Chemicals and energy company Sasol reports that its energy business showed notable improvements in operational and business performance in the second half of the 2023 financial year, ended June 30, compared with the first half of the financial year.

The improvements were underpinned by a dedicated effort to implement operational mitigation plans through the course of the year while the global economic landscape remains volatile.

Sasol has had to mitigate against fluctuating oil and petrochemical prices, an unstable product demand environment, inflationary pressure and pressure to decarbonise.

In South Africa, the underperformance of State-owned enterprises such as Eskom and Transnet, as well as socioeconomic challenges prevailing in the country, continue to impact on volumes, margins and profitability.

In its efforts to navigate the challenging landscape, Sasol is nearing completion of the first phase rollout of a “full potential programme” at the Syferfontein Colliery.

The company says the mine has achieved incremental productivity improvements across the operation, supported by Sasol’s external coal buying programme.

The company has also successfully maintained the coal stockpile within targeted levels, which ensures a stable supply of feedstock to the colliery, while also improving coal quality through optimal blending.

Sasol is looking at such initiatives at all its collieries to improve cutting time, reduce production losses and improve coal quality.

The company operates six coal mines that supply about 40-million tons a year of thermal coal feedstock to its operations in Secunda.

Meanwhile, Sasol’s drilling campaign for natural gas, in Mozambique, is progressing successfully, with the company having noted an increase in well inventory from 19 to 24.

Additionally, construction has been completed on an initial gas facility of the PSA project within cost and schedule targets, despite the impact of tropical storm Freddy which hit the coast in February.

Sasol has also discovered another gas deposit in PT5-C, which is located in southern Mozambique and can be integrated into the existing facility.

At the Secunda Operations, where Sasol produces synfuels, Sasol has recorded higher production volumes owing to operational stability, improved equipment reliability and the increased availability of natural gas.

As a result, Sasol expects to exceed the upper end of its market guidance for the full year, which was set at between 6.6-million and 6.9-million tonnes.

In the chemicals business, Sasol says its three regional segments achieved sales volumes within guidance ranges, owing to improved production and supply chain performance in Africa and America.

Demand in Europe and China, however, remains weak and has negatively impacted the group’s sales volumes.

The total sales volumes for the year ended June 30 were 4% lower year-on-year.

The average chemicals basket price for the reporting year decreased by 12% compared with the prior year, with prices in the last quarter of the year decreasing by 13% compared with the prior quarter, on the back of lower demand.

Low chemicals basket prices, together with high feedstock and energy costs, continue to put downward pressure on Sasol’s overall unit margins and profitability.

Moreover, Sasol has submitted its maximum gas price applications to the National Energy Regulator of South Africa (Nersa) for the 2023 and 2024 financial years, which have since been published for public comment.

This follows the Competition Commission on July 11 referring complaints over excessive pricing from certain Sasol Gas customers to the Competition Tribunal.

Sasol has, however, launched review proceedings, which are currently before the Competition Appeal Court, so that the court may consider Nersa’s jurisdiction to regulate gas prices.

Sasol is also appealing another decision made by the National Air Quality Officer to decline Sasol’s application to use a different review methodology in calculating minimum emission standards in terms of sulphur dioxide from its boilers.

Further, the company expects demand volatility to continue in the 2024 financial year, with global market sentiment and petrochemicals demand remaining uncertain.

Sasol will release its results for the 2023 financial year on or about August 23.