Sasol half-year earnings plummet

Chemicals giant Sasol’s headline earnings per share plummeted 74 percent to R5.94, for the six months ended December 31, 2019.
Adjusted Ebitda fell 27 percent to R19.6 billion, while cash generated by operating activities was down 21 percent to R19.6 billion.
Sasol ascribed the performance to mostly a weak macroeconomic environment, which resulted in lower margins, and the Lake Charles Chemicals Project (LCCP) being in a ramp-up phase.
“Earnings decreased by 72 percent to R4,5 billion compared to the prior period. This resulted from a 9 percent decrease in the rand per barrel price of Brent crude oil, softer global chemical prices and refining margins, lower productivity at our mining operations and a negative contribution from the LCCP.
Our gross margin percentage decreased by 2 percent compared to the prior period driven by a softer macroeconomic environment negatively impacting supply-demand dynamics especially in our chemicals businesses.
“Our energy business was impacted by lower crude oil prices as well as lower refining margins due to weaker demand,” it said.
LCCP is 99 percent complete.
“As the LCCP units progress through the sequential beneficial operation schedule, our revenues do not yet match the costs expensed.
“We do expect that for the second half of FY20 revenue will match the costs expensed better and that the LCCP will generate positive Ebitda,” Sasol said.
“The LCCP negatively impacted earnings by R2,8 billion (Ebitda of R1,1 billion and R1,7 billion in additional depreciation charges).
“Earnings were further impacted by approximately R2 billion in finance charges for the period as the LCCP units reach beneficial operation.
“Total cash fixed cost increased by 10 percent to R30,5 billion as a result of United States (US) growth costs and inflation. Normalised cash fixed cost increased by 5,4 percent, which is within our internal inflation target of 6 percent.”
The interim dividend was passed to “protect and strengthen” balance sheet.
— Moneyweb