Energy and chemicals group Sasol reported a 72% slump in earnings to R4.5-billion in the six months to December 31, 2019, compared with the prior period. Headline earnings a share, meanwhile, decreased by 74% to R5.94 when compared with the prior period.
The board also decided not to declare an interim dividend to “protect and strengthen our balance sheet”, as group gearing surged from 56.3% on June 30, 2019, to 64.5% at the end of the calendar year, within a whisker of the upper end of previous market guidance of between 55% to 65%.
Cash generated from operating activities decreased by 21% to R19.6-billion, compared to R24.8-billion in the prior period, while net cash on hand decreased from R15.8-billion at June 30, 2019 to R12.7-billion.
The company attributed the fall in earnings to a 9% decrease in the rand price of a barrel of Brent crude oil during the period, as well as softer global chemical prices and refining margins, lower productivity at it mining operations and a negative contribution from the Lake Charles Chemicals Project (LCCP), located in the US state of Louisiana.
The JSE-listed group’s chemicals businesses were particularly badly affected by what it described as a “softer macroeconomic environment”.
The company warned, too, that softer chemical prices were likely to persist for the next 12 to 24 months, with a structural recovery anticipated only in the medium to long term.
Revenues at the LCCP, which was currently ramping up, did not match the costs expensed and negatively impacted earnings by R2.8-billion during the period.
Earnings from the project were also negatively impacted by finance charges of R2-billion as the LCCP units reached beneficial operation.