Sasol ends torrid financial year with a R91 billion loss

  • The petrochemical group says ‘unprecedented low oil prices’ and impairments of R111.6 billion resulted in a loss of R91.3 billion.
  • The group expects global oil prices to remain low for up to 18 months. 
  • The company’s total debt has increased to R189.7 billion.

Sasol has ended a turbulent year with a loss of R91.3 billion.

The petrochemical group’s year to end June was marked by a sharp fall in oil prices which significantly slashed its market capitalisation. Last week it warned of R112 billion in writedowns, which exceeded its market capitalisation.

The financial results paint a devastating picture of the impact of international oil price fluctuations and Covid-19 on the group’s operations, in what is likely to add to the unease of investors. Sasol’s shares fell 4% in early trade on Monday. 

“The combined effects of unprecedented low oil prices, destruction of demand for products and impairments of R111.6 billion resulted in a loss of R91.3 billion for the year compared to earnings of R6.1 billion in the prior year,” the company said

“We expect that oil prices will remain low for the next 12 to 18 months as the impact of COVID-19 becomes better understood.”

Headline earnings per share tanked by more than 100% to a -R11.79 loss per share, compared to R30.72 in the prior year.

The gross margins of the group’s energy business, meanwhile, slumped by 38%.

To mitigate the impact of the losses on the balance sheet, the company said it had engaged its lenders to waive its loan covenants as at 30 June 2020 from 3 times to 4 times of net debt.  Sasol’s first significant debt, due next year, was $1 billion in loans.

The company’s total debt, largely denominated in US dollars, increased to R189.7 billion, from R130.9 billion in the previous year. 

It also stated that it had secured $1 billion syndicated loan facility for up to 18 months to enhance its US dollar liquidity position during the peak gearing phase as its Lake Charles Chemicals Project ramps up.

The financing of the Chemicals Project has contributed to earnings losses, with an additional R6 billion going into finance charges as the project started operating.

The Johannesburg headquartered company has embarked on a process of offloading assets, in a bid to stabilise its balance sheet, including a proposal to sell Secunda’s air separation units to Air Liquide for R8.5 billion.

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