Sasol Stock Price, News & Analysis

Sasol reported a loss of R91.3 billion for the year, a stark contrast to earnings of R6.1 billion in the previous year. The decline was driven by low oil prices averaging US$62.62 per barrel, coupled with the adverse economic impact of COVID-19. Key metrics include an adjusted EBITDA drop of 27% and a basic loss per share of R147.45. Despite challenges, sales volumes in the Base Chemicals and Performance Chemicals segments improved by 19% and 8% respectively. The firm also improved cash fixed costs, achieving a historical low working capital ratio of 12.5%.

Sasol reported a significant financial downturn for the year ending June 30, 2020, posting a loss of R91.3 billion, primarily due to the collapse of oil prices and the impact of COVID-19. This compares to a profit of R6.1 billion in the prior year. The company faced a decline in gross margins, attributed to an 18% drop in Brent crude oil prices. Despite challenges, the Lake Charles Chemicals Project showed improved EBITDA performance, with total cash fixed costs remaining flat year-over-year. The company has suspended dividend payments to protect liquidity, as its debt levels surged to R189.7 billion.

Sasol announced a projected significant loss per share of R146.75 to R148.15 for the year ended June 30, 2020, compared to earnings of R6.97 in the previous year. Headline loss per share is expected between R8.72 and R14.86, with core HEPS declining to R11.02 to R18.56. Adjusted EBITDA is projected to fall by 17% to 37%, from R47.6 billion to R30.0 billion - R39.5 billion, due to a drop in crude oil prices and weak chemical margins. The company recognized R112 billion in pre-tax impairments, largely driven by a deteriorating macroeconomic outlook.

Sasol South Africa Limited has agreed to negotiate the sale of its sixteen air separation units to Air Liquide for approximately R8.5 billion. These units, capable of producing up to 42,000 tons of oxygen per day, are crucial for Sasol's operations in Secunda. This transaction aligns with Sasol's divestment strategy announced in March 2020 to mitigate lower oil prices and COVID-19 impacts. The deal is subject to approvals and expected to close in the financial year 2021. A trading statement update is anticipated in early August 2020.

Sasol announced its production and sales metrics for the year ended 30 June 2020, revealing a total of 774 COVID-19 infections among employees, with 561 active cases. Despite these infections, operations remain largely unaffected. The Lake Charles Chemicals Project (LCCP) is nearing completion at 99%, with a total capital expenditure of US$12.7 billion. The Low Density Polyethylene (LDPE) plant, damaged in a fire, is expected to come online by the end of October 2020. A detailed trading statement is expected on or before 31 July 2020.

Sasol has entered into an agreement to sell its indirect beneficial interest in the Escravos GTL plant in Nigeria to Chevron, officially effective from September 1, 2019. This transaction will relieve Sasol of associated guarantees and obligations while enabling continued support to Chevron through catalyst supply and technical assistance.

Additionally, Sasol has finalized a 51% stake sale in an explosives joint venture to Enaex, launching operations in South Africa on July 1, 2020. These moves are part of Sasol's divestment strategy to streamline its portfolio while further asset sales are underway in Mozambique and the USA.

Sasol announced the successful startup of the Guerbet alcohol unit at the Lake Charles Chemicals Project (LCCP) on June 19, 2020, following a similar achievement with the Ziegler alcohol unit. This completion brings the specialty chemicals units online capacity to 100% and total capacity to 86%. The Ziegler unit adds 173,000 tons per year of alcohol and strengthens Sasol's position in the specialty chemicals market. The company is on track to complete all units by September 2020, with LCCP expenditures at US$12.8 billion, generating over 800 jobs in Louisiana.

Sasol announced that the Guerbet alcohols unit at the Lake Charles Chemicals Project achieved beneficial operation on June 19, 2020. This marks Sasol's second Guerbet site, complementing the one in Brunsbuettel, Germany. With this, 100% of LCCP's specialty chemicals units are operational, totaling 86% of its nameplate capacity. Additionally, the LCCP Ziegler unit began operations on June 16, boosting alcohol capacity by 173,000 tons annually. The LDPE plant is expected to be operational by September 2020, with total capital expenditure tracking at US$12.8 billion.

Sasol is advancing its response to challenges posed by COVID-19 and oil price volatility. Operations have ramped up following the easing of lockdowns in South Africa, with key production facilities, including Secunda and Natref, resuming operations. Sasol has successfully amended loan covenants, increasing balance sheet flexibility, but expects heightened interest costs due to a credit rating downgrade. The company is optimizing its portfolio with a focus on chemicals and energy, announcing a significant restructuring initiative dubbed 'Sasol 2.0' aimed at long-term sustainability.