Despite continued market volatility and inflationary pressure, petrochemicals group Sasol’s Energy business has noted an improvement in performance in the first quarter of the 2024 financial year, compared with the first quarter of the prior financial year.

The business implemented operational mitigation plans in the period ended September 30, following which production and productivity increased.

CEO Fleetwood Grobler says the South African energy operations continue to be impacted on by global economic volatility, including volatile oil and petrochemical prices; unstable product demand and inflationary pressure; and the underperformance of State-owned enterprises Eskom and Transnet, which impacts on Sasol’s sales volumes, margins and profitability.

Sasol successfully completed a phased shutdown at its Secunda operations in September, which happens every year for about three weeks in order to conduct inspections and repairs.

The company has noted higher production volumes from the plants when conducting a phased shutdown, compared with a total shutdown it did in the prior year.

Sasol has also completed a roll-out of the first phase of its full potential programme at the Syferfontein Colliery and continued to embed learnings to achieve sustainable productivity improvements across its mining operations.

The group has also started rolling out a second phase of improvement at the Shondoni Colliery.

Sasol has proactively built a healthy coal stockpile to ensure a stable supply of feedstock to the Secunda operations.

Meanwhile, the chemicals business continues to face a tough market environment, with the average sales basket price for the quarter being 31% lower compared with the first quarter of the prior financial year and 9% lower compared with the last quarter of the 2023 financial year.

Grobler explains that the decrease is driven by a combination of lower oil, feedstock and energy prices and continued weak demand. Margins and associated profitability remain under pressure as a result.

Production rates at several of Sasol’s units continue to be managed proactively in response to the lower demand and to manage inventory levels, while strict cost and capital management measures continue.

Despite these continued market headwinds, total chemical sales volumes in the reporting period were 5% higher than the first quarter of the prior financial year, largely owing to higher ethylene and polyethylene sales in the US, and improved production and supply chain performance in Africa, which was, however, offset by continued lower demand in Eurasia.

Chemical sales revenue from the South African assets was 23% lower in the reporting period, compared with the first quarter of the prior financial year, while Chemicals Africa sales volumes for the full-year are still expected to be higher than the prior financial year, depending on the continued improvement in production and supply chain performance in South Africa, especially that of Transnet, during the remainder of the 2024 financial year.

The Chemicals America business posted a 28% lower sales revenue in the period under review, but Sasol also expects the full-year sales to exceed that of the prior year.

Sasol expects pricing and demand volatility to continue through the remainder of the financial year, with global market sentiment and petrochemical markets remaining uncertain.

Particularly, the margin outlook for chemicals is looking more muted than previously expected.

The group’s guidance for the full-year’s production and sales remain unchanged for all regions.