Energy and chemicals company Sasol has reported lower earnings at the halfway stage of the financial year, in a challenging macroeconomic and operating environment.
The company’s revenue for the six months ended December fell 10% to R122.1bn, mainly due to a 13% decline in the average rand per barrel Brent crude oil price and a significant decline in refining margins and fuel price differentials.
The decline in revenue was also attributed to a 5% decrease in sales volumes, resulting from lower production and lower market demand, Sasol said in a statement on Monday.
Adjusted earnings before interest, tax, depreciation, and amortisation (ebitda) declined 15% to R23.9bn, largely due to the lower revenue. However, the company’s international chemicals segment noted an increase in its relative contribution, from 6% to 13%.
Ebit fell 40% to R9.5bn. That decline was due to non-cash adjustments, including impairments of the Secunda and Sasolburg liquid fuels refineries, which remain fully impaired.
Headline earnings per share (HEPS) declined 31% to R14.13.
Cash generated by operating activities increased 20% to R17.6bn, primarily due to changes in working capital. However, capital expenditure was slightly lower at R15bn.
Despite the challenging environment, Sasol’s management said the company’s focus was on cost containment, cash conservation and business optimisation initiatives.
“We have implemented stringent cost management and efficient capital expenditure to mitigate the impact of the challenging macroeconomic and operating environment,” CEO Simon Baloyi said in a statement.
Sasol’s net debt (excluding leases) increased to R81.8bn, mainly due to the negative free cash flow. The company’s interim financial results come amid a backdrop of increasing global uncertainty and volatility.
In terms of its outlook, Sasol said the macroeconomic and operating environments were expected to remain challenging.
The company said the board did not declare an interim dividend, citing the company’s free cash flow deficit and net debt levels exceeding the trigger point.