Sasol is currently feeling the after-effects of falling global oil prices, which fell by 41% over the year, as headline earnings declined to R25,3 billion for the period under review – down from R30,4 billion last year.

Headline earnings per share dropped to R41,40 and Sasol declared a dividend of R9,10 for the second half, down 21% from last year and an interim dividend of R5,70 per share.

“In 2016, we continued to adapt to a tough operating environment created by the further dramatic drop in global oil and commodity prices,” stated Sasol.

“The current low oil price environment has however, as expected, impacted our financial results, as well as those of our competitors.”

The group’s operating profits also took a big hit, falling by 48% to R24,2 billion as a result of “challenging and highly volatile” global markets.

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Oil prices dropped to as low as $27 per barrel (bbl) in January 2016 and recovered to a level of $48/bbl in June 2016.

Average dated Brent was $43/bbl for the year to end-June 2016 compared with $73/bbl in the prior year, said Sasol.

The weaker rand/dollar exchange rate helped offset the effect of lower oil and commodity chemical prices, stated the group. On average, the rand per barrel oil price of R630 was 25% lower compared to the prior year.

The chemicals group’s bottom line was also hampered by concerns over escalating costs at the group’s Lake Charles ethane cracker and chemical plant in the US which Sasol has ploughed R42,2 billion into for the year – more than half of the group’s total capital expenditure for the year. The project is set to cost Sasol $11 billion (R160,2 billion), around 25% more than the $8,9 billion (R129,6 billion) it signed off on in 2014.

“Although the capital expenditure for our Lake Charles chemicals project has increased, we remain confident that the fundamental drivers for this investment are sound. The cost and schedule review process, which was completed in August 2016, has set a solid platform for the continued execution of this project,” the company said.

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Sasol has undertaken a strategy to reduce its cost base since 2012, with cost-cutting measures thus far delivering R3 billion in savings.

“It allowed us to sustainably withstand a lower for much longer oil price environment,” said the company.

The group has upwardly revised its cost cutting targets for 2017 to R5 billion.

Sasol said it has managed to deliver a “solid set” of production volumes across most of the value chain and will focus on the delivery of capital projects. It also contained cost increases below inflation.

With additional reporting by News24Wire