Spoilers to Sasol’s strong results
• Strong performances reported at most business units in half-year to December, oil and chemicals giant says
A stronger rand, labour disruption in its mining division and distortions from prior year comparisons will partly offset a fundamentally strong performance from most of oil and chemicals giant Sasol’s business units in the six months to December.
Rand strengthening, labour disruption in its mining division and distortions from prior-year comparisons will partly offset a fundamentally strong performance from most oil and chemicals giant Sasol’s business units in the six months to December.
Sasol has global synthetic fuel and chemicals operations. It is also SA’s only producer of liquid fuels, extracted from coal.
It said on Thursday that its interim headline earnings a share would fall 34%-44% against the same period in 2016, while basic earnings a share would rise 12%-22%. Sasol’s shares fell 3.7% to R406.56 after the news, while Brent crude oil was trading 0.94% firmer at $55.82 a barrel and the rand was 0.9% weaker at R13.35 a dollar.
Brent crude, which touched a recent low point of $29.25 a barrel a year ago, has since almost doubled after an agreement among the world’s major producers late in 2016 to cut back production and a gradual improvement in global demand.
Sasol said the rand/dollar exchange rate at the end of December had firmed to R13.74, from R14.71 at end-June, resulting in a R1.3bn reduction in the value of foreign assets on the balance sheet. In the same period in 2016, there was a translation gain of R2.6bn.
R1bn more was lost from labour disruption at Sasol’s coal mines, which reduced its coal output by 16%. It incurred additional costs in securing supply for Secunda Synfuels. Sasol also reported a R2.3bn gain in the first half of its previous financial year on the reversal of a provision at Escravos GTL.
Sasol’s other business units performed strongly, it said.
It produced 1% more synfuels at Secunda and 8% more synfuels in its Eurasian operations, although volumes at the Natref refinery fell 7%, mainly because of a planned shutdown.
Normalised volumes in base chemicals rose 11% and in performance chemicals by 2% because of higher demand, better margins and improved plant stability. It sold 2% less synfuels because of the Natref shutdown and to divert some product to the higher-margin chemicals business, but it has not changed its guidance of 61-million barrels for the full financial year.
Sasol said its normalised fixed costs were trending well within the rate of inflation.
Its Lake Charles chemicals complex under construction in the US was making steady progress and was 64% complete, in line with overall project milestones, it said.
Sasol’s remarks that it has seen steady and continued recovery in global oil and product prices follow the release of the annual BP Energy Outlook on Wednesday.
BP, which analyses mediumterm rather than short-term trends, said while global energy demand was likely to rise by about 30% by 2035 and oil and gas would remain the primary sources of energy, gas demand would outpace oil.
Energy demand growth would lag global economic expansion because of increasing energy efficiencies, but it would be fastest in Africa.
BP forecast demand for oil would rise 0.7% a year to 2035, mainly from the transport sector, but by the 2030s the main use for oil would be in petrochemicals, to make products such as plastics and fabrics.