Sasol earnings exceed expectations

Sasol's headline earnings per share showed a 17% increase in the six months to end-December 2017, above market guidance on the back of a higher oil price

Energy and chemicals giant Sasol delivered a largely strong set of interim financial results, underpinned by higher crude oil and product prices, increased demand for our specialty chemical products and a satisfactory operational performance across the value chain.

The petrochemical giant said Heps rose to R17.67 in the last six months, while it declared a dividend of R5.00 per share, up 4% from last year at the same time. But earnings per share (EPS) dropped by 21% to R11.29. Earnings attributable to shareholders decreased by 20% to R6.9bn from R8.7bn in the prior comparable period.

EPS was negatively impacted by the scrapping of Sasol's US gas-to-liquids project amounting to R1.1bn (US$83m) and a partial impairment of the Canadian shale gas assets of R2.8bn (CAD281m). 

Normalised operating profit for the full financial year was estimated at between R3bn and R5bn. Sasol admitted that its sales were impacted by supply chain bottlenecks in December.

"Our sustained focus on cost, cash and capital conservation drove a largely strong set of results, notwithstanding continued macro-economic volatility. The recent recovery in global oil and product prices positively impacted our results, however this was offset by operational challenges at our Natref and mining operations, currency effects and poor economic conditions in South Africa. Encouraging recent developments signal a more stable political and investor friendly outlook for the country, in addition to a more positive global growth outlook with stronger demand in markets where we operate. Our recent safety performance has regrettably been marred by tragic fatalities in our mining operations. We are committed to the safety and health of our employees, communities and the environment. Safety, as one of our core values and number one priority will receive our constant and unwavering attention," said Joint President and Chief Executive Officer, Bongani Nqwababa (pictured).

"We are making steady progress in delivering the LCCP within the revised schedule, as we place increased emphasis on business readiness. Once fully operational, the LCCP will transform Sasol's earnings profile. The start-up of this world-scale chemicals facility and the implementation of our broad-based black economic empowerment ownership structure, Sasol Khanyisa, are landmark milestones to be delivered this calendar year. Guided by our clear strategic choices, we will continue to enhance our robust foundation to deliver on our refined value-based growth strategy. To this end, exercising disciplined capital allocation remains paramount to ensure we deliver sustainable growth and ongoing value to our shareholders," said Joint President and Chief Executive Officer, Stephen Cornell.

The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside the company's control and may impact results, management's focus remains firmly on managing factors within its control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating.

According to Nqwababa, Sasol management is particularly encouraged by recent developments in South Africa that signal a more stable political and investor friendly outlook. A more conducive business environment will create even greater opportunities for Sasol to be a force for good, where its capital investments have totalled over R20 billion over the past three years.