Sasol tumbled more than 7 percent on the JSE after the integrated energy and chemicals company reported that its earnings for the year-to-end June would be weighed down by impairments of R12.9 billion in its Lake Charles Chemicals Project (LCCP) in the US.
Sasol said it expected its adjusted earnings before interest, tax, depreciation and amortisation to decline between 4 and 14 percent compared with R51bn last year, despite a 19 percent increase in the rand price a barrel of Brent crude oil.
“This is mainly owing to the negative earnings contribution from the LCCP and the impact of softer chemical margins,” Sasol said.
The group also recorded further impairments in southern Africa and Canada during the period.
“The Ammonia CGU in the southern African value chain was impaired by R3.3bn, mainly as a result of much softer forecasted international ammonia sales prices.
"The Canadian shale gas business was further impaired by R1.9bn during the financial year,” Sasol added.
The overall impairment costs for the period would amount to R18.1bn, Sasol estimates.
The group said that the LCCP remained in line with the revised cost estimate provided in May and was mostly tracking schedule.
“As at the end of June, overall project completion is at 98 percent.
"Engineering and procurement activities are substantially complete and construction progress is at 94 percent,” the group said.
In May Sasol said the cost estimate for the LCCP has been revised to $12.6bn (R175.17bn) and $12.9bn, which includes a contingency of $300 million.
Despite challenges in the LCCP, the group expects its headline earnings per share to increase by between 7 and 17 percent, while core headline earnings per share (Cheps) is expected to increase by between 1and 11 percent during the period.
The group said that the Cheps was adjusted for once-off items, including operating losses from the LCCP during ramp-up.
It said that earnings per share would decrease between 46 and 56 percent as a result of higher impairments recorded in the financial year.
Sasol shares closed 6.37 percent lower on the JSE at R308 yesterday.
The group will release its results next month.
BUSINESS REPORT