South African energy and chemicals company Sasol has withheld its dividend despite reporting improved annual earnings because its debt remained above the limit set by its shareholder-distribution policy.
Headline earnings per share increased by 9% to R38.31, from R35.13 in the previous financial year.
Basic earnings per share rose 79% to R18.99, according to Sasol’s official results announcement.
Basic earnings include recognised gains, impairments and other accounting items, while headline earnings exclude several once-off capital gains and losses to give investors a clearer view of recurring performance.
Despite the improvement, Sasol did not declare a dividend.
Its net debt remained at approximately $3.3 billion, above the $3 billion ceiling contained in the company’s distribution policy.
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The decision means investors will not receive a payment from the latest annual results even though higher oil prices and increased fuel sales supported earnings.
**Why higher earnings did not produce a dividend**
Profit and cash available for distribution are not the same thing.
A company may report higher earnings while prioritising debt repayments, maintenance, working capital and investment.
Sasol’s operations are particularly capital-intensive. The group runs large chemical plants, fuel-production facilities and the Secunda complex, one of the world’s largest producers of synthetic fuels from coal.
Those facilities require continuing maintenance spending. Sasol must also finance work intended to reduce emissions from operations that remain heavily dependent on coal.
The company said average Brent crude prices increased by 7%, while improved fuel-sales volumes supported its results.
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However, net working capital rose above Sasol’s guidance range. More money tied up in stock, customer accounts and other short-term operating requirements can reduce the cash available for debt repayment or dividends.
Sasol has spent years attempting to strengthen its balance sheet following the cost overruns associated with its Lake Charles Chemicals Project in the United States and the financial pressure caused by the pandemic.
The $3 billion threshold is therefore intended to prevent shareholder distributions from weakening the company’s finances while debt remains elevated.
Falling below $3 billion would not automatically guarantee the immediate return of dividends. Sasol would still need to consider cash generation, capital requirements, commodity prices and other conditions in its policy.
For shareholders, the results present a mixed outcome: the company’s profitability has improved, but management still considers its debt too high to resume cash distributions.
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