Sasol's Lake Charles Chemicals Project
Petrochemicals multinational Sasol on Thursday said a number of noncash adjustments had contributed to a decrease in its earnings a share for the financial year ended June 30.
The company explained in a trading statement that the largest of these adjustments was the sizable impairment of relevant cash generating units, owing to the softer outlook for global chemical and gas prices.
Higher capital spend on the Lake Charles Chemicals Project (LCCP), in the US, also impacted on Sasol’s financial results.
As the project progresses through the sequential beneficial operation schedule, the costs associated with relevant units are expensed, while the gross margin contribution follows a ramp-up profile and inventory build.
Sasol expects its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the financial year to decline by between 4% and 14%, compared with the R51-billion Ebitda reported for the prior financial year.
This is despite a 19% increase in the rand price per barrel of Brent crude oil. This is mainly owing to the negative earnings contribution from the LCCP and the impact of softer chemical margins.
However, Sasol expects its headline earnings per share (HEPS) for the reporting year to increase by between 7% and 17%, or by between R1.92 and R4.66 apiece, compared with the prior year’s HEPS of R27.44 apiece.
Core headline earnings per share (CHEPS), which is adjusted for one-off items such as the operating losses from the LCCP during ramp-up, are expected to increase by between 7% and 17%, or by between 36c and R4 apiece, compared with the CHEPS of R36.38 for the prior year.
Earnings per share (EPS) for the reporting year will decrease by between 46% and 56%, or by between R6.56 and R7.99 apiece, from the prior year’s EPS of R14.26, as a result of higher impairments.
Sasol further explained that its earnings for the year were significantly impacted on by remeasurement items before tax, including R12.9-billion towards the North American value chain, and around 12.9-billion in impairments as a result of increased capital costs for LCCP and softer US ethylene and global mono-ethylene glycol prices.
Additionally, the ammonia ethylene glycol in the South African value chain was impaired by R3-billion as a result of softer forecast international ammonia sales prices.
Sasol’s Canadian shale gas business was also impaired by R1.9-billion during the financial year.
Meanwhile, on an operational front, Sasol achieved higher productivity and volumes across its mining, Secunda Synfuels, liquid fuels, base and performance chemicals and high-density polyethylene production activities.
Sasol will release its results for the financial year on August 19.