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Category: Stock Market and SASOL
Share Price: R235.16 (down 8.3% for the day) Date: 31 January 2020 SASOL shares plunge yet again. The share price of SASOL was down -8.3% for the day following the release of SASOL's trading statement for the interim period ending December 2019. The group stated that their headline earnings per share will be lower by between 69% and 79%
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About SASOL
Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. We develop and commercialise technologies, and build and operate world-scale facilities to produce a range of high-value product stream, including liquid fuels, chemicals and low-carbon electricity.
Sasol’s new value chain-based operating model came into effect in 2014. Towards this end, the Sasol Group is now organised into two upstream business units, three regional operating hubs, and four customer-facing strategic business units, supported by fit-for-purpose functions as reflected in our new Sasol website.
By combining the talent of our people and our technological advantage, Sasol has been a pioneer in innovation for over six decades. As market needs and stakeholder expectations have changed, so too have our methods, facilities and products, driving progress to deliver long-term shareholder value sustainably. The growth and enhancement of our foundation businesses in Southern Africa is complemented by the significant chapter of growth, Sasol has entered in its history.
At Sasol, we recognise the growing need for countries to secure supply of energy and chemicals. For many countries, specifically those with abundant hydrocarbons, in-country conversion of these resources into liquid fuels and chemicals goes a long way to boost national economies. Sasol’s focused and strong project pipeline means we are actively capitalising on the growth opportunities that play to our strengths in Southern Africa and North America. Our focus is creating value sustainably and we are proud to be taking this company, to new frontiers.
Sasol was established in 1950 in South Africa and we remain one of the country’s largest investors in capital projects, skills development and technological research and development. The company is listed on the JSE in South Africa and on the New York Stock Exchange in the United States.
Sasol’s new value chain-based operating model came into effect in 2014. Towards this end, the Sasol Group is now organised into two upstream business units, three regional operating hubs, and four customer-facing strategic business units, supported by fit-for-purpose functions as reflected in our new Sasol website.
By combining the talent of our people and our technological advantage, Sasol has been a pioneer in innovation for over six decades. As market needs and stakeholder expectations have changed, so too have our methods, facilities and products, driving progress to deliver long-term shareholder value sustainably. The growth and enhancement of our foundation businesses in Southern Africa is complemented by the significant chapter of growth, Sasol has entered in its history.
At Sasol, we recognise the growing need for countries to secure supply of energy and chemicals. For many countries, specifically those with abundant hydrocarbons, in-country conversion of these resources into liquid fuels and chemicals goes a long way to boost national economies. Sasol’s focused and strong project pipeline means we are actively capitalising on the growth opportunities that play to our strengths in Southern Africa and North America. Our focus is creating value sustainably and we are proud to be taking this company, to new frontiers.
Sasol was established in 1950 in South Africa and we remain one of the country’s largest investors in capital projects, skills development and technological research and development. The company is listed on the JSE in South Africa and on the New York Stock Exchange in the United States.
SASOL Trading Statement for period ending December 2019
Trading Statement for the financial half year ended 31 December 2019
Sasol is expected to deliver a satisfactory set of operational results for the six months ended 31 December 2019, with a good volume, cost and working capital performance. The financial results were however impacted by a weak macroeconomic environment. This resulted in lower margins and operating profit.
Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA*) are expected to decline by between 22% and 32% from R26,8 billion in the prior half year. This results from a 9% decrease in the rand per barrel price of Brent crude oil, softer global chemical and refining margins and a negative EBITDA contribution from the Lake Charles Chemicals Project (LCCP). As the LCCP units progress through the sequential beneficial operation schedule, the costs associated with the relevant units are expensed while the gross margin contribution follows the planned volume ramp-up profile and inventory build. Earnings are further impacted by approximately R1,7 billion in additional depreciation charges and approximately R2 billion in finance charges for financial half year 2020 as the LCCP units reach beneficial operation.
Shareholders are accordingly advised that: -
Earnings per share (EPS) for the financial half year are expected to be between R5,37 and R7,76 per share. This is a decrease of between 68% and 78% from the prior half year EPS of R23,92;
- Headline earnings per share (HEPS) are expected to be between R4,79 and R7,11 per share. This is a decrease of between 69% and 79% from the prior half year HEPS of R23,25. There were no significant impairments recorded for the half year 2020;
- Core HEPS (CHEPS**) are expected to be between R7,90 and R10,04 per share. This is a decrease of between 53% and 63% from the prior half year CHEPS of R21,45.
We expect net debt to EBITDA to remain below 3,0 times and gearing to remain within the previous market guidance of 55% and 65% for financial half year 2020.
Lake Charles Chemicals Project update
Sasol provided an update on the impact of the explosion and fire at the low-density polyethylene (LDPE) unit on 24 January 2020. Mainly as a result of the aforementioned incident, Sasol has revised its guidance on the EBITDA contribution from the LCCP for the financial year 2020 to between US$50 million and US$100 million.
The financial information on which this trading statement is based has not been reviewed and reported on by the Company's external auditors. Sasol's financial results for the financial half year ended 31 December 2019 will be announced on Monday, 24 February 2020.
* Adjusted EBITDA are calculated by adjusting operating profit for depreciation, amortisation, share-based payments, remeasurement items, movement in rehabilitation provisions due to discount rate changes, unrealised translation gains and losses, and unrealised gains and losses on our hedging activities.
** Core HEPS are calculated by adjusting headline earnings with once-off items, period close adjustments and depreciation and amortisation of capital projects (exceeding R4 billion) which have reached beneficial operation and are still ramping up, and share-based payments on implementation of B-BBEE transactions. Period close adjustments in relation to the valuation of our derivatives at period end are to remove volatility from earnings as these instruments are valued using forward curves and other market factors at the reporting date and could vary from period to period.
We believe core headline earnings are a useful measure of the group´s sustainable operating performance. However, this is not a defined term under IFRS and may not be comparable with similarly titled measures reported by other companies. The aforementioned adjustments are the responsibility of the directors of Sasol. The adjustments have been prepared for illustrative purposes only and due to their nature, may not fairly present Sasol´s financial position, changes in equity, results of operations or cash flows.
Sasol is expected to deliver a satisfactory set of operational results for the six months ended 31 December 2019, with a good volume, cost and working capital performance. The financial results were however impacted by a weak macroeconomic environment. This resulted in lower margins and operating profit.
Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA*) are expected to decline by between 22% and 32% from R26,8 billion in the prior half year. This results from a 9% decrease in the rand per barrel price of Brent crude oil, softer global chemical and refining margins and a negative EBITDA contribution from the Lake Charles Chemicals Project (LCCP). As the LCCP units progress through the sequential beneficial operation schedule, the costs associated with the relevant units are expensed while the gross margin contribution follows the planned volume ramp-up profile and inventory build. Earnings are further impacted by approximately R1,7 billion in additional depreciation charges and approximately R2 billion in finance charges for financial half year 2020 as the LCCP units reach beneficial operation.
Shareholders are accordingly advised that: -
Earnings per share (EPS) for the financial half year are expected to be between R5,37 and R7,76 per share. This is a decrease of between 68% and 78% from the prior half year EPS of R23,92;
- Headline earnings per share (HEPS) are expected to be between R4,79 and R7,11 per share. This is a decrease of between 69% and 79% from the prior half year HEPS of R23,25. There were no significant impairments recorded for the half year 2020;
- Core HEPS (CHEPS**) are expected to be between R7,90 and R10,04 per share. This is a decrease of between 53% and 63% from the prior half year CHEPS of R21,45.
We expect net debt to EBITDA to remain below 3,0 times and gearing to remain within the previous market guidance of 55% and 65% for financial half year 2020.
Lake Charles Chemicals Project update
Sasol provided an update on the impact of the explosion and fire at the low-density polyethylene (LDPE) unit on 24 January 2020. Mainly as a result of the aforementioned incident, Sasol has revised its guidance on the EBITDA contribution from the LCCP for the financial year 2020 to between US$50 million and US$100 million.
The financial information on which this trading statement is based has not been reviewed and reported on by the Company's external auditors. Sasol's financial results for the financial half year ended 31 December 2019 will be announced on Monday, 24 February 2020.
* Adjusted EBITDA are calculated by adjusting operating profit for depreciation, amortisation, share-based payments, remeasurement items, movement in rehabilitation provisions due to discount rate changes, unrealised translation gains and losses, and unrealised gains and losses on our hedging activities.
** Core HEPS are calculated by adjusting headline earnings with once-off items, period close adjustments and depreciation and amortisation of capital projects (exceeding R4 billion) which have reached beneficial operation and are still ramping up, and share-based payments on implementation of B-BBEE transactions. Period close adjustments in relation to the valuation of our derivatives at period end are to remove volatility from earnings as these instruments are valued using forward curves and other market factors at the reporting date and could vary from period to period.
We believe core headline earnings are a useful measure of the group´s sustainable operating performance. However, this is not a defined term under IFRS and may not be comparable with similarly titled measures reported by other companies. The aforementioned adjustments are the responsibility of the directors of Sasol. The adjustments have been prepared for illustrative purposes only and due to their nature, may not fairly present Sasol´s financial position, changes in equity, results of operations or cash flows.
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SASOL share price history over the last 5 years
The image below is a screenshot taken from sharenet showing SASOL's share price history over the last 5 years. And its pretty clear that since the start of 2018 its been a very tough time for the group, with the bulk of their issues emanating from the Lake Charles Chemicals Project (LCCP)
SASOL (SOL) share price plunge after it announced it is delaying the publication of its financial results
The summary below provides an overview of the share price performance of SASOL over various time periods:
The above is the last thing any shareholder would like to see. And based on the market's reaction to SASOL's trading statement it seems investors are finally fed up with the group. SASOL share plunged -8.3% after the release of this trading statement.
- 1 week: -1.34%
- 1 months: -15.48%
- Year to Date (YTD): -15.48%
- 1 year: -38.19%
- 3 years:-36.19%
- 5 years:-39.10%
The above is the last thing any shareholder would like to see. And based on the market's reaction to SASOL's trading statement it seems investors are finally fed up with the group. SASOL share plunged -8.3% after the release of this trading statement.