Unstable forex rates hurt Sasol’s profitability

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120911 Sasol Chief Executive, David E. Constable speaking at the Company results held at their offices in Rosebank North of Johannesburg.photo by Simphiwe Mbokazi 453

Dineo Faku

An unstable exchange rate was a threat to Sasol’s competitiveness, the petrochemicals giant said yesterday.

A 10c change to the dollar value of the rand affected operating profit by R800 million, chief financial officer Christine Ramon said at the financial results presentation. She said the rand-dollar exchange rate was one of the biggest external factors affecting profitability.

The company posted a 13 percent decline in attributable earnings to R12.1 billion in the six months to last December from a year earlier. Headline earnings a share rose 2 percent to R24.01 and earnings a share dropped 13 percent to R20.10 in the period. An interim dividend of R5.70 a share was declared.

During the period under review, Sasol wrote down the value of its Arya Sasol Polymer Company in Iran by R3.6bn. The write-down came against a backdrop of US and EU sanctions over Iran’s nuclear enrichment programme, which led to the devaluation of the Iranian currency.

Sasol reported partial impairments at the Arya polymer business and the German solvents business of R1.97bn and R198 million, respectively. It recorded a R1bn foreign exchange loss due to the depreciation of the Iranian rial against the dollar.

It also wrote down R428m on an unsuccessful exploration well in Mozambique.

The company was exiting Iran and would sell its 50 percent stake in the Arya petrochemical joint venture. Further details on the sale of the Arya assets would be made public in the near future, Ramon said.

Sasol planned to approach investors for a $1bn (R9.1bn) rights issue mainly for the funding of its projects in the US in the near future, she added. “To match cash flow and build the US projects we may issue a bond in the next year.”

The company issued a $1bn bond last November to fund capital investments.

Sasol’s growth strategy is focused on building a gas-to-liquids plant in the US that will produce 96 000 barrels a day. Shale gas from hydraulic fracturing is a possible feedstock. Sasol is also investing in Nigeria, Canada and Uzbekistan.

In his Budget speech, Pravin Gordhan said a tax of R120 for each ton of carbon dioxide equivalent emissions would be introduced by 2015.

David Constable, Sasol’s chief executive, said: “We are engaging with [the] government and are unable to provide guidance on the impact of the tax at this stage.” Sasol expected an updated policy paper at the end of this month.

Its shares rose 1.12 percent to close at R407.50 yesterday.