Sasol improves coal quality as earnings slump

Petrochemicals giant Sasol is focused on improving coal quality at its Secunda operations after profits slumped on lower sales during the six months ending in December 2024.

Sasol, which beneficiates coal into fuels and chemicals, said it had begun repurposing its Twisdraai export plant to a destoning operation this month which would cost under R1bn and address poor coal quality at its Secunda operations.

The project is expected to become operational in the first half of 2026. Speaking during the group's results presentation, executive vice-president for operations projects and Victor Bester said the group decided on a destoning project after exploring various options to improve the coal quality to Secunda. 

“We considered a green field destoning project, which would have cost us a significant amount. Through our engineering efforts we landed on a solution which is elegant in terms of capital costs,” he said.

Bester said the technology used for the repurposing of Twisdraai export plant would help to reduce the sinks content Mpumelelo and Bosjesspruit collieries.

Speaking to Business Times, CFO Walt Bruns said with the destoning project Secunda's output would take time to return to historic levels.

“We are not guiding we will return straight away to between 7.4-million tonnes to 7.6-million tonnes. We will use the next 18 months to address issues and to manage expectations, I don't want to overpromise and under deliver,” he said.

“Secunda is a significant free cash flow generator. The Secunda machine, if it is running well and consuming good quality low-cost coal, can still produce products people want.”

In terms of financials for the six months ended December 2024, Sasol said it was hit by a challenging macroeconomic and operating environment. The group's basic earnings per share fell to R7.22 per share, 52% lower than the previous period and headline earnings per share fell 31% to R14.13 per share driven by lower sales volumes and lower rand oil prices.

Sasol parked the dividend in the period under review after the net debt breached $4.3bn in the six months ended December 2024, higher than the “net debt trigger”.

The group on Monday reported a 10% decline in revenue of R122.1bn as the rand per Brent crude oil price fell 13% and sales volumes fell 5% as a result of lower production and lower market demand.

Bruns said Sasol was selectively working through its portfolio of assets not only international chemicals but also in Southern Africa. “We look at it through a lens: can we fix it? Can we improve the free cash flow of that asset? If not, can we sell it? Is someone else a better owner or they see more value in the asset than we do? It is the last resort.”

He said Sasol chose to mothball rather than close the three assets.

“The cost require to close the asset is significantly higher than mothballing and the market demand for chemicals is low at the moment. If the demand picks up and we see it makes sense to run that asset again we can do that. We would rather run one plant at 100% capacity utilisation than two plants at 50%.”

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