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Sasol wraps up most of hedging programme

Energy

Johannesburg – Energy giant Sasol has completed the bulk of its foreign exchange hedging programme for the 2018 year.

In a statement issued on Wednesday, the listed company said it had hedged about 70 percent of its dollar exposure for the year to June.

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The company explains it has entered hedges with a total notional amount of $4 billion, at an average of $1 billion per quarter, have been put into place.

These hedges have an annual average floor of R13.46 to the dollar, and an annual average cap of R15.51 per dollar. These levels approximate the quarterly averages, it says.

These hedges follow its December announcement that it was hedging against downside risks to the price of crude oil. Crude oil is currently just above $52 to a barrel.

The Organisation of the Petroleum Exporting Countries has sought to limit production of oil in a bid to push prices higher.

By the end of the half year, Sasol had hedged 12 percent of its foreign exchange exposure.

The hedges were completed using zero-cost collar instruments.

Read also: Sasol hedges oil

Sasol explains the hedges will provide it with some cash flow and balance sheet protection, as gearing and net debt to earnings before interest, tax, depreciation and amortisation levels are expected to peak during the 2018 financial year.

“In addition, the financial risk mitigation strategy with reference to currency hedges is expected to partially mitigate the negative translation impact of valuing the balance sheet at each reporting date,” it says.

Sasol, which has seen its profit come under pressure due to currency fluctuations and a lower oil price, says it will continue to review financial market risks, and should additional material hedges be put into place, appropriate announcements will be made.

BUSINESS REPORT ONLINE

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