Sasol Reports R44 Billion Loss Amid Market Challenges And Significant Impairments

Sasol has disclosed a startling R44 billion loss for the fiscal year ended June 30, 2024, which is principally driven by a massive R75 billion impairment. The company’s financial statements show a difficult year, with a 5% drop in revenue to R275.1 billion due to tough market circumstances and reduced chemical prices.

Despite some positive aspects, such as higher oil prices, better refining margins, and higher sales volumes, these were insufficient to offset margin pressures and the negative impact of low chemical prices. The group’s overall performance improved significantly in the second half of the year, mainly to higher operational results in the fourth quarter.

Sasol’s pre-tax and interest loss amounted to R27.3 billion, a significant downturn compared to the R21.5 billion profit recorded in the previous year. The full-year loss of R44.3 billion starkly contrasts with the R9.3 billion profit reported in 2023, reflecting a considerable deterioration in financial health.

The bulk of this loss stems from substantial asset impairments and reduced earnings before interest, tax, depreciation, and amortization. The impairments included R56.7 billion net of tax (R74.9 billion gross), with major write-downs in several key areas:

• Chemicals America Ethane Value Chain: R45.5 billion net of tax (R58.9 billion gross) impairment, influenced by prolonged market softness.
• Chemicals Africa: R3.9 billion net of tax (R5.3 billion gross) impairment, including challenges in the Polyethylene sector due to global oversupply and reduced demand.
• Secunda Liquid Fuels Refinery: R5.7 billion net of tax (R7.8 billion gross) impairment.
• This year’s impairments significantly exceed the R33.7 billion recorded in the previous year. The company also reported a basic loss per share of 69.94 cents, a sharp decline from the 14.00 cents earnings per share in FY23. Headline earnings per share fell by 66%, from 53.75 cents in the previous year to 18.19 cents.

In light of these financial difficulties, Sasol did not declare a final dividend for the year. This results in an 88% reduction in the full-year dividend, dropping from 17.0 cents per share in FY23 to just 2.00 cents per share in FY24, although an interim dividend was issued earlier in the year.

The company acknowledged that its dividend policy, which was based on 2.5x to 2.8x core headline earnings per share, has had to be revised due to the disconnect between earnings and cash flow generation and heightened leverage levels.

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