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Sasol share price resilient despite sharp drop in earnings

This sharp decline in basic earnings can be attributed to the impairment of assets, including a R35 billion write-down of its Secunda facility.

Source: Bloomberg

Key Takeaways:

  1. Sasol Limited reported a 13% increase in annual profit.

  2. Headline earnings per share (HEPS) increased significantly from the previous year.

  3. However, basic earnings per share experienced a sharp decline of 78%

  4. Sasol has decided to reduce its final dividend for the year by 32%

  5. The downward trend in chemicals basket prices throughout the year further added pressure on Sasol's financial performance.

Sasol FY23 results

Sasol Limited, a global energy and chemical company, has reported a 13% increase in annual profit, despite facing challenges from weaker crude prices. This increase was primarily driven by enhanced operations during the second half of the year.

Sasol's headline earnings per share (HEPS), stood at 53.75 South African cents for the 12 months ending June 30. This marks a significant increase from the 47.58 cents reported a year ago.

However, basic earnings per share witnessed a steep fall of 78%, dropping from R62.34 in the previous year to R14 in FY23. This sharp decline can be attributed to the impairment of assets, including a R35 billion write-down of its Secunda facility. Other contributing factors include the inflationary impact on costs, the decline in Brent crude oil price, and refining margins in the latter part of the year. Moreover, chemicals basket prices were on a downward trend during 2023.

Final dividend reduced

In response to these challenges, Sasol has strategically decided to reduce its final dividend for the year to R10 per share, down 32% from the R14.70 per share declared last year. This decision was primarily driven by the dramatic fall in basic earnings.

Sasol – trading view

Source: IG Charts
Source: IG Charts

The share price of Sasol currently trades within a broad range or channel. The price currently trades near the support of this range while also trading within oversold territory.

For new long positions, traders might prefer to see a bullish price reversal confirmed off current support, accompanied by a move out of oversold territory. A bullish reversal might be confirmed on a close above the dotted trend line on the chart.

Should this scenario manifest, 25300 would be the initial resistance target from the move, while a close below the low at 23470 or channel support could be used as a stop loss consideration for the trade.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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