Sasol expects a significant rise in earnings for the year to June, pushed by higher production, stronger oil prices and an improvement in refining margins.
The Middle East conflict has pushed up crude oil prices, having surged to more than $100 a barrel as shipping through the Strait of Hormuz was disrupted.
The price of oil increased to about $76 per barrel on Wednesday after oil prices had fallen for two days in a row before rising again. Even though there has been a recorded increase, it remained cheaper than it had been during the recent price spike.
Refining margins also increased as the war affected nearly 10% of global refining capacity and limited fuel exports, leading to shortages of petrol, diesel and jet fuel and tightening fuel supplies faster than crude oil supplies.
Sasol expects earnings per share to increase
According to the Sasol trading statement for the year ended June 30, the company expects earnings per share (EPS) to increase by between 84% to between R17.50 and R19.50 from R10.60 in the previous year. Headline earnings per share (HEPS) is expected to increase by 2% to 14% to between R36 and R40 from R25.13.
Sasol said the improvement was driven by management actions and a more supportive economic environment during the final quarter of the financial year.
Sales volumes increased by 4%, supported by improved production, while the average Brent crude oil price rose by 7%.
One of the biggest boosts came from refining margins, which increased by more than 100% following improved fuel differentials.
The group also recorded lower impairments of R16.8 billion before tax, compared with R20.7 billion in the previous year.
“The increase in earnings was partially offset by a 7% stronger average Rand/US$ exchange rate, the once-off Transnet SOC Limited net settlement of R4.3-billion, received in the prior year, and unrealised losses of R1.1-billion on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts compared to unrealised gains of R2-billion in the prior year,” the company said.
Read More: Sasol aims for green jet fuel exports to EU
Sasol said the Secunda liquid fuels refinery cash-generating unit remains fully impaired. Its recoverable value improved following management actions, but this was offset by a stronger forecast rand against the US dollar.
The group said further progress on its initiatives is needed before more benefits can be included in the recoverable value. All R7.7-billion in costs capitalised during the year were impaired, with R3 billion already recognised in the interim results.
The group also recorded a R3.7-billion impairment on its Polyethylene cash-generating unit. This was mainly due to a stronger forecast rand against the US dollar and lower long-term US dollar price assumptions.
Sasol also recorded a R3.9-billion impairment on the Production Sharing Agreement development in Mozambique. This impairment had already been recognised in the group’s interim financial statements.
“While earnings are expected to improve, higher year-end working capital driven by elevated pricing following the Middle East conflict and the previously reported fuels inventory build, is expected to moderate the improvement in free cash flow generation,” the company said.
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- Sasol expects a significant earnings increase for the year to June, driven by higher production, stronger oil prices, and improved refining margins.
- The Middle East conflict has raised crude oil prices above $100 a barrel, disrupting shipping and tightening fuel supplies globally.
- Earnings per share (EPS) are forecasted to rise 84% to between R17.50 and R19.50, with headline earnings per share up 2% to 14% to between R36 and R40.
- Refining margins more than doubled due to fuel shortages and tighter supplies, while impairments decreased compared to the previous year.
- Despite earnings growth, higher year-end working capital and inventory builds are expected to dampen free cash flow improvements.
Sasol expects a significant rise in earnings for the year to June, pushed by higher production, stronger oil prices and an improvement in refining margins.
Sasol said the improvement was driven by management actions and a more supportive economic environment during the final quarter of the financial year.
Sales volumes increased by 4%, supported by improved production, while the average Brent crude oil price rose by 7%.
One of the biggest boosts came from refining margins, which increased by more than 100% following improved fuel differentials.
“
Read More: Sasol aims for green jet fuel exports to EU
Sasol said the
Sasol also recorded a R3.9-billion impairment on the Production
“While earnings are expected to improve, higher year-end working capital driven by elevated pricing following the
Read More: Sasol cuts external coal purchases after a R700m efficiency upgrade
