- Volumes generally lower: Sasol’s volumes in 4Q and the full year were generally lower due to COVID-19 lockdowns in several countries.
- Sasol Mining: Production and internal sales volumes in FY20 in the division were unchanged from last year despite the shutdown of 25% of the Synfuels facility in 4Q. Coal exports declined by more than 1mn tons as the company increased inventories by more than 1mn tons.
- Sasol Synfuels impacted by shutdown: Sasol Synfuels saw a decline of 3% (250kt) in production volumes for the full year as a result of the shutdown in 4Q. On a normalised basis the decline was closer to 5% following the large shutdown included in FY19.
- Synfuels yields and costs under pressure: The combined intake of coal and natural gas into Synfuels was however flat, suggesting a significant decline in production yields. This should see an increase in costs. The company prioritised chemicals over fuels in 4Q and for the year refined product was 4% lower with chemicals only 1% lower.
- Energy: Overall refined product production declined by 11% in FY20 following the partial Synfuels shut as well as the total shutdown of Natref in 4Q. White product sales were 12% lower than in FY19 as a result of the COVID lockdown in 4Q. Black product sales were flat, however.
- Base Chemicals: South African sales volumes for FY20 were 2% below the volumes achieved in FY19 and realised prices declined by 18% in US dollar while prices were flat in rands. Volumes in the US increased significantly (>100%) as the LCCP continued with ramp up. The basket price was 35% lower on weaker prices and a weaker mix.
- Performance Chemicals: We estimate that volumes declined by 6% on a like for like basis with volumes in the organics segment 7% lower and organics product prices 15% lower. The unit benefited from increased sales of MEG. Overall sales decreased by 7% if measured in dollars but were higher (+1.5%) if measured in rands. The company restated feedstock costs which make historical comparisons difficult. Based on these restated numbers, feedstock prices declined at a faster rate than product prices and gross margins expanded from 63% to 65%.
- LCCP: The cracker at the LCCP continues to produce below nameplate capacity. Sasol postponed the start-up of the LDPE plant in the US to October. The company will therefore continue produce ethylene at low margins through 1QFY21 and the operating rate at the cracker could remain suboptimal.
- Hedging: The company continues to hedge oil but at a slower rate than in the past. No hedging was done for 4Q21 and Sasol’s oil hedging for FY21 is at 14mn barrels, still well below the target of 40mn bbl.
- What next? We maintain our neutral rating and await a trading statement and news on asset sales and the potential rights issue
