Sasol today, 26 February 2018, delivered a largely strong set of interim financial results, underpinned by higher crude oil and product prices, increased demand for our specialty chemical products and a satisfactory operational performance across the value chain.
For the six months ended 31 December 2017, earnings attributable to shareholders decreased by 20% to ZAR6.9 billion from ZAR8.7 billion in the prior period. Headline earnings per share (HEPS) increased by 17% to ZAR17.67 and earnings per share (EPS) decreased by 21% to ZAR11.29 compared to the prior period.
EPS was negatively impacted by the scrapping of our US gas-to-liquids (GTL) project mounting to ZAR1.1 billion (US$83 million) and a partial impairment of the Canadian shale gas assets of R2.8 billion (CAD281 million). Core HEPS, which is reflective of our sustainable profitability, was up 5% to R18.22. The Board has declared an interim gross cash dividend of ZAR5.00 per share based on Core EPS, from ZAR4.80 per share in the prior period.
Average Brent crude oil prices moved higher by 19% and since December 2017, spot prices have moved closer to the $70/bbl mark, which if sustained at these levels, are expected to positively impact the company’s results during the second half of financial year 2018. Similarly, Natref refining margins increased by 16% to $9,73/bbl.
In the chemicals business, there has been a steady increase in most commodity chemical prices and the average margins for most of Sasol’s specialty chemicals products, in dollar terms, have remained resilient.
Excluding the effect of the hedging programme, the average rand/US dollar market exchange rate strengthened by 4% from the prior period to ZAR13.40, and the closing rand/US dollar market exchange rate strengthened by 5% from ZAR13,06 in June 2017 to ZAR12.37. This resulted in translation losses of ZAR1.2 billion on the valuation of the balance sheet compared to translation losses of ZAR341 million in the prior period.
Performance Chemicals sales volumes increased by 3% mainly due to increased market demand. Normalised Base Chemicals sales volumes decreased by 1% mainly due to lower volumes from Secunda Synfuels Operations (SSO).
Production volumes from Eurasian Operations increased by 2% due to stronger demand and increased plant availability.
Natref’s production volumes were down 21% owing to planned plant shutdowns and an unexpected Eskom electricity supply interruption at the start of the financial period. This, together with softer market demand, lowered our liquid fuels sales volumes by 3%.
Production volumes from SSO decreased by 1% due to a planned shutdown. Based on the current plant performance, Sasol expects to produce 7.7 million tons for the full financial year.
At Mining, stabilising operations post the strike in FY17 has been a challenge. There has been some improvement in production run rates and management will maintain focus on reaching the productivity rates achieved prior to the strike.
“Our sustained focus on cost, cash and capital conservation drove a largely strong set of results, notwithstanding continued macro-economic volatility. The recent recovery in global oil and product prices positively impacted our results, however this was offset by operational challenges at our Natref and mining operations, currency effects and poor economic conditions in South Africa. Encouraging recent developments signal a more stable political and investor friendly outlook for the country, in addition to a more positive global growth outlook with stronger demand in markets where we operate. Our recent safety performance has regrettably been marred by tragic fatalities in our mining operations. We are committed to the safety and health of our employees, communities and the environment. Safety, as one of our core values and number one priority will receive our constant and unwavering attention,” said Bongani Nqwababa, Joint President and Chief Executive Officer.
“We are making steady progress in delivering the LCCP within the revised schedule, as we place increased emphasis on business readiness. Once fully operational, the LCCP will transform Sasol’s earnings profile. The start-up of this world-scale chemicals facility and the implementation of our broad-based black economic empowerment ownership structure, Sasol Khanyisa, are landmark milestones to be delivered this calendar year. Guided by our clear strategic choices, we will continue to enhance our robust foundation to deliver on our refined value-based growth strategy. To this end, exercising disciplined capital allocation remains paramount to ensure we deliver sustainable growth and ongoing value to our shareholders,” said Stephen Cornell, Joint President and Chief Executive Officer.