Sasol's performance lags in Q1 owing to chemical market, coal quality issues

JSE-listed petrochemicals group Sasol has reported a mixed production and sales performance for the three months ended September 30, with the company having been impacted on by the stronger rand, oil price volatility and lower refining margins.

The group says chemical markets remain oversupplied globally, with higher input costs and weak chemical prices and demand impacting on Sasol’s margins.

The Southern Africa energy and chemicals business had “encouraging progress” with increased gas flows from a production sharing agreement licence and a successful ramp-up at the ORYX gas-to-liquids plant, in Qatar.

Sasol says its Secunda operations faced challenges from ongoing coal quality issues, as well as shutdowns that impacted on production and sales volumes for the quarter under review.

Sasol’s saleable production in the mining division amounted to 7.5-million tons in the quarter under review, which was 1% lower quarter-on-quarter and 4% lower year-on-year owing to coal quality challenges, which led to higher external coal purchases.

The group, nevertheless, still expects its saleable production for the full year to be between 30-million and 32-million tons.

Gas production in the reporting quarter was 31.3-billion standard cubic feet, which was 1% higher quarter-on-quarter, despite a planned shutdown at Sasol’s central processing facility, in Mozambique, and 3% higher year-on-year.

Fuel production volumes from the Secunda operations were 8% lower quarter-on-quarter and 2% lower year-on-year, at 823 000 t, partly owing to coal quality challenges and lower equipment availability during shutdowns. Chemical production from this operation amounted to 634 000 t.

Sasol maintains its full-year guidance of between 7-million and 7.2-million tons from the Secunda operations across all products. 

In the Chemicals Africa division, sales revenue was 9% lower in the quarter under review, compared with the preceding quarter, with the average basket price having remained flat.

Year-on-year, however, sales revenue was 6% higher in the division, driven by higher sales prices and offset by lower sales volumes.

Sasol still expects its Chemicals Africa sales volumes for the full-year to be between 0% and 4% higher than the prior financial year, despite the weaker performance in the reporting quarter, which aligns with Sasol’s production outlook for the Secunda operations.

The group’s Chemicals America business posted 2% higher quarter-on-quarter sales revenue and 12% higher year-on-year revenue; however, the group’s margins were impacted on by the need to buy ethylene at elevated spot prices.

Sales revenue in Chemicals Eurasia was 4% lower quarter-on-quarter but 5% higher year-on-year, owing to a favourable product mix that included more higher-value products.

Sasol revised downward its production expectation from the Natref refinery, in South Africa, for the full year following operational challenges at the end of the reporting quarter.

The company explains Natref production was 24% lower in the reporting quarter, compared with the preceding quarter, and 27% lower compared with the same quarter of last year, owing to a planned shutdown and startup delays.

Sasol now only expects a volume increase of between 0% and 10% for the full year, which was revised down from a growth expectation of between 5% and 15%.

Meanwhile, Sasol and power utility Eskom in September signed a memorandum of understanding to collaborate on future liquefied natural gas supply solutions, which positions Sasol as a gas aggregator for South Africa.

Sasol also advises that its 69 MW Msenge Emoyeni Wind Farm, in the Eastern Cape, started operating commercially in October and is now supplying power to the Sasolburg operations through the national grid.

Sasol is planning to have 1 200 MW of renewable energy installed by 2030.