Sasol Faces Monumental Losses After R55 Billion in Impairments

Sasol, one of the leading integrated energy and chemical companies in South Africa, has reported a significant financial downturn, which will reflect in its full-year results for the period ending June 30. According to a recent statement from the Johannesburg-based corporation, Sasol is to book a staggering R55.1 billion of impairments after tax, resulting in a substantial loss that starkly contrasts the prior year's profit.

This expected loss puts the basic loss per share in the range of R68.82 to R71.48, a dire flip from the profit of R14 per share the company enjoyed just a year ago. These figures underscore a tumultuous period for Sasol, which has hitherto been regarded as a stalwart in its sector.

A significant portion of the impairment, about R45.5 billion after taxes, is attributed to the devaluation of Sasol's Chemicals America ethane value-chain cash-generating unit. This writedown comes in the wake of enduring soft market pricing and a gloomy market outlook, which have collectively hampered the unit's profitability and future earnings potential.

Moreover, the African chemicals business has not been spared, with its various chains, including polyethene, chloralkali, polyvinyl chloride, and wax, encountering impairments totaling R3.9 billion net of tax. Meanwhile, the Secunda liquid-fuels refinery, a key operation based within South Africa, is wrestling with a R5.7 billion writedown.

Reflecting the weight of these impairments on its financial health, Sasol's so-called headline earnings per share are projected to fall to a bracket of R12.28 to R21.95, implying a decrease of up to 77% from the previous year. This anticipated performance falls markedly short of the R40.86 average estimate quoted by analysts on Bloomberg.

These figures represent a moment of reckoning for Sasol, prompting a re-evaluation of its business strategy amidst volatile global market conditions. The company also looks to navigate through external challenges that have adversely affected its various business divisions. Stakeholders and investors are keenly observing how Sasol will steer itself toward recovery and what strategic shifts may emerge in response to these substantial financial headwinds.