Sasol has released its full year financial results for the year ended 30 June 2016. Earnings attributable to shareholders decreased by 55% to R13.2 billion from R29.7 billion in the prior year. Headline earnings per share (HEPS) decreased by 17% to R41.40 and earnings per share (EPS) decreased by 56% to R21.66 compared to the prior year. The Sasol Limited Board has declared a final gross dividend of R9.10 per share (21% lower compared to the prior year).
"We are excited to be taking over as Sasol's Joint Presidents and Chief Executive Officers. We have been working together over the last six months to clearly define how we will lead Sasol, address the challenges the company is facing and pursue the exciting opportunities ahead.
Sasol's global operations continue to perform well, with our Secunda Operations reporting record production volumes. Our cost reduction and cash savings initiatives are exceeding their targets, which places us on a sound footing as we gear up our balance sheet to complete the world scale, company changing investment in Louisiana in the US," said Bongani Nqwababa, Joint President and Chief Executive Officer, Sasol Limited.
"Although the capital expenditure for our Lake Charles Chemicals Project has increased, we remain confident that the fundamental drivers for this investment are sound. The cost and schedule review process, which was completed in August 2016, has set a solid platform for the continued execution of this project. In Mozambique, we continue to advance our growth projects to further develop our footprint in that region. We look forward to building on Sasol's past successes, as we lead the company forward and continue to grow in both Southern Africa and North America. In the medium-term, we will continue to focus on pursuing zero harm, building a resilient organisation for the future, nurturing our foundation businesses, delivering sustainable growth and clarifying our future investment opportunities," said Stephen Cornell, Joint President and Chief Executive Officer, Sasol Limited.
Operating profit of R24.2 billion decreased by 48% compared to the prior year on the back of challenging and highly volatile global markets. Average Brent crude oil prices moved dramatically lower by 41% compared to the prior year (average dated Brent was US$43/bbl for the year ended 30 June 2016 compared with US$73/bbl in the prior year). Although commodity chemical prices were lower due to depressed oil prices, there was still strong demand and robust margins in certain key markets.
The average basket of commodity chemical prices decreased by 22% compared to a 41% decrease in oil. However, the average margin for the speciality chemicals business remained resilient compared to the prior year. The effect of lower oil and commodity chemical prices was partly offset by a 27% weaker average rand/US dollar exchange rate (R14.52/US$ for the year ended 30 June 2016 compared with R11.45/US$ in the prior year).
On average, the rand/bbl oil price of R630 was 25% lower compared to the prior year.
The highlights of the company’s operational performance can be summarised as follows:
- Secunda Synfuels Operations (SSO) increased production volumes by 1%, or 97 kilo tonnes (kt), compared to the prior year, to a record 7.8 million t.
- Production volumes at our Eurasian Operations increased by 4% compared to the prior year.
- Total liquid fuels production for the Energy business increased by 1% (0.6 million barrels) compared to the prior year due to higher total production volumes by SSO, continued stable operations at the Natref Operations and a greater portion of SSO's volumes being utilised by the Energy business as a result of planned commissioning activities associated with the C3 Expansion Project.
- The average utilisation rate of the ORYX GTL facility in Qatar was impacted by a planned extended statutory shutdown in the third quarter of the financial year. Subsequent to the shutdown, utilisation rates averaged above 100% of nameplate capacity, enabling us to achieve an overall utilisation rate of 81%, which is in line with previous market guidance provided.
- Secunda Chemical Operations' production volumes were 1% higher than in the prior year.
- Despite the largest planned statutory shutdown since its inception, Sasolburg Operations' production volumes remained in line with the prior year. The planned extended statutory shutdown resulted in a 21% decrease in ammonia production compared to the prior year. This was partly offset by the slightly slower than planned ramp-up of our FTWEP facility which contributed 8 kt per annum of additional hard wax production during the year. Normalised production volumes for the Sasolburg site increased by 2%.
- Sales volumes from our Base Chemicals business decreased by 8% as a result of a planned extended shutdown to enable the commissioning activities of the C3 Expansion Project, subdued demand for explosives and fertilizers and a planned stock build. Normalised sales volumes decreased by 2.6% on a comparable basis.
- Sales volumes from our Performance Chemicals business, normalised for the planned shutdowns at the Sasolburg facilities and ethylene plant in North America, increased by 1.8% compared to the prior year.
The current economic climate remains volatile and uncertain. While the outcome of the United Kingdom referendum, regarding its exit of the European Union, adds a further element of uncertainty and downside risk to the global economic outlook, the company expects moderate global growth to be maintained, with advanced economies generally performing better than commodity and oil exporting nations. In the short term, high oil inventory levels are expected to continue weighing on the market, but as more evidence emerges of lower non-OPEC production, the oil price cycle is likely to turn higher. The extent and timing of this upturn remains unpredictable. Although the rand showed some resilience in recent months, it is believed that the currency still faces a number of near term depreciation risks as the possibility for a sovereign credit downgrade has not been eliminated, domestic growth prospects remain challenging, and emerging market sentiment is still fragile. As oil price and foreign exchange movements are outside the company’s control, its focus remains firmly on managing factors within our control, including volume growth, cost optimisation, project execution, effective capital allocation and cash conservation.
The company expects an overall strong operational performance for the 2017 financial year, with:
- Liquid fuels sales volumes for the Energy SBU in Southern Africa to be approximately 61 million barrels.
- Base Chemicals and Performance Chemicals sales volumes to be higher than the prior year.
- A higher average utilisation rate at ORYX GTL in Qatar of approximately 90%.
- Improved utilisation rate at EGTL in Nigeria due to a steady ramp-up.
- Normalised cash fixed costs to remain in line with SA PPI.
- The RP cash flow contribution to range between R15 billion and R20 billion.
- BPEP cash cost savings to achieve an annual run rate of R5.4 billion by financial year 2018.
- Capital expenditure, including capital accruals, of R75 billion for 2017 and R60 billion in 2018 as the company progresses with the execution of the growth plan and strategy.
- The balance sheet gearing up to a level of between 25% and 35%.
- Average Brent crude oil prices to remain between US$40 and US$50.
- Ongoing rand/US dollar volatility due to various factors, including the pending outcome of the next review of the South African sovereign credit rating and increased capital inflows resulting from investors seeking higher yields globally, including South Africa.
Adapted from press release by Rosalie Starling
Read the article online at: https://www.hydrocarbonengineering.com/refining/13092016/sasol-hits-record-production-volumes-at-synfuels-operations-4071/