Sasol: Total, Air Liquide, And Decarbonization Will Likely Help

Sasol: Total, Air Liquide, And Decarbonization Will Likely Help

Summary

Sasol is a global integrated chemicals and energy company with interests in mining, gas, fuels, and the chemical industry in Africa, America, Europe, and Asia.

If management continues to decrease its net debt, the process of decarbonisation continues, and more partnerships are signed, revenue will likely trend north.

I don’t like to highlight obvious results, but let’s state clearly that management is already enjoying revenue growth thanks to higher crude oil price, refining margins, and demand.

PashaIgnatov/iStock via Getty Images Sasol ( SSL ) offers access to a diversified number of petrochemical and energy businesses all over the world. Management is also working with large partners from Europe, which will likely help the company receive financing, and invest outside South Africa. In my view, if management continues to send beneficial outlook messages, and net debt decreases, the share price will likely trend north. Sasol

Sasol is a global integrated chemicals and energy company with interests in mining, gas, fuels, and the chemical industry in Africa, America, Europe, and Asia. Sasol’s most relevant business interests are in the chemical sector, which represent more than 56% of the total adjusted EBITDA. Energy’s EBITDA representation stands at 34%, and mining’s EBITDA representation is close to 10%. 79% of the company’s EBITDA is generated in Southern Africa. However, America and Eurasia represent close to 21% of the total amount of EBITDA. In sum, I believe that Sasol will receive a lot of attention from investors because the business is very well diversified. In my view, future FCF will be a bit less volatile than that of other competitors: Results Presentation For The Six Months Ended December 2021 I also need to highlight the fact that FY 2022 and 2025 targets seem quite optimistic. The company expects an increase in its gross margin, reduction in costs, robust demand, and less supply chain disruptions: Results Presentation For The Six Months Ended December 2021 Results Presentation For The Six Months Ended December 2021 Analysts Expect Net Sales Growth Of 22% In 2022

With the petroleum outlook improving, investment analysts are expecting beneficial figures from the company. Market estimates include 22% sales growth in 2022 with an EBITDA margin of 27% and net income of ZAR31 billion. The median net sales from 2019 including estimates until 2024 is 3%, and the median EBITDA margin stands at 27%. In sum, most analysts are expecting a sweet future: Qingshan Capital Management Interestingly, as sales increase significantly, the capex/sales ratio would decline from 22% in 2020 to 9% in 2021. As a result, the company’s FCF/sales ratio would gradually increase from 7% in 2021 to 14% in 2024: Qingshan Capital Management Base Case Scenario Would Include More Partnerships With Large Operators Like Total ( TTE ) or Air Liquide ( OTCPK:AIQUF )

I don’t like to highlight obvious results, but let’s state clearly that management is already enjoying revenue growth thanks to higher crude oil price, refining margins, and demand. Perhaps, analysts will increase their sales expectations as they learn Sasol’s new financials: To highlight some of ou+9r operational performances, in our energy business, external sales revenue was 47% higher in rand terms, due to higher crude oil, refining margins and demand. Source: Conference Call Transcript Like many other operators all over the world, Sasol is currently undertaking a process of decarbonization, which will likely help the company comply with new environmental regulations. I am quite optimistic about the new plans, which will most likely allow the company to compete with other multinationals. The fact that management established partnership with other foreign companies is also quite beneficial: We have two defined plans to accelerate the decarbonization of our business and are progressing several partnerships to realize our ambitions. Source: Conference Call Transcript Against these commitments, I’m pleased to report the following progress. We are jointly executing 600 megawatt renewables together with Air Liquide. Source: Conference Call Transcript And as I say that, Natref we have not come to an outcome, we are with a number of studies, work angles to look at viability of options, and that is still ongoing with our partner Total. Source: Conference Call Transcript Under this scenario, for the next ten years, I believe that net sales growth should stand close to 7% and 1%. I also assumed an EBITDA margin of 27%, which is close to the median EBITDA margin obtained in the past. With conservative capex/sales ratio of 9%, changes in working capital/sales of 4%, and an effective tax of 21%, FCF/Sales stands […]

source Sasol: Total, Air Liquide, And Decarbonization Will Likely Help

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