Pain for South African energy giant

Petrochemical group Sasol’s earnings dropped massively in the first half of the financial year ended December 2024, tanking 48% over the comparable period.

Revenue of R122.1 billion was 10% lower than the prior period, mainly as a result of a 13% decline in the average rand per barrel Brent crude oil price and a significant decline in refining margins and fuel price differentials.

The group also experienced a 5% decrease in sales volumes due to lower production and market demand.

Earnings were also hit by the impairments of the Secunda and Sasolburg liquid fuels refineries’ cash-generating units, which were both fully impaired during the period.

As a result, earnings for the period dropped to R4.75 billion, down from R9.18 billion before, a 48% drop.

The group’s basic earnings per share decreased by 52% to R7.22 per share, and headline earnings per share decreased by 31% to R14.13 per share compared to the prior period.

Sasol did not delcare a dividend.

The group said that its dividend policy is based on 30% of free cash flow generated provided that net
debt (excluding leases) is sustainably below US$4 billion.

Over the reporting period, free cash flow was a deficit of R1.1 billion and the net debt at 31 December 2024 was US$4.3 billion.

“This exceeds the net debt trigger, therefore no interim dividend was declared,” it said.

Across the group’s different segments, it’s clear that the fuels segment was the main drag on operations.

The mining segment saw earnings jump by more than 100% to R2.3 billion compared to the prior period due to a revised coal supply agreement pricing with Secunda Operations.

This was partially offset by lower US$ export coal prices, lower internal sales volumes and higher total costs.

Gas production saw earnings jump 65% to R3.9 billion compared to the prior period due to higher gas prices, higher gas production and lower total cost—partly offset by higher remeasurement items.

The chemicals businesses in America, Africa and Eurasia each had different performances.

Africa saw improved sales, up 1%, while the Americas and Eurasia were down—the latter most recording a loss of R100 million.

However, the fuels business was the main drag, recording a loss of R1 billion.

This was due to lower Brent crude oil prices, refining margins and product differentials, a stronger exchange rate, lower production, higher feedstock costs, and lower earnings generally.