Sasol flags ‘at least 20%’ annual earnings rise as oil price recovers
JOHANNESBURG - PETROCHEMICALS giant Sasol expects a jump in earnings for the year ended June 2021 despite hurricanes disrupting its US-based chemicals business during the nine months ended March 2021 and as oil prices recovered.
Sasol, which operates Secunda Synfuels in Mpumalanga, ended trade 0.17 percent lower and closed at R250.89 after flagging that its headline earnings a share would improve by at least 20 percent for the year ended June 2021 compared with the headline loss a share of R11.79 a year earlier.
Earnings a share were also expected to improve by 20 percent in the year ended June 2021 compared with the loss per share of R147.45 recorded in the year ended June 2020.
Sasol was rocked by record low oil prices as demand was muted due to Covid-19 pandemic lockdowns managed during the year to June. It turned the corner during the six months ended December 2020 with headline earnings a share of R19.16 and earnings a share of R23.41 during the six months ended December with earnings surging by more than 100 percent higher at R15.3 billion.
Commenting on the numbers, Michael Treherne, a portfolio manager at Vestact Asset Management, said Sasol had benefited from a recovery in the oil price and increased fuel demand as life returned to normal, and then lower costs thanks to all of its restructuring.
“The current set of numbers will be a bit ‘noisy’ due to the shift in business model, but they will set the benchmark for next year,” Treherne said.
Last year Sasol overhauled its strategy to mitigate the impact of the Covid-19 pandemic and lower oil prices through deleveraging measures together with a reset of the strategy.
“The new operating model is now in place and allows the business to be more agile, cost competitive and customer focused,” said Sasol.
In terms of production, Sasol said its sales volumes from its US-based chemical assets for the nine months ended March 31 were 14 percent lower
than the prior year and impacted by the three significant weather-related events.
Hurricane Laura and Hurricane Delta made landfall near Sasol’s Lake Charles Chemicals Complex (LCCC) in August and October respectively.
In February this year, an Arctic winter storm hit both the states of Texas and Louisiana, negatively impacting production across a number of petrochemical sites, including the LCCC.
“Base Chemicals sales volumes for the nine months ended March
31, 2021 were further affected by the divestment of our 50 percent interest in the Base Chemicals business at LCCC to LyondellBasell, which was successfully closed on December 1, 2020 and the divestment of our 50 percent interest in the Gemini HDPE joint venture to INEOS Gemini HDPE LLC, a wholly-owned subsidiary of INEOS LLC,” said Sasol.
Sasol announced the disinvestments as part of measures to pay down debtl. Sasol, however, said in the nine months ended March 2021, it had continued to see a strong recovery in demand for liquid fuels and gas, following the easing of Covid-19 restrictions, although jet fuel demand remained constrained.
“The demand for diesel is currently at pre-Covid-19 levels, while petrol is between 90 percent and 95 percent of pre Covid-19 levels.
“However, jet fuel demand continues to remain constrained and is expected to be below pre-Covid-19 levels for at least the next 12 months,” said Sasol.