Sasol Ltd. paid its first dividend in three years as strong demand and a rise in oil and chemical prices helped South Africa’s biggest fuel producer more than quadruple full-year earnings and pay down debt.
The company slashed its net debt to $3.8 billion as of June 30, after massive cost overruns at the Lake Charles Chemicals Project in the US contributed to driving it to near $10 billion just two years ago. It has cut costs and sold off assets to repair the balance sheet, and, like others across the world, benefited from surging energy prices following Russia’s invasion of Ukraine.
Strong refining margins and higher export prices for coal helped push annual net income to 38.96 billion rand ($2.3 billion) from 9.03 billion rand a year earlier. It will pay a final cash dividend of 14.70 rand per share. The stock jumped as much as 4.7%, the most in more than six weeks, and before paring the gains to 0.3% as of 1:16 p.m. in Johannesburg.
Brent crude prices rose 70% and chemicals were 39% higher in the year. While Sasol largely benefited from those increases, the group recorded hedging losses of more than 18 billion rand during the period. The company is shrinking its hedging program, typically used to mitigate downside risk, for the 2023 financial year.
While the financial performance is improving, Sasol is facing a major challenge in achieving its target to reduce emissions by at least 30% by the end of this decade from 2017 levels. It is South Africa’s second-biggest producer of greenhouse gases, and coal and other fossil fuels still make up the major part of its operations.
Sasol’s plans to transition away from the coal — the most polluting fuel — to gas. It has piped the cleaner burning fuel from Mozambique to its South Africa operations, though output from those areas is declining. Liquefied natural gas imports from the Matola terminal planned by TotalEnergies SE and Gigajoule Group will be a key source of future energy supply, along with further development of its own fields in the neighboring country.
Recent results at its Mozambique wells indicate production will hold until at least 2028 “and we’re busy doing more work,” Chief Executive Officer Fleetwood Grobler said in an interview. The company still plans to source LNG from 2026 and expects to finalize a term sheet by the end of the year to ensure security of supply, he said.
Separately, Sasol plans to make the Natref oil refinery it owns with TotalEnergies in South Agrica a hybrid facility capable of processing feedstocks such as bioethanol. The 108,000 barrel-a-day plant will undergo a feasibility study.
The company is also in the process of setting up a venture capital fund for innovative green energy solutions that will leverage Sasol’s own technology, Grobler said.