Sasol expects a fall in earnings for the six months ended December, weighed down by lower oil prices and fresh impairments, while stronger refining margins, improved operations and lower capital spending are expected to support cash flow.
In a trading statement on Thursday, the chemicals and energy group said headline earnings per share are expected to range between R8.50 and R10, down 29% to 40% from the prior period.
The weaker earnings were driven by a combination of softer commodity prices and impairments of R7.8bn before tax, up from R5.7bn in the same period last year.
Sasol said the earnings pressure was mainly driven by Brent crude oil prices dropping 17% in rand terms, and the chemicals basket falling 3% in US dollar terms, as the company remained exposed to global energy and petrochemical markets.
Adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the period is expected to come in between R19bn and R23bn, a decrease of 4% to 21% from a year ago. The group attributed the decrease to lower commodity prices, partly offset by stronger operational performance.
Sasol’s Secunda liquid fuels refinery remains fully impaired. During the period, R3bn of capitalised costs were written off in full.
The company also recorded a R3.9bn impairment on its Mozambique gas project. The company said while the total gas resource is unchanged, a slower production profile and a stronger rand led to the write-down.
The fall in headline earnings was partly offset by stronger downstream performance, with refining margins more than doubling on improved fuel differentials.
Sales volumes rose 3%, supported by better operational reliability across the group’s assets. The company said cost management also helped limit the impact of weaker commodity prices and impairments.
Despite the fall in headline earnings, Sasol said overall free cash flow generation is expected to improve year on year, mainly due to lower capital expenditure.
By 10am, the company’s share price was down 0.5% at R114.15.
Sasol will release its interim results on February 23.
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