Sasol’s Ebitda — earnings before interest, taxes, depreciation, and amortisation — for the six months to the end of December 2021 rose by 12%, compared with the same period in 2020, to R24.3-billion. But its headline earnings were down 20% to around R9.5-billion.  

The group’s earnings were negatively affected by losses of R5.3-billion on the valuation of financial instruments and derivative contracts. On the plus side, the company noted a “reversal of impairments of R1.4-billion mainly due to a higher price outlook on the back of a sustained increase in demand for alcohols into the personal hygiene market during and post the Covid-19 pandemic”. 

It also had a R4.9-billion gain from the divestment of its Canadian shale gas assets.  

Sasol has come far from the depths of the pandemic in 2020 when there were serious question marks about the viability of its business model as oil prices collapsed. The company is making money, but said in a statement that “in the context of the high level of macroeconomic uncertainty the board believes it is prudent not to declare an interim dividend at this stage”. 

Restoring the dividend is a priority — the last one paid out was an interim dividend for the 2019 financial year — but the recent surge in global oil prices raises the prospect that it could be reinstated sooner rather than later. The industry’s benchmark Brent Crude is up by more than 25% since the start of 2022 and at over $90 a barrel has regained levels that seemed out of reach less than two years ago and which will flow to Sasol’s bottom line.

“The oil price does help us quite a bit, we produce crude oil at equivalent between $30 and $35… Sasol is built for high oil prices. We are very close to making a decision on reintroducing the dividend, so things are going very much according to plan,” Sasol’s outgoing CFO Paul Victor told Business Maverick.  

Sasol, which after Eskom is South Africa’s No 2 emitter of the greenhouse gases linked to climate change, also provided an update on its green energy transition plans. 

“In 2023, Sasol plans to produce the first commercial-scale green hydrogen in Sasolburg, using electrolysers which have been repurposed,” the company said. It is also making progress in its pivot to natural gas from coal. This is an area that greens are going to watch like hawks, but pressure on this front is also coming from investors and the wider public. 

In the meantime, red-hot oil prices will presumably, and perhaps ironically, help Sasol fund its transition into a greener company. DM/BM

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