Sasol is expecting a massive make loss amid a challenging operating environment.

In a trading statement for the year ended 30 June 2024, the group said that it was negatively impacted by challenging market conditions, with pressure from depressed chemicals prices and constrained margins.

However, it said that stronger rand/oil prices, improved refining margins, and higher sales volumes provided some relief.

It added that its more robust operational performance in Q4 contributed to its overall stronger performance in the second half of the financial year.

As such, the group anticipates reporting a basic loss for the year—although headline earnings should remain in the black.

Still, its adjusted EBITDA for the year is expected to decline by between 2% and 17% from R66.3 billion in the prior year to between R54.7 billion and R64.7 billion.

The group’s expected earnings drop of over 100% was impacted by the following notable non-cash adjustments:

• “Net loss of R55.8 billion after tax (R75.4 billion gross) on remeasurement items mainly due to the following impairments*:

  • Chemicals America Ethane value chain (Alcohols, Alumina, Ethylene Oxide, Ethylene Glycols and associated shared assets) cash-generating unit (CGU) of R45.5 billion net of tax (R58.9 billion gross).

  • Additionally, Chemicals Africa’s Polyethylene, Chlor-Alkali & Polyvinyl Chloride and Wax value chain CGUs of R3.9 billion net of tax (R5.3 billion gross). The impairments are primarily driven by external conditions, including prolonged softer market pricing and outlook.

  • Secunda liquid fuels refinery CGU of R5.7 billion net of tax (R7.8 billion gross), which remains fully impaired as of 30 June 2024.

• ­ Derecognition of deferred tax asset to the value of R15.3 billion, mainly relating to assessed loss carry forward on our Chemicals America operations, which are not anticipated to be utilised; and

• Unrealised gains of R4.7 billion (before tax) on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts.”

Amid these massive impairments, the group said that it expects to make a basic loss per share between R68.82 and R71.48 for the financial year.

This is an over 100% decline from the basic earnings per share of R14.00.

Headline earnings per share (HEPS) are expected to be between R12.28 and R21.95, representing a smaller decrease of between 59% and 77% from the prior financial year’s R53.75.

Core headline earnings per share are also expected to drop between 9% and 27% from R47.71 to R35.03 and R43.6.

Another blow

This is yet another blow to Sasol after the Constitutional Court recently dismissed its appeal regarding gas price gouging allegations.

Sasol has been accused of excessively pricing gas for close to a decade, with its markup reaching 72%

The group was, however, recently given some reprieve from the new Minister of Forestry, Fisheries, and Environment, Dion George, who upheld a prior decision allowing Sasol to use an alternative method for measuring sulphur dioxide emissions at its Secunda facility.

Sasol is one of the worst emitters in South Africa, and the reprieve will allow it to regulate its emissions on an alternative emission load basis from April 1, 2025, to March 2030 instead of through the standard particle concentration measures.

source:Massive loss for Sasol – BusinessTech