Sasol’s share price falls hard after it reports operational challenges
SASOL’S share price closed 4.72% lower on the JSE yesterday at R285.05 after it reported production issues that have forced it to revise downwards its guidance for local production of fuels and chemicals operations.
It nevertheless forecast a more than 20% increase in headline earnings per share (Heps) for the six months to December 31.
In explaining the higher earnings, the group said in a trading statement: “We continue to see the favourable impact of the higher Brent crude oil price, refining margins and weaker rand/US dollar exchange rate on gross margins.
“These benefits were partly offset by the downturn in chemical sales prices and higher chemical feedstock prices in our international operations.”
An internet search, however, shows the oil price has fallen steadily since July with, for instance, the benchmark Brent crude oil price trading at $87.84 (R1 494) per barrel yesterday, from $123.58 on July 8, 2022.
Sasol said it experienced several operational challenges in October and last month in its Secunda coal value chain.
“These factors have negatively impacted production and sales volume performance in quarter two of the 2023 financial year, as well as the outlook for the remainder of the financial year.”
Coal quality, proactive safety and operational stoppages in mining, under-performance of the contracted Isibonelo coal supply and other suppliers whose production was impacted by load shedding and higher rainfall, and a rainfall-related incident in November that resulted in a factory outage for several days, were among the production issues mentioned.
There were also unplanned outages on reforming units in the restart of the plant, and the group was now faced with prolonged downtime on two of 17 reformers, which were expected to be back online before the end of the 2023 financial year.
The challenges with coal quality impacted gasifier availability, and despite action to improve equipment availability, a further deterioration of coal quality during October and November 2022 had impacted production.
Lower production from Secunda also had a direct impact on the downstream chemicals value chains in South Africa.
Sasol’s force majeure on the local supply and export of certain chemicals was largely lifted at the start of November 2022, with the end of the Transnet strike, but a shortage of rail cars resulted in the declaration of a force majeure on the local supply of ammonia again in November 2022.
Positive results had been received from infill well drilling in Mozambique. “We exceeded our internal volume plan to date and are reviewing opportunities to minimise the impact of coal-related production losses.
“The strong performance is also carried through in the extension of the gas plateau. A further opportunity exists to increase gas supply to the downstream units to the extent possible from January 2023,” the group said.
The international businesses delivered steady operational performance.
Guidance to the market on mining productivity, Secunda operations, liquid fuel sales volumes and Chemicals Africa sales volumes for the year were revised downwards due to the production challenges.