Sasol joint president and chief executive Bongani Nqwababa presents the company’s financial results for the period to the end of June at Sasol’s head office in Sandton.Photo: Simphiwe Mbokazi/ANA
CAPE TOWN - Sasol shares traded in positive territory despite the group announcing a 15% fall in headline earning for the year end to June.

The stock moved 1.58% up in early trade to R396.75, slightly higher than Friday’s closing price of R390.57.

The shares eventually settled 0.57% up at R392.80 at the close of the JSE.

Analysts said the results were ahead of market expectations, but raised alarm bells about the money spent on the Lake Charles Chemicals Project (LCCP) in the US, where the group spent $7.5 billion (R98.53bn) capital expenditure of the approved $11bn budget.

The project is 74% complete.

Cannon Asset Managers’ portfolio manager Samantha Steyn said the company’s headline earning was in the guided range, but slightly ahead of market consensus.

Steyn said revenue was slightly better than expected with lower taxes.

She said the results were positive, with the share trading on a 12 times forward price earnings better than the company’s long-term average of 10 times.

“While there are a number of positives from the result, such as the decreased capex spend and some cost savings, we remain cautious on the current Lake Charles project as well as the Mozambique operations,” Steyn said.

The LCCP consists of a world-scale 1.5 million ton per year ethane cracker, and six downstream chemical units.

Once commissioned, the complex will triple Sasol’s chemical production capacity in the US, enabling the company to further strengthen its position in a growing global chemicals market.

Sasol reported 54% increase in earnings attributable to shareholders to R20.4bn during the period - up from R13.2bn recorded during the corresponding period last year - while the headline earnings per share fell to R35.15 and earnings per share (Eps) increased by 54% to R33.36.

Sasol said last year’s Eps was negatively impacted by the R9.9bn partial impairment of its Canadian shale gas assets.

Core headline earnings increased by 6%.

The company declared a final dividend of R7.80 a share plus an interim dividend of R4.80 to take the full year dividend to R12.60 a share. 

Jordan Weir, an equities trader at BayHill Capital, said the results were largely in line with what Sasol had expected, given the macroeconomic environment, along with certain changes in assumptions and other estimates, which were implemented in 2016.

“Aside from once-off expenses the results were largely in line with expectations. The rand’s strength against the US dollar, along with lower oil prices, did however have a small dragging effect on Sasol’s top and bottom line during the period,” Weir said.

During the current financial year, Sasol entered into a number of hedges to mitigate specific financial risks and to provide protection against unforeseen movements in oil prices, interest rates, currency movements, and commodity and final product prices.

The group said about 50% of the crude oil exposure was hedged with crude oil put options for 2017 and 2018 at a net price of $48.15 per barrel.

The recovery in global oil and product prices as average Brent crude oil prices were 15% higher compared to the prior year (average dated Brent was $49.77/bbl for the year to end June 2017 compared with $43.37/bbl in the prior year).