Post Earnings Coverage as Sasol Reports Record Production Volume
LONDON, UK / ACCESSWIRE / September 15, 2016 / Active Wall St. announces its post-earnings coverage on Sasol Ltd (NYSE: SSL). The company reported its financial results for full year fiscal 2016 (FY16) on September 12, 2016. The Johannesburg, South Africa-based company posted solid operational performance across most of the value chain with record production volumes at Secunda Synfuels Operations. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the year ended on June 30, 2016, Sasol's earnings attributable to shareholders was down by 55% y-o-y to R13.2 billion from R29.7 billion in the year-ago period. The company's earnings per share (EPS) decreased by 56% y-o-y to R21.66 during FY16.
The company's profit before one-time items, or headline earnings fell to R25.3 billion, in FY16 from R30.4 billion in FY15. Furthermore, headline earnings per share (HEPS) declined 17% y-o-y to R41.40, in FY16. However, HEPS for the reported period outperformed market expectation of R40.31.
"Sasol's global operations continue to perform well, with our Secunda Operations reporting record production volumes. Our cost reduction and cash savings initiatives are exceeding their targets, which places us on a sound footing as we gear up our balance sheet to complete the world-scale, company-changing investment in Louisiana in the US," said Bongani Nqwababa, Joint President and Chief Executive Officer of Sasol Limited.
Segment-wise
In FY16, Secunda Synfuels Operations (SSO) production volumes increased by 1% y-o-y, or 97 kilo tons (kt), to a record 7.8 million tons. The company's production volumes at Eurasian operations grew 4% y-o-y. Furthermore, total liquid fuels production for the Energy business improved by 1%, or 0.6 million barrels, from the prior year, primarily due to higher total production volumes by SSO.
The integrated energy and chemical company's performance chemicals sales rose 1.8% y-o-y during FY16; base chemicals sales fell 2.6% y-o-y in the reported period; while liquid fuels sales growth was flat, which was 2% higher than market guidance.
Operational Metrics
During FY16, the company was able to report cash savings of R28 billion, which was above the target amount of R12 billion. The company's Business Performance Enhancement Programme (BPEP) was able to provide for actual cost savings of R4.5bn during the reported period.
Sasol's operating profit fell by 48% on y-o-y basis to R24.2 billion in FY17, as the company battled with challenging and highly volatile global markets. In its earnings release, Sasol's management point out that the average price of Brent crude, which is the main source of the company's revenue, was down by 41% y-o-y and stood at US$43/bbl as on June 30, 2016 compared to US$73/bbl at the close of previous financial year.
The company's weight of lower oil and commodity chemical prices in its operation was partly offset by a 27% weakness in average rand/US dollar exchange rate, which was R14,52/US$ as on June 30, 2016, compared with R11,45/US$ for the year-ended June 30, 2015.
Financial Stability
Despite an average decrease of 25% in annual Rand oil prices, the company's cash from operating activities fell only by 12% to R54.7 billion in FY16, from R61.8 billion in FY15. Due to Sasol's cash conservation initiatives and favorable impact Rand/US dollar exchange rate, the company's net cash balance was down by only 2% on y-o-y basis to R52 billion as at June 30, 2016.
Dividend
The company announced final dividend of R9.10 per share, 21% lower than the prior year, to be paid on October 13, 2016 to shareholders of record at the close of business on September 30, 2016, with Rand/US dollar exchange rate conversion cutoff date of October 04, 2016. As on June 30, 2016, the final dividend cover was 2.8 times compared to 2.7 times as on June 30, 2015.
Guidance
The company is looking forward to a strong operational performance in FY17 with liquid fuels sales volumes of approximately 61 million barrels from Energy SBU in Southern Africa. The company anticipates a higher sales volume in Base Chemicals and Performance Chemicals. The company forecasts RP cash flow contribution to be in the range of R15 billion to R20 billion. Furthermore, the company targets to achieve BPEP cash cost savings annual run rate of R5.4 billion for FY18. The company expects average Brent crude oil prices to be in the range of US$40 and US$50 in the upcoming fiscal year.
Stock Performance
Sasol's share price finished yesterday's trading session at $26.72, jumping 4.25%. A total volume of 602.09 thousand shares exchanged hands, which was higher than the 3 months average volume of 302.84 thousand shares. The stock is trading at a PE ratio of 13.18 and a dividend yield of 4.64%.
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