On Wednesday, Sasol rose 4.87% to settle at R379.35, buoyed by a massive rally in oil prices. This sharp increase was mainly due to reports that OPEC had agreed to reduce its supply by about 1.2mn barrels per day by January. As a result, production will be cut by 3% to 32.5mn barrels per day, down from 33.64mn barrels per day. This marks the first production cut in eight years by OPEC, with the agreement seeking to reduce the current global supply glut. As it stands, Saudi Arabia will reduce its oil output by 486,000 barrels a day at 10.058mn, while Iraq agreed to cut its production by 210,000 barrels a day from its October levels.
Sasol shares were punished yesterday after the company published a trading statement advising shareholders it expects headline earnings per share to decrease by between 10% and 30%, down from R49.76 in 2015. In addition, earnings per share are expected to decline by between 53% and 73%, or by between R25.82 and R35.56, compared to R48.71 in the previous corresponding period. Both of the numbers were within expectation bands and the decreases were mainly attributable to the volatile macroeconomic environment, in particular lower crude oil prices. What the market didn’t count on however was the additional R7.4bn impairment of its share in the Montney shale gas asset, with the group set to recognise an additional impairment of approximately R4.1bn. In a separate statement, the company also announced it expects capital expenditure at its Lake Charles project to approach $11 billion. This overrun of the already expensive Ethane Cracker and subsidiary projects takes the total cost to just over 60% of Sasol’s total market capitalisation. As investors digested the information, shares fell 10.93%. Finally, Sasol will release its results for the period on or around the 12th of September 2016.
In its trading statement for the six months ended 31 December 2015, Sasol advised shareholders that the group’s performance had been negatively impacted by highly volatile global markets. The group’s profitability was adversely affected by a 57% lower average Brent crude price, while the price of a basket of commodity chemicals fell by 23% compared to the previous year. However, these sharp declines were partly offset by a 24% weaker average R/$ exchange rate. As a result, the group expects Sasol’s headline earnings per share for the period to decline by between 23% and 28%, or by between R7.36 and R8.96, compared to headline earnings of R32.00 in the first half of the 2015 financial year. In addition, the group expects to see its earnings per share decrease by between 62% and 67%, or by between R19.86 and R21.47, from R32.04 in the previous corresponding period. However, on a normalised basis, which excludes the impact of once-off items, earnings per share are only expected to decline by between 8% and 13%. Lastly, the group’s results for the six months ended 31 December will be announced on the 7th of March 2016.
Continue reading Sasol sees earnings crushed as oil drop 57%
Yesterday, Sasol’s JSE listing fell 1.7% to close at a 2-week low of R407.95. However, as the evening progressed, Brent crude continued to decline, before settling 5.71%, or $2.08, lower at $34.34 per barrel. This continuing decline was evident in the stock’s NYSE listing, where it ended 3.94% lower as it moved to trade at $25.58. Looking ahead, Sasol could be in for a tough trading session today after Brent crude reached a new 11-year low this morning. However, the weakening rand may provide some support.
Continue reading Sasol: Slides in overnight trade
Exactly one week ago, on Monday the 24th of August, Sasol ended the session at R375.25, its lowest level since January, amid a rout in global markets and a slump in oil prices. However, since then, Sasol has been one of the top performers on the JSE, as equity and commodity markets recovered. Over the past two sessions, Sasol has added 5.25% and 7.41%, respectively, as it rose to trade at R431.79 per share. This was mainly due a 16.25% increase in the Brent crude price over the same period. Looking the forward, Sasol will continue to be somewhat correlated to the Brent crude price and thus, vulnerable to any declines.
Continue reading Sasol: Spectacular Recovery
Sasol is sliding up its lower inclined trend line and a number of recommendations have come out to buy the stock with a target just below the top of the channel at around R530 (±20% gain).
First half headline earnings per share (HEPS) were up +6% at 3200cps (vs guidance 3110cps to 3290cps) vs Bloomberg consensus estimate of 3350cps. It seems they’re continuing to see the impact of lower oil prices…