Sasol’s share price leapt 7% on Wednesday morning despite it issuing a sobering forecast for its financial performance for the six months ending December 31, 2024, predicting a significant downturn in its headline earnings per share (Heps).

The shares leapt to an intraday high of R93.54 before moderating to R88.39 at 3.30pm. The shares are down 34.51% in the past three months.

The South African petrochemicals giant on Wednesday projected a decline of between 26% and 36%, estimating Heps to fall in the range of R13.00 to R15.00, compared to R20.37 in the previous half-year.

This forecast is largely attributed to declining fuel prices and diminished sales volumes during the period.

Sasol also said that its earnings per share (Eps) were expected to drop even sharper, plunging between 47% to 61% to an anticipated range of R6.00 to R8.00, down from R15.19 in the prior six months.

The company’s adjusted earnings before interest, tax, depreciation, and amortisation (adjusted Ebitda) are also projected to decrease significantly, expected to fall between R22 billion and R25 billion from R28bn previously, marking a decrease of 11% to 22%.

The factors contributing to this bleak forecast stem primarily from a 13% decline in the average rand price per barrel of Brent crude oil and reduced refining margins, alongside a notable decrease in fuel price differentials.

Additionally, Sasol’s sales volumes saw a 5% downturn, influenced by lower production and diminished market demand, further impacting the interim earnings.

Further complicating matters, the company reported non-cash adjustments that included an increased net loss of R6.2bn from remeasurement items, compared to R5.8 billion in the previous half-year.

This loss can mainly be attributed to the impairment at the Secunda and Sasolburg liquid fuels refinery cash-generating units, which remain entirely impaired. The current period also saw a full impairment of the capitalised costs amounting to R5.6bn.

Sasol disclosed unrealised losses of R100 million resulting from the translation of monetary assets and liabilities, as well as on the valuation of financial instruments and derivative contracts. This is in stark contrast to the unrealised gains of R2.7bn reported during the prior half-year period.

“These negative financial impacts were partially offset by an increase in average chemicals basket prices, stringent cost management and efficient capital expenditure,” Sasol said while adding that it remained focused on improving the performance of the business.

Investors and stakeholders will have their eyes on Sasol's upcoming presentation of its 2025 interim financial results, scheduled for Monday, 24 February 2025, where the company plans to unveil more detailed information regarding its strategies for improving performance.

Martin Rodgers, a portfolio manager at Integrity Asset Management, (@SAValueInvestor), “Not sure how but Sasol $JSESOL jumped 7.4% on this trading update. Currently up over 5%. Market doing its thing!

“Sasol $JSESOL is a well covered share on the JSE with 9 analyst ratings. Currently, there is 8 Buys and 2 Holds (no Sells) with an average price target of R190 (implied upside of 118.1%). Over the last year, Sasol is down almost 45% compared to the JSE ALSI which is up 20.3%,” he said.

The Passive Income Guy (@hazelwood_dave) posted, “Sasol is working very hard to bring down capex & in line with depreciation (has already peaked). Expect to see more announcements from Sasol in this regard.”

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