Sasol’s share price notched up more than 3% yesterday after an update showed that business performance in the six months to December 31 was impacted by a volatile macro-economic environment, weaker oil and petrochemical prices, unstable product demand and inflationary pressure.
However, full year 2024 production and sales volume guidance remained intact for all segments, except the ORYX GTL (gas-to-liquid) utilisation rate, the fuel and chemicals from coal group said in an update yesterday.
A reactor coil leak was detected at the GTL plant in October, which brought forward a shutdown to the second quarter from the third quarter, and the repair was expected to require work into the third quarter. This meant the full year utilisation rate was revised to be 65 - 75%, below the previous guidance of 80% - 90%.
There were two fatalities in December 2023, one at Secunda Operations (SO) and the other at Mining Operations, bringing the total number of fatalities to four in the first half of the 2024 financial year.
Looking ahead, persistent under-performance of state-owned enterprises in South Africa was a concern, as did the outlook for weaker global growth, the group said.
On the six month period to December 31, the group said, “Pricing pressure continues to impact sales volumes, margins and resultant profitability.”
In the Energy Business, the first half performance improved compared to the first half of 2023, due to higher production and productivity since the start of operational mitigation plans.
At SO, production volumes increased mainly due to a phase shutdown, versus a total shutdown in the prior year, improved equipment availability and operational stability.
The liquid fuels segment saw operational improvements, but rand oil price and inflationary pressure continued to impact the business.
“We started the roll-out of our full potential programme at Shondoni and Thubelisha collieries and continue to embed learnings to achieve sustainable productivity improvements across our mining operations.”
However, productivity declined in the second quarter, mainly due to the safety-related incidents and unplanned engineering downtime.
The drilling programme in Mozambique was on track. The chemicals business continued to face challenging market conditions with macro-economic weakness especially in China and Europe, and customer destocking negatively impacting global demand.
The average sales basket price was 24% lower than in the first half of 2023, with the decrease driven by lower oil, feedstock and energy prices, as well as weak market demand.
The average sales basket price was, however, 6% higher in the second quarter compared with the first quarter, but prices, margins and associated profitability remained under pressure.
First half total chemicals sales volumes were 4% higher, largely due to higher ethylene and polyethylene sales in America, improved production and supply chain performance in Africa offset by lower demand in Eurasia.
Sales volumes for the second quarter were 2% lower than the first quarter due to lower production in Africa and demand in Eurasia.
Pricing and demand volatility for chemicals was expected to continue through the second half. Global market sentiment and petrochemical markets remained uncertain with the persistent muted demand and margin outlook for Chemicals.
South African suppliers and customers continued to face business disruptions due to challenges at Eskom and Transnet.
Mining productivity was 6% higher and Secunda Collieries productivity 5% higher.
“Although we have seen an improvement in productivity rates since the implementation of our full potential programme, we experienced a challenging second quarter where productivity declined by 8% compared to the first quarter.”
The lower productivity was attributable to safety-related incidents and operational challenges, including more difficult geological conditions than expected and delays in availability of mechanical spares for infrastructure maintenance.
The Coal Quality Management Centre had been operational since October 1, 2023, and there had been some improvement in the coal quality supplied to SO by monitoring and managing variabilities.
However, this was not sufficient to mitigate the lower production in the second quarter, which negatively impacted coal quality with reduced blending capability.
Gas production volumes are expected to remain between 113 -119 bscf for the full financial year in line with previous market guidance.
Natref delivered a crude oil rate that was 1% higher than the prior year due to improved availability of the refinery units. There were no illegal hot tapping incidents on the crude oil pipeline in the second quarter compared to eight incidents in the first quarter
There were also two fatalities in December 2023, one at Secunda Operations (SO) and the other at Mining Operations, bringing the total number of fatalities to four in the first half of the 2024 financial year.