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Sasol expects higher H1 earnings, but warns of Lake Charles cost increase

8th February 2019 BY: Nadine James
Creamer Media Writer

Chemicals and energy company Sasol expects to report earnings per share (EPS) and headline earnings per share (HEPS) of between R23.71 and R24.16 and between R22.97 and R23.68, respectively, for the six months ended December 31.

This means EPS is expected to increase by between 110% and 114% year-on-year, while HEPS is expected to improve by between 30% and 34% year-on-year.


Sasol attributed the increase mainly to the impact of half-year valuation adjustments associated with crude oil hedges and closing exchange rates.

The Brent crude price were 26% higher year-on-year, while the average rand/dollar exchange rate was 6% weaker. Refining margins contracted by 2%.


“The normalised cash fixed cost for the period under review has been contained to below our 6% inflation target despite operational challenges experienced during the period,” the company added.


Sasol noted that as at the end of December, engineering and procurement activities at its Lake Charles Chemicals Project (LCCP), in the US, were substantially complete and construction progress was at 84%.

“Our overall project completion was 94% and capital expenditure amounted to $10.9-billion.”

The first derivative linear low-density polyethylene (LLDPE) unit produced its first product in January 2019 and beneficial operation is expected in February, about two months behind schedule, Sasol commented.

Utilities to support the early process units were fully operational by end-November 2018.These utilities, together with LLDPE, will comprise around 40% of the LCCP’s existing total cost.

“Unfortunately, during the last quarter of the 2018 calendar year, several factors within and beyond our control impacted on the completion schedule and associated cost for the remaining units, resulting in the overall project capital cost estimate being revised from $11.13-billion to a range of $11.6-billion to $11.8-billion.

“The difference between the upper end and lower end of the range represents a contingency and weather provision of $200-million.”

Sasol noted that while the underlying productivity factor remained on track, inclement weather, scope additions and absenteeism had a significant impact on actual productivity.

These factors were assessed and quantified late and where feasible, management interventions were put in place to arrest the controllable trends. However, said interventions were not successful in reversing the full impact on schedule and cost.

As a result of the delays, Sasol is revising the Lake Charles earnings before interest, taxes, depreciation and amortisation (Ebitda) estimate down from $110-million and $160-million to a loss of between $165-million and $195-million for the 2019 financial year.

“However, we maintain our guidance that [the project] will deliver a steady state Ebitda of $1.3-billion in 2022,” the company advised.

Sasol will release its interim results on February 25. 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online