Integrated chemicals and energy company Sasol on Monday reported a 22% year-on-year decrease in its headline earnings a share to R27.44 for the financial year ended June 30.

Speaking at a presentation of the group’s results on Wednesday, joint president and CEO Bongani Nqwababa said core headline earnings per share decreased by 6% year-on-year to R36.03, while earnings before interest, taxes, depreciation and amortisation rose by 10% year-on-year to R52-billion and the company declared a dividend a share of R12.90.

“Our resilient 2018 performance was underpinned by higher sales and production volumes, particularly in the second half of the year. This was enabled by our continued focus on factors within our control and higher global oil prices, resulting in improved product prices and margins, notwithstanding continued exchange rate volatility,” he noted.

He added that unplanned Eskom electricity supply interruptions and two internal outages at Secunda Synfuels Operations, negatively impacted on volumes.

President and joint CEO Stephen Cornell commented that 2019 would be a defining year for Sasol with the start-up of the Lake Charles Chemical Project (LCCP) in the US, a catalyst for transforming Sasol’s earnings profile.

“We are progressing with the LCCP. Overall, the project is 88% complete with capital expenditure amounting to $9.8-billion.”

The project remains on track to start up the first three manufacturing units by the end of December. 

“Mozambique, our other key growth area, remains central to our gas strategy where we are stepping up efforts to secure long-term gas feedstock, while delivering on our stakeholder commitments,” he said.

He further noted that improving the flexibility of Sasol’s balance sheet, through increased cash flow and reduced gearing, and managing an optimal capital structure will be a key focus going forward.

Sasol experienced some challenges with regard to its operational performance during the year, largely as a result of planned and unplanned production interruptions at its Secunda Synfuels Operations (SSO), Natref and its mining operations, which impacted on production and sales volumes across the value chain.

“Our production run-rates during the fourth quarter of financial year 2018, on an annual average basis, supports our internal targeted run-rates. Sales volumes increased by 1% for our performance chemicals business spurred by robust market demand. Base chemicals reported a 1% decrease in sales volumes mainly due to production interruptions at SSO and a stock build for our high-density polyethylene joint venture in the US.

Excluding the impact of Eskom electricity supply interruptions, sales volumes increased by 1%.

Liquid fuels sales volumes were down 2% as a result of lower volumes from SSO and Natref and a challenging South African retail liquid fuels market.

Our low oil price Response Plan (RP) achieved cumulative cash savings of R85.3-billion since January 2015, exceeding our target range of R65.75-billion. The RP, which we formally closed at the end of June, has delivered sustainable annual cash fixed cost savings of R3.5-billion.

“The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside our control and may impact our results, our focus remains firmly on managing factors within our control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating,” Nqwababa said.