Markets cheer robust Sasol profit forecast
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JOHANNESBURG - PETROCHEMICALS giant Sasol surged on the JSE on Friday after a robust profit forecast for its 2021 half-year ended December as efforts to reduce operating cost and delay capital spend in an uncertain environment paid off.
Sasol closed 8.92 percent higher at R164.99 a share after it said headline earnings a share would surge by 200 percent to between R18.59 and R19.78 compared to R5.94 in the prior half year on strong capital and cost management.
Core headline earnings per share were likely to increase to between R6.94 and R8.79 compared to R9.25 in the prior half year.
Earnings per share were expected to be between R22.76 and R24.07 compared to the prior half-year earnings per share of R6.56.
“Sasol is expected to deliver a strong set of results for the six months ended December 31, 2020, underpinned by a strong cash cost, working capital and capital expenditure performance despite the effects of the Covid-19 pandemic, a severe decline in crude oil prices and softer chemical product prices,” said the company.
The impact of hurricanes in the US Gulf Coast would result in a loss of 300 000 tons at the Lake Charles Chemical Project (LCCP) Base Chemicals Business for the 2021 financial half year, the group said.
However, adjusted earnings before interest, tax, depreciation and amortisation is expected to decline by up to 10 percent to between R17.9 billion and R19.8bn a year earlier.
“This decline results from a 23 percent decrease in the rand per barrel price of Brent crude oil coupled with lower sales volumes due to softer demand attributable to Covid-19 lockdowns and the aforementioned hurricanes impacting our gross margins adversely,” said the group, adding that this was offset by a strong cost performance, supported by delivery towards the $1bn (about R15.15bn) integrated crisis response plan commitment.
Sasol said non-cash adjustments would include R5.4bn on the translation of monetary assets and liabilities due to the 15 percent strengthening of the closing rand/dollar exchange rate compared to June 2020.
They also included R4.7bn on the valuation of financial instruments and derivative contracts, a R3.3bn gain on the realisation of the foreign currency translation reserve mainly on the divestment of 50 percent interest in the LCCP Base Chemicals Business.
In March Sasol announced a range of measures to cushion the blow of the deteriorating operating environment after the combination of the oil price collapse, the impact of the Covid19 pandemic and South Africa's weak sovereign rating.
The group announced it would generate $6bn by the end of the 2021 financial year through asset disposals and the potential rights issue of up to $2bn.