Sasol, the energy and chemicals giant, has reported a significant decline in earnings for the first half of its financial year, driven by a tough economic environment. The company’s revenue for the six months ending December dropped by 10% to R122.1 billion. This was mainly due to a 13% fall in the average rand per barrel price of Brent crude oil and reduced refining margins.
A 5% decrease in sales volumes also contributed to the revenue drop. This decrease resulted from lower production levels and decreased market demand. The company’s adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) fell by 15%, reaching R23.9 billion. The decline in earnings was primarily due to the revenue drop, though Sasol’s international chemicals segment showed growth, increasing its contribution from 6% to 13%.
In addition, EBIT saw a sharp 40% decline to R9.5 billion, largely due to non-cash adjustments like impairments at Sasol’s Secunda and Sasolburg refineries. As a result, headline earnings per share (HEPS) fell by 31% to R14.13.
Despite the challenges, Sasol reported a 20% increase in cash generated from operating activities, reaching R17.6 billion, due to changes in working capital. Capital expenditure was slightly reduced, coming in at R15 billion.
The company’s net debt increased to R81.8 billion, partly due to negative free cash flow. Sasol’s outlook remains cautious, as it expects the macroeconomic and operating environments to remain tough, and it decided not to declare an interim dividend due to the cash flow deficit and high debt levels.