Sasol earnings expected to be lower

SASOL’S earnings for the year ended June 30 could fall as much as 11 percent as the listed energy and chemicals group took a knock from a R16 billion depreciation charge and R1.5bn of employee share-based payment expenses, the company said on Friday. Core headline earnings per share for the year were expected to decrease by 46 cents to R4.30.

The company said earnings before interest, tax, depreciation and amortisation (Eb itda) were expected to increase by 6 percent to 16 percent.

“The difference between core headline earnings per share and Ebitda in the current year is largely due to depreciation of approximately R16bn and employee sharebased payment expenses of R1.5bn, due to the marked improvement of the Sasol share price at the end of the financial year,” Sasol said.

The group said the stronger rand had resulted in lower operating profit and earnings per share for the financial year. Sasol benefits when the rand is weaker, because most of its turnover is denominated in dollars, while its costs are mainly calculated in rands. The average exchange rate was R12.85 to the dollar, compared to R13.61 in 2017.

Susceptible

Sasol’s turnover and operating profit is susceptible to exchange rate and international oil price movements.

Sasol last year announced that it had hedged about 70 percent of its dollar exposure for the year to June 30. The hedges, with a total notional amount of $4bn (R53.52bn), had an annual average floor of R13.46 to the dollar, and an annual average cap of R15.51 per dollar.

Sasol last year estimated that a 10c strengthening in the average rand/dollar exchange rate below the average contractual floor would increase operating profit by approximately R400m in the year ended June 30. On the other hand, if the rand increased above the average contractual cap, operating profit would decrease by approximately R400m.

Sasol on Friday said the average Brent crude oil price was 28 percent higher in the year ended June 30, compared to the previous year.

“The rand per barrel oil price increased by approximately 20 percent to R818 per barrel compared to 2017, and has subsequently increased by approximately 15 to 25 percent since the end of June, 2018,” Sasol said.

Sasol said in the year ended June 30, it experienced problems relating to operational and cost performance and singled out planned and unplanned production interruptions at the Natref inland crude oil refinery in Sasolburg.

Sasol shares closed 0.77 percent up on the JSE on Friday at R502.84.