Sasol feels the pain from collapsing SOEs

Sasol reported poor results for the first six months of its 2024 financial year, as low commodity prices and Transnet and Eskom’s failures weighed on its operations.

Sasol released its results for the six months ended 31 December 2023 today, which revealed a significant decline in the company’s performance compared to 2022.

The company reported revenue of R136.3 billion – around 9% lower than the prior period of R149.8 billion.

This was mainly the result of the lower chemical product prices across all regions, Sasol said.

Earnings before interest and tax (EBIT) of R15.9 billion is 34% lower than the prior period, mainly due to lower revenue and lower gains on the valuation of financial instruments and derivative contracts, offset by lower chemical feedstock prices in Europe, Asia and the US.

Sasol noted that the six-month period includes remeasurement items of R5.8 billion mainly due to –

• Impairments of the Secunda liquid fuels refinery cash-generating unit (CGU) of R3.9 billion, driven by a further deterioration assumed of the macroeconomic outlook, including Brent crude oil and electricity prices, resulting in the full amount of capital expenditure incurred during the period being impaired

• Impairments of the Chemicals Africa Chlor-Alkali & PVC and Polyethylene CGUs of R1.2 billion due to lower selling prices associated with reduced market demand.

The prior period also included impairments of R6.4 billion, mainly due to –

• The Secunda liquid fuels refinery CGU – R8.1 billion

• Chemicals SA Wax CGU – R900 million

• China Essential Care Chemicals CGU – R900 million, offset by a reversal of the US Tetramerisation CGU impairment R3.6 billion

The company’s basic earnings per share dropped from R23.23 in 2022 to R15.19 – an almost 35% decrease.

“Sasol’s performance for the period continued to be negatively impacted by the continued volatile macroeconomic environment, with weaker oil and petrochemical prices, unstable product demand and continued inflationary pressure,” the company explained.

“Despite some operational improvements in South Africa, persistent underperformance of the state-owned enterprises involved in Sasol’s value chain and the weaker global growth outlook continue to impact Sasol’s business performance.”