Sasol confident of a boost in its financial performance

SASOL said yesterday that it expected higher crude oil and product prices, as well as increased demand for speciality chemical products, to boost its financial performance in the six months to December.

In a trading statement yesterday, Sasol said that since last December the price of crude oil had moved closer to $70 (R845) per barrel. It said, if sustained at current levels, the oil price would boost the group’s performance in the second half of the financial year. Brent crude futures were up 0.41 percent at $69.31 a barrel yesterday afternoon.

Sasol has previously said that it was profitable and could generate free cash flows at oil prices of $40 per barrel.

Sasol’s headline earnings a share for the six months are expected to rise by between 12 percent and 17 percent, approximating R1.81 to R2.57 a share, compared with the 2017 financial half-year headline earnings a share of R15.12.

Sasol said poor economic conditions in South Africa stifled the demand for its products. It said other factors that constrained its performance in the six months were a less-than-satisfactory operational performance at its Natref refinery operations, a much stronger closing rand/dollar exchange rate, and the negative impact of remeasurement and once-off item charges.

Sasol also reported a net remeasurement items expense of R6.37 billion. The remeasurement items included an impairment of its US gas-to-liquids (GTL) project amounting to R1.1bn and a partial impairment of Canadian shale gas assets of R2.8bn, “driven mainly by the depressed gas market outlook”.

In November last year, Sasol unveiled a strategy to drive future growth. The group announced that it would not invest in further greenfields GTL projects. As such, it said it would no longer pursue its proposed GTL project in the US.

Sasol said its refining margins rose 16percent to $9.73 a barrel.

“We have also seen a steady increase in most commodity chemical prices. Despite the volatile macro-economic environment, average margins for most of our specialty chemicals products increased over the first six months ended December 2017,” Sasol said.

Sasol said, in the six months, production volumes from Secunda synfuels operations decreased by 1 percent due to a planned shutdown. But it said the Secunda synfuels production trend was in line with the company’s 2018 production targets.

On the other hand, plant shutdowns and an unexpected Eskom electricity supply interruption were behind a 21 percent drop in Natref’s production volumes in the six months. “This, together with softer market demand, lowered our liquid fuels sales volumes by 3 percent,” Sasol said.

It said that as at December 31 last year, capital expenditure at Lake Charles Chemical Project in the US was $8.8bn and the overall project completion was 81 percent. The company said the forecasted costs of the project were within the market guidance of $11.13bn.

Sasol shares closed 0.4 percent lower at R437.50 on the JSE yesterday.