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Steep drop in Sasol profit on oil price tumble

Johannesburg – Sasol [JSE:SOL] shareholder earnings took a knock following a challenging economic environment over the past year, the company said on Monday.

According to the group’s audited financial results statement for the year ended June 30 2016, earnings to shareholders decreased 55% to R13.2bn from R29.7bn in the previous year.

The group’s operating profit of R24.2bn fell by 48%, due to “challenging and highly volatile” global markets. Headline earnings per share (Heps) slipped by 17% to R41.40 and earnings per share (EPS) decreased by 56% to R21.66 compared to the previous year.

“In 2016, we continued to adapt to a tough operating environment created by the further dramatic drop in global oil and commodity prices,” stated Sasol. “The current low oil price environment has however, as expected, impacted our financial results, as well as those of our competitors.”

Over the past year, average Brent crude oil prices fell by 41%. Oil prices dropped to as low as $27 per barrel in January 2016 and recovered to a level of $48/bbl in June 2016. Average dated Brent was $43/bbl for the year to end-June 2016 compared with $73/bbl in the prior year, said Sasol.

Commodity chemical prices also followed the trend, with the average basket decreasing by 22%. However, demand for these products remained “strong” and the group reported “robust margins” in certain key markets.

The weaker rand/dollar exchange rate helped offset the effect of lower oil and commodity chemical prices, stated the group. On average, the rand per barrel oil price of R630 was 25% lower compared to the prior year.

Sasol has undertaken a strategy to reduce its cost base since 2012. “It allowed us to sustainably withstand a lower for much longer oil price environment,” said the company.  

Sasol said it has managed to deliver a “solid set” of production volumes across most of the value chain and will focus on the delivery of capital projects. It also contained cost increases below inflation.

Sasol shares traded at R370.30 at 08:46.

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