Strong rand, low oil price hit Sasol profits

SASOL expects its profits for the year ended June to fall 11 to 21 percent.

The listed chemicals and energy company said yesterday in a trading update that this decline was despite the facts that its Secunda Synfuels operations reporting record volumes and its Eurasian business was delivering its highest production volumes since 2015.

Headline earnings per share (heps) were projected to fall between R4.55 and R8.69 a share, down from the previous year’s R41.4.

The company said its bottom line was hurt by a stronger rand and one-off items. The rand strengthened 11 percent against the greenback in the year under review. Headline earnings are the main profit, which strips out certain oneoff items.

The company said its profits would also be hurt by the strike at its Secunda mining business, which cost the group about R1 billion.

The group said its earnings per share for the financial year under review were expected to increase 48 to 58 percent.

The markets, however, cheered Sasol’s trading update despite the expected decline in profits when its stock surged on the day. The shares closed 4.21 percent higher on the JSE at R387.58.

The company said in a statement that the group had delivered a strong business performance. Most of its value chain, especially Secunda Synfuels and Eurasian Operations, had outperformed in the period.

“However, continued volatility in the macro-economic environment, particularly the stronger rand and low oil price, had adversely impacted our financial performance, excluding the effect of our hedging programme,” said the company.

The group’s Secunda Synfuels unit increased production volumes to a record 7.83 million tons in the period under review, while its Eurasian operations increased production volumes 6 percent, buoyed by stronger product demand in the period.

However, the company said that plant shutdown during the first half of the year contributed to a 3 percent decrease in production volumes and the plant incident on May 22, which resulted in unintended downtime, led to a 2 percent reduction in production volumes at its Natref production.