Synfuels production holding steady
In the nine months to the end of March trading update, the group said last week that SSO had maintained stable production during the quarter and was continuing to support a normalised run-rate of 7.8 million tons a year.
“Stable production at SSO has enabled us to offset the previously reported 6-percent reduction in production volumes for the first half of 2019, now resulting in a 3-percent reduction in volumes compared to the prior year. We expect to achieve the upper end of our planned production targets of 7.5 to 7.6 million tons for the year,” the group said.
The group’s base chemicals also delivered a 9-percent improvement in volumes compared to the second quarter.
“The base chemicals business, excluding US-produced products, achieved a 6-percent improvement in volumes compared to the second quarter,” the group said.
Despite a decline of 6 percent in the year to date, in overall base chemicals sales volumes compared to last year, the group maintains its expectation that its annual sales volumes, excluding US-produced products, will be 1 percent lower than last year’s.
Its Lake Charles Chemicals Project (LCCP) in the US is now 96 percent complete and at the end of March, capital expenditure on the LCCP amounted to $11.4 billion (R162bn).
In February, Sasol reported that Stephan Schoeman, the group executive committee member responsible for, among others, LCCP, would be retiring from the company after 30 years of service together with its chairman Mandla Gantsho. They would retire with effect from the close of the company’s annual general meeting on November 22.
Victor von Reiche, a portfolio manager at Citadel, said their reading of the quarterly production and sales update was that it was slightly disappointing on balance. “Strong group performance with regard to sales volume was offset in the base chemicals division by a weak base pricing environment. From a divisional perspective, energy and mining reported decent production gains, with a strong recovery in Sasol Synfuels production the stand-out performer,” Von Reiche said.
However, he said that the base chemical divisions were impacted by weak polymer and ethylene pricing, while performance chemical prices were roughly unchanged from the previous quarter.
“Management provided an update on the LCCP project, which is largely in line with previous guidance. Of note is the cost guidance which is now expected to be at the upper end of the range provided in February. For the full year management guidance is broadly unchanged to slightly positive (Synfuels production volume and liquid fuel sales).
“The one notable exception is in performance chemicals where management reduced their volume guidance to decline of 1 to 2 percent year-on-year (previously grow by 1 to 2 percent) and at Oryx where full-year average utilisation rates have been revised down to due to an extended shutdown,” Von Reiche said.