Sasol revises guidance for Secunda operations after fall in production

Chemicals and energy company Sasol has blamed reduced equipment availability and operational instability at its Secunda operations for a drop in production at the facility.

On Tuesday, it said in a production update for the nine months to end-March, quarter three production was 9% lower than the previous quarter.

Its synfuels operation in Secunda produces refined products, heating fuels, chemicals and other products. Despite the 9% drop in the third quarter, production for the nine months was up 3%, but Sasol has indicated that it would not reach the mid or upper point of its previous production guidance.

“As a result, the production volumes in [in 2024] are expected to be between 6.9-7.1 million tonnes, lower than the guidance of 7.0-million to 7.3-million tonnes,” Sasol said.

It has kept guidance for liquid fuel sales unchanged at 51-million to 54-million barrels.

A 20% drop in the average dollar basket price for chemicals saw the group’s revenue from its chemicals business in Africa, the US and Europe drop by 17% for the period.

This was despite an overall 4% increase in sales volumes across regions. The low prices, it said, were due to lower oil prices and weaker global demand.

In Europe, energy prices have declined sharply after record-high levels resulting from the war in Ukraine, and by the third quarter of the current financial year prices had retracted back to levels at the beginning of 2024.

Sasol CEO Simon Baloyi said the group had expected chemicals pricing and demand to reach the bottom end of the cycle at the end of 2023 with signs of slow recovery.

“We anticipate ongoing disruptions at our suppliers and customers due to challenges at Eskom and Transnet and continue to engage with the SA government to address the associated energy and supply chain constraints,” he said.

For the six months to end-December the group reported a 21% drop in revenue in its chemicals business.

The group said on Tuesday that it had, via Sasol Gas, launched an application to the Constitutional Court for leave to appeal against this decision, announced by the Competition Appeal Court (CAC) in March.

The CAC dismissed Sasol Gas’ review application, which challenges the jurisdiction of the Competition Commission and its authority to investigate pricing complaints lodged by Sasol’s gas customers.

The commission launched an investigation into excessive gas pricing after Egoli Gas, the Industrial Gas Users Association of Southern Africa and Spring Lights Gas laid a complaint against Sasol in 2022. Sasol is the monopoly supplier of natural gas in SA.

In preliminary findings published in July, the commission said Sasol had been charging excessive prices for almost a decade, extracting markups of as much as 72% on natural gas. The case was then referred to the Competition Tribunal for prosecution, with the recommendation of a maximum fine of 10% of Sasol Gas’s revenue over the period of the contravention.

In an appeal to the CAC Sasol Gas challenged the commission’s jurisdiction to investigate those complaints, arguing that gas prices were determined by the National Energy Regulator of SA.

In its update on Tuesday, Sasol said gas production from Mozambique was up 8% for the nine months to end-March. It also saw a 6% increase in gas sales volumes.

By market close Sasol’s share price had fallen the most since the early days of the pandemic in March 2020, down 10.85% to R135.51, giving it a market cap of R86.7bn. It has fallen 25% so far this year.

At the height of its success, the share price hit a record above R650 a share. 

erasmusd@businesslive.co.za