Sasol declares ‘force majeure’ on export of chemicals
SASOL yesterday said it has declared a on the export of some chemicals products due to the impact of heavy rainfall and floods.
KwaZulu-Natal was recently hit by devastating floods.
Sasol, the producer of fuel products and chemicals from coal, which released its production and sales metrics for the nine months ended March, said the impact of the floods might affect its fourth-quarter volume outlook.
Sasolburg volumes were 11 percent lower than the previous period, resulting from coal supply issues. Liquid fuels sales were 5 percent higher due to a recovery in fuel demand.
Chemicals sales volumes from Sasol’s South African assets were 10 percent lower, but this was offset by higher prices, resulting in a 16 percent increase in sales revenue.
“At this stage, only production rates at certain plants in Sasolburg have been impacted due to the damage on the Sasolburg-Durban railway infrastructure,” it said.
The impact of the disruption could not be quantified at this stage.
Sales volumes from the group’s American and European chemicals assets were also lower, but revenues were 60 percent and 31 percent higher, respectively. Sasol said it made significant progress in deleveraging its balance sheet through a combination of asset divestment, operational actions and now more supportive pricing.
“Despite this improvement, leverage remained above target levels at December 31, 2021, along with ongoing volatility and unprecedented uncertainty about the macro outlook,” the company said.
On oil hedging, Sasol said its hedging programme had been kept in place to mitigate downside pricing risks and ensure that Sasol can execute its strategy with confidence.
“Given Sasol’s improved financial position, the oil hedge cover ratio for the financial year 2023 was reduced to 40 percent compared to the 69 percent in the financial year 2022.
“This includes 80 percent of total Synfuels synthetic crude oil production and 90 percent of Sasol’s share of Oryx production,” the group said.
On the back of the recent increase in oil prices as a result of the Russia/ Ukraine conflict, Sasol had progressed the implementation of the financial year 2023 hedging strategy and had now executed 85 percent of the oil hedging mandate.
The company said the hedge cover ratios were expected to decrease further.
Umthombo equity analyst Matthew Zunckel said the production update was in line with expectations.
“I think this in a sense is a relief as the past few production updates the company has released have been poor and management had repeatedly downgraded guidance.
“Importantly, the mining performance seems to be stabilising, which is crucial as Sasol needs to maintain adequate feedstock levels for its plants.
“Also pleasing is that the company continues to benefit from high oil and chemical prices.
THE RAND continued a two-week slide yesterday, falling 2.27 percent to the dollar, while JSE prices slumped more than 3 percent, after global investors sought safer havens amid uncertainty about the global growth outlook and lockdowns in China, while the dollar soared.
By 5pm the rand was bid at R15.75 against the dollar, 17 cents lower than at the same time the previous day. The all share index ended the day 3.48 percent lower at 69 750.67 points, while the Top40 index slid 3.81 percent to 62 895.89 points.
The rand had already lost 7 percent over the past two weeks. Perceptions of aggressive interest rate hiking in the US due to rising US inflation – it increased by 60 basis points in March to 8.5 percent, the highest since December 1988 – lower than expected global growth, weakening commodity prices and worsening Covid-19 cases in China have all created negative sentiment around emerging market currencies, analysts said.
Meanwhile locally, the rand has been impacted by concerns about the South African economy, severe power cuts by Eskom, and devastating floods that have caused more than R10 billion of damage to infrastructure in KwaZulu-Natal.
Investec chief economist Annabel Bishop said the negative impact to South Africa’s trade balance over April from the floods in KwaZulu-Natal, and disruptions to exports, would have had a “particularly negative effect” on the domestic currency, along with lower commodity prices. The large trade surplus had previously been a key rand support. Both the World Bank and International Monetary Fund had cut global growth forecasts by close to 1 percent year-on-year, she said.
Vestact Asset Management CEO Paul Theron said local stocks fell as part of an “overflow” of factors that drove investment sentiment lower on the JSE last week.
These factors included perceptions of aggressive rate cutting by the US Federal Reserve, concerns about the expanding Covid-19 pandemic in China, and slipping prices for commodities such as gold and oil.
Theron, however, advised investors to “keep calm” through the market turmoil, and said he believed that perceptions of aggressive interest rate increases in the US were “not well supported”.
Reuters reported that other emerging market currencies have also come under pressure. The bearish sentiment extended to other emerging market equities, with, for example, China stocks touching 23-month lows yesterday.
The MSCI’s index for emerging market stocks fell 2.4 percent lower in its worst one-day percentage fall since mid-March