Sasol says it has benefited in the first quarter, from a favourable macro environment compared to the prior year. Picture: Simphiwe Mbokazi/African News Agency/ANA
Sasol’s share price slumped up to 9% yesterday morning after it declared force majeure on the local supply and export of certain chemical products, while its 2023 first quarter sales volumes were down.
The chemicals and fuels group said in an operational update that production rates at plants in Secunda and Sasolburg had been impacted by the Transnet strike that ended earlier this week.
Sasol’s shares traded at R286.11 on Thursday morning on the JSE, 34.7% below a 52-week high.
The Natref refinery, the only operating oil refinery in the country, continued to function as no disruption was caused to Transnet’s pipeline.
Sasol said port and rail activities had recommenced after the strike, and the discharge of containers from ships in the harbour was being prioritised, this after the conclusion of negotiations between Transnet and its majority trade union on Monday.
“We are unable to quantify the impact on our South African value chains as the extent and timing to clear the backlogs across the port and rail system remain uncertain,” Sasol said in the quarterly update.
It said a fire had occurred at the new Ziegler alcohol unit at the Lake Charles Chemicals Complex in the US, on Saturday.
“Our on-site emergency response team responded swiftly, and the fire was contained with no injuries reported. An investigation is under way to determine the cause, damage, scope and timeline of repair,” the group said.
CEO Fleetwood Grobler said that production volumes fell by 7% at the Secunda fuel operations, which included a phase shutdown. Fuel demand continued to be under pressure owing to high pump prices.
Chemicals sales volumes were 9% lower than the first quarter of the 2022 financial year, largely due to lower production and supply chain challenges in Africa, lower demand in Eurasia, offset by higher sales volumes in America from the ramp-up of the Lake Charles Chemicals units.
Grobler said the chemicals business had faced multiple challenges in the quarter, including erosion of consumer sentiment and high energy prices in Europe, limited recovery of demand since Covid-19 in Asia and softer demand in the US following higher interest rates.
Grobler said the group had benefited in the first quarter, from a favourable macro environment compared to the prior year, with higher crude oil and chemical prices, a weaker rand-dollar exchange rate and stronger diesel differentials.
“We have, however, started experiencing the impacts of weaker economic growth globally, together with a downturn in chemicals pricing and higher feedstock costs,” he said.
The South African operations were further impacted by Eskom power outages.
“The Energy business performed in line with expectations for the first quarter of the 2023 financial year. Our focus on improving coal availability and coal quality remains key,” he said.
Benefits from operational improvement initiatives in mining were expected in the second half. The coal stockpile closed at 2.5 million tons, well above the 1.5 million ton target.
Further pricing and demand volatility were expected for the rest of the 2023 financial year, impacting the group’s ability to provide accurate volume forecasts.
“We broadly maintain our previous market guidance, but given the significant macro volatility and more recently the strike action by Transnet’s unions disrupting South African rail and port services, significant downside risk remains,” said Grobler.
BUSINESS REPORT
Related Topics: