Sasol Ltd plans to reexamine its operations after the fuel and chemicals producer booked 56.7 billion South African rand of impairments on its US and South African operations, triggering its first loss since 2020.

“We will review and assess our asset portfolio,” chief executive officer Simon Baloyi, who took over the role in April, said on a results call. “We’ll take decisive action on underperforming assets to ensure robust returns.”

The writedown is Sasol’s biggest since that same year, when it last reported a loss and took 112 billion rand of charges, primarily from its US chemical assets. 

For the year ended June 30, Sasol’s loss was 44.3 billion rand compared with profit of 8.8 billion rand a year earlier, the Johannesburg-based company said in a statement on Tuesday. The loss, coupled with “elevated” net debt of US$4.1 billion , prompted a revision in the company’s dividend policy, with the result that there is no final payout for 2024.

The shares fell as much as 6.8% in Johannesburg and have declined 29% this year.  

Sasol is able to provide gas from its fields in Mozambique to private customers through the 2027 financial year, 12 months longer than previously indicated, and is exploring options to extend supply further. While previous CEO Fleetwood Grobler found liquefied natural gas imports to be too expensive, Baloyi plans to utilise them. 

The imported fuel “is expensive to go into our facilities,” but it remains affordable by many industries, Baloyi said in an interview.  

Sasol is South Africa’s second-biggest emitter of greenhouse gases and under growing pressure to reduce pollution caused largely by its coal-based manufacturing processes. It has announced plans to reduce the group’s emissions 30% by 2030, and plans to do this by cutting use of 40 million tonnes of the dirtiest fossil fuel annually, replacing it with natural gas and lining up renewable energy and clean power solutions.

The company’s emissions for 2024 showed a 5% reduction from the 2017 baseline it references to measure the target, but increased for a second consecutive year.

Sasol needs a larger shift by 2050, when it plans to reach net-zero emissions. Grobler outlined plans to utilise green hydrogen - a developing technology that burns without generating climate-warming greenhouse gases and is produced by splitting water using renewable energy - which remains prohibitively expensive. Sasol’s project at Boegoebaai, a rugged and undeveloped area on South Africa’s west coast, has had few updates since the company first announced it in 2021.

Sasol has had a pilot project to produce green hydrogen and “there’s no single person in South Africa that wants to buy it,” Baloyi said, adding that costs to develop the fuel have also been impaired. “It was a valuable, valuable lesson for me to say, ‘don’t move faster than the customers.”’  

The company has 750 megawatts (MW) of contracts signed for renewable-energy supply, according to a presentation. It aims to utilise 1,200MW of clean energy at its South African operations by 2030. The country’s grid is facing a shortage of connections to add the green projects, posing a risk to an estimated 66 gigawatts of wind and solar plants that are already at various stages of development.

Sasol’s 2024 impairment was dominated by a 46 billion rand writedown of its Sasol’s Chemicals America ethane value chain due to “prolonged softer market pricing,” it said. 

The volatility of the chemicals business adds to a legacy of Sasol’s US$12.8 billion Lake Charles chemicals facility in Louisiana, designed to expand its operational footprint abroad. The facility suffered from mismanagement issues and cost overruns before its completion at the end of 2020.

  - Bloomberg