Sasol's Operational Improvements: A Mixed Bag for FY24

Sasol Limited, the South African integrated chemicals and energy company, has published its production and sales performance metrics for the six months ended 31 December 2024. The report highlights operational improvements in Mining, Gas, and Secunda Operations (SO), but the overall financial performance has been impacted by various external factors and operational challenges.

Mining productivity for FY24 was 983 t/cm/s, 3% higher than FY23, aligning with market guidance. This improvement was mainly due to the benefits of the ongoing full potential program, partly offset by safety-related incidents and other operational challenges. In Q4 FY24, total Mining collieries increased by 4% and ended at 1,000 t/cm/s compared to Q3 FY24. However, saleable production for FY24 declined by 2% compared to FY23 due to a reduction in mining sections and increased discards from the export beneficiation plant. (Source: Sasol Limited: Production and Sales Metrics June 2024 2)

Gas production for FY24 was 6% higher than FY23 and exceeded market guidance. This was supported by the early commencement of production from the PSA Initial Gas Facility in Mozambique in May 2024, following the necessary approval from the government. This development highlights the strategic importance of Sasol's operations in Mozambique and the company's commitment to expanding its gas production capabilities. (Source: Sasol Limited: Production and Sales Metrics June 2024 2)

Secunda Operations (SO) production volumes increased slightly compared to the prior year, aligning with market guidance. Q4 FY24 performance increased by 9%, benefiting from improved equipment availability and operational stability. However, the company faced operational challenges related to ongoing coal quality complications and the consequent impact on gasifier and equipment availability. The implementation of destoning and ongoing equipment reliability improvement initiatives are expected to improve production levels going forward. Sasol took a Final Investment Decision (FID) in December 2024 for a destoning solution to enhance the coal quality supplied to SO, with beneficial operation of the solution expected in H1 FY26, which is earlier than the previous communicated date. (Source: Sasol Limited: Production and Sales Metrics June 2024 2)



Despite these operational improvements, Sasol's overall financial performance was negatively impacted by persistent macroeconomic volatility, lower diesel differentials, and inflationary pressure on the liquid fuels segment. The company's turnover for the six months ended 31 December 2024 was R275,1 billion, 5% lower than the prior year. Adjusted EBITDA was R60,0 billion, 9% lower than the prior year. Core headline earnings per share was R40,28, 16% lower than the prior year. (Source: Sasol Limited: Summary of Financial Results for the year ended 30 June 2024)

In conclusion, while Sasol's operational improvements in Mining, Gas, and Secunda Operations (SO) have led to some positive developments, such as increased productivity and production volumes, the company's overall financial performance has been negatively impacted by various external factors and operational challenges. The implementation of a destoning solution at Secunda Operations represents an important strategic investment to address persistent coal quality issues that have been hampering production efficiency. However, the company must continue to mitigate geopolitical risks, address coal quality complications, and navigate the challenging macroeconomic environment to improve its overall performance.