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Sasol slumps as lower oil prices, virus crimp full-year profit

High debt levels and falling oil prices weigh.
A man walks past Sasol's synthetic fuel plant in Secunda, in Mpumalanga. Image: Reuters

Sasol shares fell the most in almost three weeks after the South African chemicals and fuel manufacturer forecast full-year profit will probably decline by a fifth as it takes measures to mitigate a depressed oil market.

Sasol earnings per share before one-time items are expected to drop by at least 20% in the 12 months through June, according to a statement distributed by the Johannesburg Stock Exchange. It outlined steps in March, including plans to conserve cash and a potential $2 billion rights offer, to offset the collapse in oil prices earlier this year.

Read the full Sens statement here.

The stock fell as much as 9.1%, the most since May 4, and was trading 7.5% down as of 10 a.m. in Johannesburg. The shares have slumped 75% this year, making Sasol the worst performer in an index tracking South Africa’s 40 biggest companies.

The company has endured a challenging year so far, such as cost overruns and the mismanagement of its US chemicals project at Lake Charles, Louisiana, that resulted in Sasol’s co-chief executive officers stepping down. Then came a price war between the world’s biggest oil producers that sent prices lower and the coronavirus pandemic that curbed demand.

“Shareholders are advised that implementation of the response strategy is underway, the outcome of which may have a material effect on the price of the company’s securities,” Sasol said.

Results will be announced on August 17.

Earnings per share are also expected to fall by at least 20% from the previous period, according to Sasol. Results “may be impacted further by adjustments resulting from the year-end closure process.”

© 2020 Bloomberg

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How big will “one-time” losses be THIS time compared to all the OTHER times?

At some stage the accounting rules need to start saying companies that habitually have one-time adjustments need to report them under usual results.

Sasol has also now got contaminated by the ‘’Dutch Disease’’ (or ‘’crude awakening’’) of the 1970s – the so-called travails of manufacturers in the Netherlands after the discovery there of natural gas. Dutch disease strikes when foreign demand for an export drives up the exchange value of the exporting country’s currency.

Former Venezuelan Oil Minister and OPEC cofounder Juan Pablo Perez Alfonso (nice long name!) in 1970 actually put it like this: ‘’Ten years from now, twenty years from now, you will see: Oil will bring us to ruin.
He correctly foresaw the inability of virtually all OPEC nations to use their riches to diversify significantly beyond petroleum and related products.
The mighty ‘’Colonists’’ – Britain also went through an apparent bout of it in the early 1980s, following the development of North Sea oil.
But, don’t feel alone Sasol. Russia in the wake of the collapse of communism is struggling with a big dose Dutch disease today!

Eish man – this Khanyisa 25 % Sasol ownership, she is also going down the drain now – this Corona Virus she is a big problem – maybe Sasol should have given us money to buy food instead – that would have been a much better ” diversification” than these shares – we want ”pap en vleis on the table now – we can’t even sell theseshares now to buy beer!

You sound jealous that you also didn’t get free stuff. Entitled too?

I think Sasol may come back to R40 in the short term.

Planes are flying look at TSA website 350k on friday, up from 90k a month ago.

No brainer. Just buy at these levels. Bofa will get partner for LCP. Don’t be dumb. Saudi’s need oil at 50-60 to balance budget and they set prices. Trump and MBS are friends they just wanted to scare frackers. Not ruin like reported.

Will be 150 in 12 months.

Sasol has underperformed the oil price for the last 7 years (I did not bother looking further back).
Yes, oil will probably make some sort of a comeback, but there are better options than Sasol (like starting your Weber with R100 notes).
If you plan to hold Sasol long term don’t forget about the BEE structures that get unwound every 10 years.

@lemon what did you say about the notes?

I actually crunch numbers and model for living. This is just a fun hobby to me, but also help the minority that see value.

Look at sasol price? Met my R150 target within 3 months. 3 parties made bid for LC project. Aka bidding war. Next stop is zar250.

The world is run by the elite. This includes OPEC. They want $60 oil and will get it. Whenever they want. Therefore this is still no brainer. Upside only 80-100% in next 12-18 months. But its a lock.

End of comments.

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