While Sasol notified shareholders in a buying and selling assertion a number of weeks in the past that its revenue for the 12 months to finish June 2022 could be a lot increased – saying that earnings per share would enhance from R14.57 in 2021 to as a lot as R63.50 – the share value nonetheless jumped greater than 4% on affirmation of the figures on Tuesday.
The outcomes announcement additionally introduced with it the excellent news that Sasol pays its first dividend in three years.
Sasol final declared a dividend in 2019, an interim paid in March that 12 months from revenue earned in the course of the six months to December 2018.
The sharp enhance in earnings to greater than R41.6 billion in the final monetary 12 months from R10.5 billion in 2021 – and a lack of almost R92 billion in monetary 2020 – reveals that Sasol has come a great distance.
The restoration in earnings to R62.33 per share stands in stark distinction with the lack of greater than R148 per share in 2020.
Presenting the outcomes, Sasol CEO Fleetwood Grobler started by telling shareholders the group confronted a number of challenges in South Africa and overseas over the last two years.
Challenges
“The outbreak of Covid significantly impacted the global economy and the world is still adjusting to major supply chain disruptions,” says Grobler.
“The conflict in Ukraine, now coming into its sixth month, has brought about huge upheaval in world vitality markets, together with a devastating toll on human life; inflation is hovering throughout the globe, and recessionary issues are rising.
“In South Africa, the civil unrest of July 21 and, more recently, the torrential rainstorms in April this year in KwaZulu-Natal, affected our ability to export products and disrupted our operations.”
Progress
“Notwithstanding this backdrop, we remained focused on meeting our short-term targets, while recording progress on Future Sasol,” says Grobler.
“In this era, we have been profitable in considerably strengthening our steadiness sheet via well-executed response measures, with out the necessity for a rights subject.
“We completed our strategy-led, accelerated asset divestment programme. Today, I am pleased to announce the reinstatement of dividends to our shareholders.”
Grobler says a few of the enchancment in Sasol’s fortunes resulted from increased oil and chemical costs, however that sturdy value and capital expenditure efficiency contributed to the outcomes.
“However, these advantages have been partly offset by operational challenges in our built-in South African worth chains that led to decrease manufacturing.
“I am pleased to report that we have already improved our Synfuels plant output and coal stockpile situation,” he provides.
Listen: CEO Fleetwood Grobler on Sasol outcomes and benefitting from increased vitality and chemical substances costs
Divisional highlights
The vitality division benefitted from a restoration in the demand for gasoline after the Covid-19 lockdowns which plagued the earlier monetary 12 months, regardless of the impact of decrease manufacturing volumes on the Secunda and Sasolburg vegetation.
Mining operations skilled setbacks in the first six months of 2022, however productiveness and output improved in the second half to rebuild coal stockpiles.
“The chemicals businesses delivered a 21% increase in revenue this year, benefiting from a stronger average sales basket price,” says Grobler.
“Overall volumes have been 12% % decrease than the prior 12 months, largely because of the divestment of fifty% of the US base chemical substances property, which was concluded in December 2020, and decrease SA manufacturing volumes.
“Sales volumes for our speciality chemical business divisions were higher as US operations continued to ramp up production. The ramp up at Lake Charles is continuing as planned.”
Sasol famous that it’s doing every little thing attainable to answer potential fuel provide constraints in Europe because of sanctions towards Russia. The sanctions influence all producers in the area as Russia is the most important provider of fuel. The group can also be evaluating various feed shares the place technically possible.
Balance sheet
Hanré Rossouw, Sasol’s new chief monetary officer, famous in the dialogue of the outcomes that earnings earlier than curiosity, tax, depreciation and amortisation elevated by 48% to round R72 billion.
“The steadiness sheet was strengthened, ending with internet debt of $3.8 billion at year-end, effectively under the goal of $5 billion. The rand remained comparatively flat in the course of the monetary 12 months, however the closing price was 14% increased, which negatively impacted the interpretation of our dollar-denominated debt.
“Our group profitability and financial position has improved dramatically over the last year,” says Rossouw.
“Favourable macroeconomics have helped us, along with targeted and well-executed plans and a method which can protect and develop long-term worth.
“We continued to enjoy the benefit of significant increases in the oil and other energy and chemical prices. We saw Brent crude increasing by 70% to average $92 per barrel and polyethylene prices up 38%.”
Comment
Christiaan Bothma, funding analyst at Sanlam Private Wealth, says Sasol delivered “a solid set of numbers” on the again of robust commodity costs.
“The bulk of the rise in income might be attributed to stronger oil and chemical costs, however the associated fee efficiency was additionally pleasing with the corporate exceeding its value financial savings targets set a 12 months in the past. This was achieved regardless of a number of operational setbacks – most notably the problems reported on final December at its coal mines, which affected manufacturing at different divisions.
“While longer-term climate risks need to be taken into account, we think the current market price more than discounts for these issues and we expect the business to continue to outperform given the tight prevailing energy markets,” says Bothma.
Outlook
One will get the impression that administration would love buyers to attract their very own conclusions in regards to the future prospects so far as ongoing profitability is worried.
Grobler solely says that the adjustments of the previous few years will place Sasol to be sustainably worthwhile and aggressive, even in a lower-oil-price world.
He has been promising profitability at decrease oil costs since he took over as CEO in 2019, at a time when the oil value was fluctuating between $45 and $65 per barrel.
The newest outcomes confirmed the potential for income at increased commodity costs, whereas Grobler says:
“There is, of course, much more to do, but there is also little doubt that we have created a stronger platform.”
He provides: “Looking forward, there are a number of key areas the place we should preserve our relentless focus to proceed delivering on our ambition [and] to develop shared worth, whereas accelerating our transition.
“First and foremost, we must achieve zero harm for our people. Also important, will be to progress our climate change and broader ESG goals, which is fundamental to our long-term sustainability. Maintaining operational stability and focused volume improvement will ensure that we maximise value from our well-invested assets,” says Grobler.
Shareholders have benefitted from Sasol’s transformation from a gaggle apprehensive about its survival to regaining its standing as considered one of SA’s hottest shares.
The share value has been recovering steadily from the Covid-19 lows, with the newest earnings figures and dividend displaying potential for extra progress.
Headline earnings per share of R47.58 put the share on a price-earnings ratio of seven instances, and the R14.70 dividend represents a dividend yield of 4.2%.
For a pdf of the above, click on right here.
Brought to you by Sasol.
Moneyweb doesn’t endorse any services or products being marketed in sponsored articles on our platform.