1 000 tons per continuous miner per shift - lower than previously forecast.
According to the group, the impact of the global weaker economic growth, disrupted supply chains, depressed chemical prices and the resultant higher input costs impacted its chemicals business negatively.
“Performance of our South African value chain was muted given the scheduled total East factory shutdown at Secunda and operational variability experienced, mainly due to lower productivity and coal quality in our mining operations, contributing to lower volumes for the six months,” it said.
Sasol said it made good progress with stabilising its operations in recent weeks, but a key priority remains the improvement of productivity and coal quality in its mining operations through the implementation of its full potential programme (Fulco).
Meanwhile, Air Liquide and Sasol announced that they signed two Power Purchase Agreements with TotalEnergies and its partner Mulilo for the long-term supply of a total capacity of 260 MW of renewable power to Sasol’s Secunda site, in South Africa, where Air Liquide operates the biggest oxygen production site in the world.
“This is the second set of PPAs signed by Air Liquide and Sasol after the PPAs announced in January with Enel Green Power for a capacity of 220 MW.
“Together, these PPAs represent a total of 480 MW of the joint commitment by Air Liquide and Sasol to pursue the procurement of a total capacity of 900 MW of renewable energy. These will significantly contribute to the decarbonisation of the Secunda site,” the groups said.
BUSINESS REPORT