Sasol's $11bn project on track for 2018

Sasol Lake Charles in the US. Photo: Supplied

Sasol Lake Charles in the US. Photo: Supplied

Published Feb 28, 2017

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Johannesburg - Sasol, the world’s biggest producer of

liquid fuels from coal, said the first units at its Lake Charles chemical

project will start operating in 2018, as the company reported lower first-half

profit because of currency losses and a strike.

The Lake Charles project is 64 percent complete and still

within its $11 billion budget, co-CEO Stephen Cornell said in a statement on

Monday. The fundamental drivers for the investment “remain sound,” he said.

Sasol said last year the cost of the project in Louisiana

had escalated by almost 25 percent, prompting the Johannesburg-based company to

make cuts elsewhere. The chemicals complex, which includes a 1.5

million-tons-a-year cracker, will convert ethane into plastics and other products.

Sasol’s profit before one-time items, known as headline

earnings, for the six months through December decreased 38 percent to R15.12 a

share, the company said. Sasol declared an interim dividend of R4.80 a share

and said it’s well placed to operate profitably at an oil price of $40 to

$50 a barrel.

Sasol feels “very comfortable” as the company prepares to

enter a fresh round of negotiations with workers around May, Cornell told

reporters on a call. “We believe that hopefully we’re in a better spot than we

were last year.”

Read also:  Sasol minimises lower oil price risk with hedge

The Association of Mineworkers and Construction Union

downed tools for about three months last year at the company’s Secunda mining

operations over disputes about wages and benefits. The mining unit’s operating

profit fell 35 percent from a year earlier as a result, Sasol said. The Secunda

plant, located 130 kilometers west of Johannesburg, converts coal from five

mines into synthetic fuels and chemicals.

Translation losses

The company also recorded translation losses of about R1.3

billion ($100 million) due to the strengthening of the rand relative to the

dollar. Sasol benefits when the rand is weaker because most of its products are

sold in dollars, while it meets most costs in the South African currency.

For the rest of the year, the company has hedged 30

million barrels of crude oil at $47 a barrel, but doesn’t have currency-related

protections in place, co-CEO Bongani Nqwababa said. It’s still in the early

stages of hedging for the next financial year, he said.

“We’re still open to the risks of the rand at the moment,

which is quite significant,” Nqwababa said.

The company said it remains committed to its plans in

Mozambique, where the economy is struggling under mounting debt after the

global commodity slump combined with a freeze on aid. Key projects are either

on or ahead of schedule, and “we’re in a good space and we want to do more” in

Mozambique, Cornell told reporters.

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