Fossil Fuels

Sasol warns of dramatic earnings collapse as it confirms R112bn impairment

Sasol warns of dramatic earnings collapse as it confirms R112bn impairment

11TH AUGUST 2020




Chemicals and energy group Sasol warned of a dramatic collapse in its 2020 financial performance on Tuesday, confirming that losses for the period would represent a deterioration of more than 100% when compared with results reported for the 2019 financial year.

The decline, the company told shareholders in a statement, was driven largely by an impairment charge of about R112-billion across its chemicals and energy portfolios, which had been negatively affected by the deterioration in the long-term macroeconomic outlook.


The deterioration in the outlook was attributed to the Covid-19 pandemic and a severe decline in crude oil and chemical product prices.

The impairments and fair value adjustments confirmed by Sasol included: a R12.5-billion charge across its energy portfolio; a base chemicals charge of R71.3-billion, primarily in the US; and a R27.7-billion performance-chemicals charge, primarily relating to the group’s share of ethylene producing assets in the US.


Other noncash adjustments included: unrealised losses of R7.4-billion on the translation of monetary assets and liabilities due to the 23% weakening of the closing rand/US dollar exchange rate; unrealised losses of R4.8-billion on the valuation of financial instruments and derivative contracts; and depreciation of R3.9-billion attributable to those Lake Charles Chemicals Project units that had reached beneficial operation.

Sasol’s adjusted earnings before interest, tax, depreciation and amortisation would decline by between 17% and 37% from R47.6-billion in the prior year, to between R30-billion and R39.5-billion.

Sasol is scheduled to release results on August 17, but told shareholders on August 11 to anticipate a loss a share of between R146.75 and R148.15, representing a dramatic deterioration from earnings a share of R6.97 in the prior year.

The JSE-listed group said the headline loss would be between R8.72 a share and R14.86 a share, a decline of well over 100% when compared with headline earnings of R30.72 a share reported in the previous financial year.

Core headline earnings a share were expected to be between R11.02 and R18.56, compared with R37.65 a share in the prior year.

Sasol, which is in the middle of a far-reaching restructuring process that includes the sale of assets, said the rand value of Brent crude oil for the period had declined by 18% and that global chemical and refining margins had tightened materially, especially during the second half of the 2020 financial year.

The group had developed a list of ten major assets that were prioritised for sale, as it moves to streamline the business and reduce its $9.5-billion debt to about $4-billion by the end of its 2021 financial year.

It aimed to achieve the objective through a combination of asset disposals of between $2-billion and $4-billion, as well as a possible rights issue, the size of which had been capped at $2-billion. 

Add Comment

Click here to post a comment

Leave a Reply

WP Twitter Auto Publish Powered By :