Sasol to report lower Ebitda, despite operational improvement in H2

14th August 2023 By: Schalk Burger - Creamer Media Senior Deputy Editor

Sasol to report lower Ebitda, despite operational improvement in H2

Photo by: Bloomberg

JSE-listed energy and chemicals multinational Sasol says it expects to report a 2% to 16% year-on-year decrease in adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) to between R60.6-billion and R70.6-billion for the financial year ended June 30.

In a trading statement ahead of the August 23 publication of its results, the company says its financial results were impacted by a combination of operational challenges and a volatile global economic landscape, which included weaker global economic growth, higher inflation, depressed chemicals prices and higher feedstock and energy costs.

"The softening of the Brent crude oil price and refining margins in the latter part of the 2023 financial year were offset by a weakening of the rand:dollar exchange rate.

"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.

"Business performance was further impacted on by the underperformance of State-owned enterprises in South Africa, which have constrained our supply chains and resultant sales volumes," Sasol reports.

Further, a notable improvement in Sasol’s operational performance was realised in the second half of the financial year, underpinned by focused mitigation plans to address the production instabilities experienced earlier in the year, the company adds.

Sasol’s basic earnings a share are expected to decrease by between 74% and 84% to between R10.26 and R16.49, compared with the prior year’s earnings a share of R62.34.

Further, core headline earnings a share are expected to decrease by between 25% and 39% to between R41.54 and R51.14, but headline earnings a share are expected to show an improvement of between 4% and 18% to between R49.47 and R56.13.

Sasol highlights three notable noncash adjustments, before tax, for the financial year, with the first being an unrealised gain of R5.8-billion on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts.

Second is a net loss of R33.9-billion on remeasurement items, mainly owing to the full impairment of the South African wax cash generating unit of R900-million and the Essential Care Chemicals cash generating unit in Sasol China of R900-million, as well as a reversal of the full impairment processed in 2019 on the Tetramerisation cash generating unit in Lake Charles, in the US, of R3.6-billion.

Last is the full impairment of the Secunda liquid fuels refinery cash generating unit of R35.3-billion.

"The Secunda chemicals cash generating unit's recoverable amount remains above the carrying value given the higher value products that are produced. The impairment is mainly as a result of the increase in the weighted average cost of capital 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 made notable progress with the implementation of its ERR despite mounting external and internal pressures on the business. Optimisation of the ERR is ongoing and 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 says.