JOHANNESBURG: South Africa's Sasol Ltd, the world's top maker of motor fuel from coal, defied a stronger rand to post a 27 percent rise in full-year earnings on Monday, helped by cost cuts and higher commodity prices.
Monday, 12 September 2011 19:45
The petrochemical manufacturer said it expects a better operational performance in the 2012 financial year, even as it struggles with the strong local currency.
"The rand certainly remains a challenge going forward," Chief Financial Officer Christine Ramon said, adding that each change of 10 South African cents in the exchange rate hit operating profit by about 950 million rand ($130.4 million).
A strong rand is a negative for South African exporters as it eats into profits when overseas earnings are brought home. The currency has strengthened 23 percent against the dollar since the start of 2009.
Under new leadership since July, Sasol is investing heavily to further diversify its operations into chemicals, gas and clean energy projects, and to reduce its heavy carbon footprint.
"It's good to see that they are broadening their base to not remain too reliant on only one significant contributor," said Sasha Naryshkine, an analyst at asset manager Vestact.
"They seek to increase their profile in North America and that's where the growth will be."
Sasol recently bought two shale gas interests in Canada to boost its gas portfolio and secure feedstock. New Chief Executive David Constable said the company was scouting North America, Africa and Asia-Pacific for other assets.
"We will continue most definitely on the gas-to-liquids leg of the strategy and that will take us to more international locations," he said. For related interview:
Capital expenditure for the current financial year is forecast at 31 billion rand ($4.3 billion), and 32 billion rand the following year.
Sasol and Canada's Talisman Energy are working on a feasibility study into 48,000 barrels per day gas-to-liquids plant that would eventually use the gas produced from their Farrell Creek assets.
Sasol said it had completed a feasibility study for a gas-to-liquids plant in Uzbekistan and would decide in the near future whether to proceed to an engineering study on the project.
Due to a delay in China's approval for a proposed coal-to-liquids plant, the company said it had relocated staff and planned funding to other projects.
Sasol said it expects volumes from its synthetic fuels operations in South Africa to reach between 7.2 and 7.3 million tonnes in the current financial year, and forecast improved volumes from its operations from Mozambique and Canada.
Headline earnings per share for the year to the end of June rose 27 percent to 33.85 rand from the previous year. Headline EPS, the main profit gauge in South Africa, excludes certain one-time items.
Earnings were in the middle of Sasol's own estimate of a 22 to 32 percent increase.
Full-year revenue rose to 142.4 billion rand from 122.3 billion. Sasol said it would pay a final dividend of 9.90 rand per share, up from 7.70 rand a year ago.
Shares in the company were down 1.7 percent at 318.35 rand at 1305 GMT, hit by the broader market sell-off on concerns about the European debt crisis.
Copyright Reuters, 2011