Sasol projects a wide loss for FY2020 amid R112 billion in write-downs

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  • Loss per share expected to drop by more than 100%
  • Headline loss per share expected to dip significantly by more than 100%
  • Adjusted EBITDA expected to decline by between 17% and 37%

Harare – Integrated energy and chemical company Sasol warned that it had plunged into a huge loss for the year ended 30 June 2020 due to COVID-19 pandemic and a severe decline in crude oil and chemical products prices.

In a trading statement, the company said the loss per share is expected to be between R146.75 and R148.15 compared to the prior year earnings per share of R6.97 representing a decline of more than 100%.

Sasol also expects headline loss per share is expected to be between R8.72 and R14.86 compared to the prior year headline earnings per share (HEPS) of R30.72 representing a decline of more than 100%.

Sasol’s adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA*) is also expected to decline by between 17% and 37% from R47.6 billion in the prior year, to between R30.0 billion and R39.5 billion.

The company attributes this to an 18% decrease in the rand per barrel price of Brent crude oil coupled with much softer global chemical and refining margins impacting Sasol’s gross margins adversely, especially during the second half of the 2020 financial year.

However, the company said the cash fixed cost performance for the second half of the year improved markedly, partly offsetting the impact of lower gross margins.

The company added that, “The largest contributor relates to impairments of a number of cash generating units following the decline in the long-term macro-economic outlook, and the fair value impact following the commencement of partnering discussions for our Base Chemicals assets in the United States. Aggregate pre-tax impairment charges of approximately R112 billion have been recognised in the 2020 financial year.”

The R112 billion write-down exceeds Sasol’s market capitalisation of R94.9 billion.

Sasol highlighted that it had written down its energy portfolio by R12.5 billion, Base Chemicals by R71. 3 billion and Performance Chemicals by R27.7 billion.

The company seeks to find a partner at its US Base Chemical operations in an effort to avert a potential $2 billion rights issue after a slump in the oil price and the impact of the coronavirus pandemic.

The company expects to publish its financial results on 17 August 2020.

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