Sasol, the South African petrochemicals giant, reported a sharp 66% decline in full-year profit on Tuesday, driven primarily by weaker chemical prices. Consequently, the company decided to forego a final dividend for the year.

Headline earnings, a key measure of profit for South African companies that excludes one-off items, dropped to R11.5 billion for the year ending June 30, down from R33.8 billion the previous year. The company, which produces liquid fuels and chemicals from coal, cited depressed chemical prices as the main factor putting pressure on margins, leading to a 5% decrease in revenue to R275.1 billion.

Sasol recorded impairments totaling nearly $2.6 billion at its American chemicals unit, contributing to a total write-down of $3 billion in the value of its chemicals and fuel assets. These impairments, driven by softer market pricing and a bleak outlook, resulted in a basic loss per share of R69.94, compared to R14 basic earnings per share the previous year.

In response to these challenges, Sasol did not declare a final dividend, leaving the interim dividend of R2 per share declared at half-year as the full-year payout for the 2024 financial year. Additionally, the company announced a change in its dividend policy. Previously based on 2.5 to 2.8 times core headline earnings per share, the new policy now targets 30% of free cash flow generated, provided that net debt remains below $4 billion on a sustained basis.

“The disconnect between headline earnings and cash flow generation, as well as elevated leverage levels, has necessitated a revision to the company’s dividend policy,” Sasol stated.

For 2024, net debt stood at $4.1 billion, just above the threshold needed to trigger dividend payments under the new policy.