Sasol brushes aside delays, costs as core earnings per share rise 18%
DURBAN – Sasol has brushed aside the delays and escalating capitals costs at its Lake Charles Chemicals Project (LCCP) in the US to report an increase in its earnings for the six months to end-December.
Sasol said it had revised its cost estimate at LCCP to $11.6 billion (R162bn) and $11.8bn from $11.3bn, and said the start-up would be delayed by five months.
The petrochemical giant reported an 18 percent increase in core headline earnings per share to R21.45 a share during the period.
Joint chief executive Stephen Cornell said while the LCCP fundamentals remained intact, there had been disappointing cost and schedule overruns.
“The project was impacted by several challenges, within and beyond our control, in the fourth quarter of the previous calendar year.
“Despite incremental cash flows from the project being deferred due to a schedule delay, we remain confident that the project will deliver the steady earnings before an interest, tax, depreciation and amortisation (Ebitda) run-rate of $1.3bn in financial year 2022,” Cornell said.
The group reported a 17 percent increase in turnover to R103bn, while Ebitda rose 10 percent to R27bn on slower-than-expected earnings growth to volatility in the oil price, as well as production and sales volumes.
Sasol declared an interim dividend of 590 cents an ordinary share, from 500c last year.
The group said production losses from a longer-than-planned shutdown at Secunda Synfuels Operations were offset by a 43 percent improvement at Natref and an 8 percent productivity increase at its mining operations.
It said liquid fuels sales volumes increased 4 percent during the period. However, Sasol’s chemicals division declined by 3 percent, and base chemicals sales volumes fell 11 percent.
Co-chief executive Bongani Nqwababa said the group’s production and sales performance was mixed, with largely lower-than-expected production in the first half of the financial year, mainly as a result of the longer-than-planned total shutdown at Secunda Synfuels Operations.
“However, our operational performance was enhanced by management interventions in previous periods resulting in improved performances at Natref and Sasol mining. Post the shut-downs, we are pleased to see steady progress across our value chains,” Nqwababa said.
Victor von Reiche, a portfolio manager at Citadel, said Sasol’s results were broadly in line with market expectations. Von Reiche said the sharp increase in earnings was largely due to lower non-cash interest charges.
“The dividend cover was sustained, with the group declaring an interim dividend of R5.90 a share,” he said.
“Of concern is further balance sheet deterioration, with net debt/Ebitda increasing to 2.2x, which is ahead of management’s target of 2.0x. Cash flow was weaker,” Von Reiche said.
Sasol fell 0.36 percent on Monday to close at R413.