JOHANNESBURG – Sasol share price slumped by 13percent on the JSE on Friday morning after the integrated energy and chemicals company warned about a fall in earnings, negatively impacted by Lake Charles Chemicals Project (LCCP) in the US.
LCCP is now expected to contribute only between $50million (R748.56m) and $100m in the group’s earnings before interest, tax, depreciation and amortisation (Ebitda) as a result of fire and an explosion at one of its projects in the US about two weeks ago.
Sasol said the LCCP was 99percent complete and the fire only caused damage to a low-density polyethylene unit. LCCP’s capital expenditure on the overall project is estimated at $12.5billion.
Sasol had already lowered contribution from LCCP for the year on August 26 to between $150m and $300m, which was already down from earlier projections of $300m to $350m, citing technical issues and delays.
“Earnings are further impacted by approximately R1.7bn in additional depreciation charges and approximately R2bn in finance charges for financial half year 2020 as the LCCP units reach beneficial operation,” the group said.
The group added that as the LCCP units progress through the sequential beneficial operation schedule, the costs associated with the relevant units were expensed, while the gross margin contribution follows the planned volume ramp-up profile and inventory build.
The LCCP has resulted in the group expecting its adjusted Ebitda to decline by between 22 and 32percent for the six months to the end of December, down from R26.8bn reported last year.
The group said the expected fall in earnings was also caused by a 9percent decline in the rand per barrel price of Brent crude oil, softer global chemical and refining margins.
The share price declined to its lowest level on Friday to R226.02 a share. It closed the day on the JSE at R239.17.
The group also expects its earnings per share (Eps) for the six months to be between R5.37 a share and R7.76, reflecting a decline of between 68 and 78percent compared with the Eps of R23.92 reported last year.
Its headline earnings per share (Heps) are expected to be between R4.79 and R7.11, reflecting a decline of between 69 and 79percent, compared to the Heps of R23.25 in the previous year.
Core headline earnings per share are expected to decline by between 53 and 63percent, to be between R7.90 and R10.04 compared to the core Heps of R21.45 reported last year.