Impairments push Sasol into a loss

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The energy and chemicals group, Sasol, says it was impacted by Covid-19 and a severe decline in crude oil and chemical product prices.

Sasol says it will report a full-year loss after writing down the value of its portfolio of businesses by more than its market capitalisation. Its earnings were also impacted by a big decline in the oil price.

In a trading statement, the energy and chemicals group said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to end-June were likely to be 17-37% lower than the R47.6 billion reported last year. It blamed the decline on an 18% decrease in the rand per barrel price of Brent crude oil coupled with much softer global chemical and refining margins, particularly in the second half of the year. This was partly offset by improved cash fixed costs.

Impairments of R112 billion for the year included R12.5 billion of write downs across its Energy portfolio, the R71.3 billion impairment of its Base Chemicals business – primarily in the US, and R27.7 billion against the US ethylene-producing assets of its Performance Chemicals business.

As a result of the impairments, it said it would report a loss per share of between R146.75 and R148.15, down from earnings of R6.97 last year. Its headline loss per share would be between R8.72 and R14.86, from earnings of R30.72 previously. Core headline earnings per share were expected to fall by as much as 71% from last year’s R37.65.

Apart from the impairments, earnings were also impacted by unrealised losses totalling R12.2 billion and depreciation of R3.9 billion attributable to the units at its Lake Charles Chemicals Project in the US that had already reached beneficial operation.

Last month, Sasol announced the R8.5 billion sales of its oxygen production site in Secunda to French multinational Air Liquide as part of an accelerated disposal programme aimed at reducing debt. Apart from asset disposals, its response strategy to Covid-19 and a weak oil price, announced in March, included a possible $2 billion rights issue. It made no mention of the rights issue in yesterday’s announcement.

Its results are scheduled for release on Monday. After an initial decline, its shares turned around to close 4.4% higher at R158.37 yesterday, valuing the company at about R99 billion.

Main Image: HeraldLive

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