Sasol impacted by Eskom electricity supply interruptions

Chemicals and energy company Sasol on Monday reported a 6% decline in core headline earnings per share for the year ended June 2018, citing a number of production interruptions including power outages from state electricity supplier, Eskom.

Core headline earnings per share dropped to R36.03, while headline earnings per share was down 22% to R27.44.

Earnings before interest, taxes, depreciation, and amortisation climbed 10% to R52 billion. Sasol said that the difference between core headline earnings and EBITDA in the current year is largely due to depreciation of approximately R16 billion and employee share-based payment expenses of R1.5 billion due to the marked improvement of the Sasol share price at the end of the financial year.

A final gross cash dividend of R7.90 per share (30 June 2017 – R7.80 per ordinary share) has been declared.

“Our financial results were negatively impacted by several unplanned Eskom electricity supply interruptions and two internal outages at our Secunda Synfuels (SSO) and Natref operations that resulted in lower production volumes, as well as a 6% stronger average rand/US dollar exchange rate compared to the prior period,” Sasol said.

It highlighted ‘satisfactory sales and production volumes’, delivering a flat normalised real cash fixed cost base and benefitting from much higher crude oil and product margins in the second half of the financial year.

Sasol said that plant interruptions lowered Secunda Synfuels Operations volumes by 3%, while Eurasian Operations volumes were up 3%.

Joint president and CEO, Bongani Nqwababa said: “Our resilient 2018 performance was underpinned by higher sales and production volumes, in the second half of the year. This was enabled by our continued focus on factors within our control and higher global oil prices, resulting in improved product prices and margins, notwithstanding continued exchange rate volatility.

“Overall, our operational performance was satisfactory, however unplanned Eskom electricity supply interruptions and two internal outages at Secunda Synfuels Operations, negatively impacted volumes.

“Enhancing our foundation businesses, a core aspect of our value-based strategy, will be delivered through ensuring safe and sustainable operations, robust asset management strategies, continuous improvement and digitalisation, underscored by disciplined capital allocation,” he said.

Looking ahead, joint president and CEO, Stephen Cornell said: “2019 will be a defining year for Sasol with the start-up of the LCCP, a catalyst for transforming our earnings profile. Mozambique, our other key growth area, remains central to our gas strategy where we are stepping up efforts to secure long-term gas feedstock, while delivering on our stakeholder commitments.

“Improving the flexibility of our balance sheet, through increased cash flow and reduced gearing, and managing an optimal capital structure will be a key focus ahead. We remain confident in delivering on our strategy, which will realise sustainable long-term value for our stakeholders.”

Read: The impressive technology behind Sasol’s new R2 billion head offices in Sandton

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Sasol impacted by Eskom electricity supply interruptions