Sasol allocates R1.2bn to implement cost-cutting

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Independent Newspapers

Sasol chief David Constable presents the company's interim results on Monday. Photo: Simphiwe Mbokazi

Johannesburg - Petrochemical and energy giant Sasol yesterday reiterated its plans to cut jobs amid the restructuring of its management, which comes into effect in July.

The restructuring comes as Sasol declared a record interim dividend of R8 a share, which was a 40 percent increase from the previous year.

Interim earnings a share rose 26 percent to R30.19 with help from a 19 percent weakening in the rand against the dollar during the six months to December last year.

The plan to overhaul management structures was announced last year as part of the company’s R3 billion annual savings target.

Yesterday, chief executive David Constable said the group had allocated R1.2bn to implement cost-cutting measures in the 2014 financial year.

He said the operating model of the group, which had 16 business units, would be structured along the value chain.

Talks with unions are under way, and trade union Solidarity has said in the past that about 1 000 people would be affected.

The new management structure, which would result in the reduction of top management decision-making layers, was expected to save R200 million in the 2014 financial year.

The company said it was confident that it would exceed the savings target. Between 30 percent and 40 percent of savings would be made by the end of the 2015 financial year.

“We are moving full steam ahead to go live with our new operating model, which will drive streamlined management structures, cost-effective processes and meaningful savings,” Constable said.

The company said it was developing projects in Mozambique, Nigeria, South Africa, the US and Uzbekistan.

Sasol had allocated R20bn in capital expenditure for the half year, of which 54 percent was spent in South Africa.

It was also gaining momentum from the shale gas boom in the US as it was progressing with the shale ethane cracker and the gas-to-liquid projects in Louisiana.

Sasol posted a 33 percent increase in operating profit to R25.1bn, while cash generated from operations surged 50 percent to R28.1bn.

Operating profit was negatively affected by a R5.7bn one-off item, including a R5.3bn impairment of Montney, a Canadian shale gas asset.

The Canadian shale gas asset generated a R6.3bn operating loss, including a R1.3bn depreciation in the period.

The operating profit at Sasol Synfuels rose 30 percent from the previous year to R16.22bn. This was because the weaker rand-dollar exchange rate resulted in improved margins.

Production in the division was stable at 3.7 million tons.

The company was also focusing on foundation business and had commissioned the ethylene purification unit in Sasolburg, which would increase volumes of polyethylene by about 47 kilotons a year.

The R1.3bn C3 stabilisation project in Secunda, which is under construction, was expected to be operational from the middle of the 2014 financial year, sasol said.

Operating profit from Sasol’s oil division increased 22 percent to R989m on improved crude refining and higher sales and marketing margins.

The macro environment remained volatile and uncertain with labour unrest in South Africa, and increasing input costs of the workforce and electricity price hikes, said Paul Victor, the acting chief financial officer.

Sasol shares fell 0.38 percent to close at R579.76 yesterday, off the day’s high of R584.85. - Business Report


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