Sasol share price slumps as it warns of lower than expected production

Sasol share price slumps as it warns of lower than expected production

SASOL’S share price fell sharply by 10.85% yesterday after it said there had been operational headwinds in the Mining and Secunda Operations (SO) in the nine months to March 31, and full-year production was expected to be lower than expected.

The chemicals and fuel from coal group said in a production and sales update yesterday that its energy business had benefited from higher basic fuel prices along with improved refining margins in the quarter to end-March 2024. The share price closed at R135.51.

Mining productivity had improved, but at a slower pace than anticipated. Fatality and operational challenges had a negative impact on productivity in the quarter, and “consequently we are tracking towards the lower end of our guidance range of 975 – 1 100 t/cm/s,” the group’s directors said.

At SO, production volumes increased compared to the prior period, but volumes were impacted by operational disruptions in the quarter. As a result, full-year production volumes were expected to range between 6.9 – 7.1 million tons, lower than previous guidance.

In chemicals, product prices continued to be subdued, with the average sales basket price for year-to-date being 20% lower than the prior period, driven by a combination of lower oil, feedstock and energy prices and weak market demand, especially in China and Europe.

Margins and associated profitability were under pressure. Despite the market headwinds, chemicals sales volumes year-to-date were 4% higher, largely due to higher sales in America together with a slight increase in demand in Eurasia.

Sales volumes in Chemicals Africa were lower due to the SO operational challenges and were expected to meet the lower end of the group’s guidance range.

Sasol said Chemicals Africa’s sales revenue from its South African assets was 15% lower than the prior period driven by lower prices, offset by higher sales volumes.

Sales volumes were 2% higher than the prior period mainly due to the SO phase shutdown in 2024 relative to a total shutdown in 2023.

“Close collaboration with Transnet is continuing. We have recently concluded a haulage and tanker maintenance contract with Transnet Freight Rail for the dedicated rail transport of ammonia from Sasol’s facilities,“ it said.

It said the average sales basket price was 17% lower than the prior period due to lower oil prices and weaker global demand. Quarter three 2024 prices were, however, 3% higher than quarter two with higher prices across almost all product divisions.

“We anticipate macro volatility to persist in the fourth quarter of 2024, with geopolitical risks remaining elevated, negatively impacting our business performance. Fuel demand in RSA for the remainder of FY24 is expected to remain at similar levels.”

Chemicals pricing and demand appeared to have reached the bottom end of the cycle at the end of the 2023 calendar year, with “signs of slow recovery in key markets on volumes and prices, partly driven by increased oil prices.”

Simon Baloyi, the CEO of Sasol, said, “The five tragic fatalities reported for the year-to-date weighs heavily on my heart. It is an imperative that we maintain an unwavering focus on safety, ensuring that our teams return home safely each day.”

He said the business continued to be impacted by the volatile operating environment and operational challenges experienced in the third quarter of 2024.

Despite this, the company had achieved positive results from our gas drilling campaign in Mozambique and continued to work on its operational mitigations plans in South Africa to address these challenges. Sasol’s chemical business also experienced a modest increase in both demand and pricing.

“We have streamlined our business and leadership structures to establish clearer focus areas and accountability, effectively driving our strategy,” Baloyi said.

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