Sasol weighs up ailing European investment
Carli Lourens
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Trade and Industry Editor
PETROCHEMICALS giant Sasol says it may reconsider its investment in Condea, the European chemicals operation it bought four years ago, if the oil price stays above $40 a barrel.
Sasol acquired Condea for R8,3bn four years ago in its largest acquisition to date.
Asked about the possible sale of the struggling operation, outgoing Sasol CE Pieter Cox said yesterday that the group might have to “take another look at it” if the oil price remained above $40 a barrel.
Analysts have speculated for some time that Sasol could reconsider its investment in Condea, which has been hit hard by steep oil price hikes. It uses oil derivatives as inputs.
Cox said that Sasol would for now continue efforts to improve efficiencies at Condea, where cash costs had been reduced materially during the period under review.
A solid performance by Sasol’s overall chemicals division, meanwhile, accounted for the bulk of the 65% jump in group operating profit to R6,5bn in the six months to December last year compared with the corresponding period in 2003.
Sasol said chemicals output grew and margins increased as world chemicals prices rose and as the group restructured its chemicals operations.
Incoming deputy CE Trevor Munday said the group had withdrawn from 27 poorly performing chemicals businesses over the past 18 months.
The improvement in group operating profit was also driven by a 49% rise in oil prices and, to a lesser extent, changes in accounting standards. The rise in operating profit was achieved despite a R1,56bn bite the stronger rand took out of operating profit.
It was also achieved despite Sasol’s hedging of 30% of its synthetic fuel production at a price significantly below the actual oil price during the period.
Sasol estimated it would have had R315m more in attributable earnings had it not hedged this production, said Cox.
Sasol reported a 77% increase in headline earnings to 703c a share in the period under review. Revenue rose 13% to R33,8bn.
The company said that before the accounting standard changes headline earnings a share of 640c were 61% higher than the corresponding period under review.
Capital expenditure rose to R5,8bn in the period. Gearing rose to 42% as a result, but was within Sasol’s targeted range of 30%- 50%.
Cox said the group’s gas-to-liquids plant in Qatar was on track for commissioning in the first quarter of next year. The major contract for the construction of its gas-to-liquids plant in Nigeria would be awarded in the next two months. The gas-to-liquids projects represented the next major driver of shareholder value.
Sasol said it expected full-year earnings to be at least equal to those achieved during the interim.
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