Sasol has revealed to its shareholders that the expectation on its basic earnings per share is a decrease by between 74% to 84% for its 2023 financial year.
Sasol said its year-end financial results for the 30th of June 2023, were impacted by “operational challenges and a volatile global economic landscape”. The landscape that is spoken about, included a weaker global economic growth, higher inflation, depressed chemicals prices and higher feedstock and energy costs.
The global chemicals and energy company also went on to reveal that the softening of the Brent crude oil price and refining margins in the latter part of the 2023 financial year was offset by a weakening of the rand/US dollar exchange rate. Sasol added by mentioning that the chemicals basket prices were on a declining trend during 2023, and while we have seen some respite in lower feedstock and energy prices, gross margin and global demand remain depressed, particularly in our American and Eurasian operations.
Sasol revealed that another thing that impacted its performance was the underperformance of state-owned enterprises in South Africa, which have constrained our supply chains and resultant sales volumes.
The company expects the following changes to its earnings compared to the prior year:
- Basic earnings per share (EPS) are expected to be between R10.26 and R16.49 compared to the prior year EPS of R62.34 – representing a decrease of 74% to 84%.
- Headline earnings per share (HEPS) are expected to be between R49.47 and R56.13 compared to the prior year HEPS of R47.58 – representing an increase of 4% to 18%.
- Core HEPS (CHEPS) are expected to be between R41.54 and R51.14 compared to the prior year CHEPS of R68.54 – representing a decrease of 25% to 39%.
Sasol mentioned how a notable improvement in its operational performance was realised in the second half of the 2023 financial year, “underpinned by focussed mitigation plans to address the production instabilities experienced earlier in the year”. The company’s adjusted EBITDA for the year ended 30 June 2023 is expected to decline by 2% and 16% from R71.8 billion in the prior year to between R60.6 billion and R70.6 billion.
During that time, the company already had gains of R5.8 billion on the translation of monetary assets and liabilities and the valuation of financial instruments and derivative contracts. Mainly due to impairments, the company also reported a net loss of R33.9 billion on remeasurement items.
Sasol saw a full impairment of its South African wax cash-generating unit (CGU) of R0.9 billion and Essential Care Chemicals CGU in Sasol China of R0.9 billion, together with the reversal of the full impairment processed in 2019 on the Tetramerisation CGU in Lake Charles of R3.6 billion.
By the 30th of June 2023, Sasol also saw a full impairment of the Secunda liquid fuels refinery CGU of R35.3 billion in the company’s Fuels segment. Sasol said Secunda chemicals CGUs recoverable amount remains above the carrying value given the higher value products that are produced.
The company also mentioned that the impairment is mainly a result of the increase in the weighted average cost of capital (WACC) rate on the back of higher global interest rates and its associated impact on the cost of debt, higher feedstock cost assumptions, and a revised production profile based on the emission reduction roadmap (ERR).
Sasol has also revealed it had made notable progress with the implementation of its ERR despite mounting external and internal pressures on the business, and said that the optimisation of the ERR is ongoing.
“There are a number of technology and feedstock solutions being evaluated. However, the maturity thereof needs to be progressed before it can be incorporated in the impairment assessment.” – the company added.
