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Sasol eyes robust annual earnings ahead

Sasol expects its annual earnings to increase by more than half in its year to end-June, as geopolitical tensions in eastern Europe continue, resulting in higher crude oil and chemicals prices.

In a trading statement for the financial year ended June 30, 2022, released yesterday, the JSE-listed global chemicals and energy company said earnings per share (eps) were expected to be between R60.59 and R63.51 compared to the prior year’s earnings per share of R14.57, a more than 100 percent increase.

Headline earnings per share (heps) were forecast to increase by up to 28 percent to R50.74, an increase from the R39.53 the group reported in the prior year.

Sasol´s adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) was expected to increase by between 36 percent and 56 percent from R48.4 billion in the prior year to between R66bn and R75.6bn.

“This is mostly due to a strong recovery in Brent crude oil and chemical prices, partly offset by realised oil hedging losses and lower chemicals sales volumes,” the group said.

Sasol said its performance for the period was underpinned by a favourable macroeconomic environment, with higher crude oil prices, refining margins and chemicals prices against a backdrop of heightened geopolitical tensions.

“This resulted in a strong gross margin improvement from the prior year, combined with robust cost and capital expenditure performance. These benefits were partly offset by operational challenges in our integrated South African value chains which resulted in lower production,” it said.

This year Sasol faced operational issues, with Secunda having been hit by coal availability problems, including wet weather that disrupted supplies and mining accidents at its operations.

Sasol said non-cash adjustments, before taxation, for the 2022 financial year included unrealised losses of R5.2bn on the translation of monetary assets and liabilities while it achieved a net gain, which includes R3.7bn on the divestment of 30 percent equity interest in the Republic of Mozambique Pipeline Company.

It also expected a R1.4bn reversal of impairment on the Chemicals Work Up and Heavy Alcohols value chain due to a higher price outlook on the back of a sustained increase in demand for alcohols into the personal hygiene market during and post the Covid-19 pandemic.

Earlier this week Sasol said it had restarted production at the 108 000 barrels a day Natref refinery that it co-owns with TotalEnergies. This after last month it declared force majeure on the supply of petroleum products to its commercial customers, following delays in crude oil shipments to Natref due to a force majeure at the loading port, Durban.

In its operational update released last month it said that there might be demand contraction for its products in the year ahead, as higher inflation and interest rates would continue to impact consumers.

Anchor Capital investment analyst Seleho Tsatsi said Headline earnings per share is expected to increase by 8 percent to 28 percent. Core Heps and adjusted Ebitda are up by quite a bit more.

“More broadly speaking, Sasol’s share price has come off significantly recently. Although oil prices remain high, the market is concerned about the impact of a recession on oil demand. That has impacted the valuation of not just Sasol but the sector in general,” he said.

Sasol is set to release its full-year results on August 23.

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