Sasol secunda .Sasol 9 month review .PHOTO SUPPLIED 3

Londiwe Buthelezi

Sasol had increased its production of petroleum products to 5.26 million tons in the nine months to March and was on track to achieve production guidance of about 7.1 megatons by the end of its financial year to June, the energy and chemicals firm said yesterday.

The nine-month production figures showed Sasol produced 1.89 megatons in the three months to March.

Sasol chief financial officer Christine Ramon said although the weaker local currency had subjected the company to inflationary cost pressures in its third quarter to March, the group had benefited from improvements in the operational performance of its main businesses, as well as a weaker rand/dollar exchange rate.

It had also witnessed a recovery in its operations since the incidents of phased maintenance outage and industrial action that had a negative impact on production in the first half of the current financial year.

“We remain confident that, based on the production guidance and macroeconomic indicators, we will deliver solid operational results and increased earnings for the 2012 financial year, compared with the attributable earnings of R19.8 billion in the 2011 financial year,” Ramon said.

In the nine months to March, the high oil price combined with a weakening of the rand against the dollar resulted in a 31 percent rise in average domestic fuel prices.

The chemical business, on the other hand, came under pressure due to high feedstock prices, as well as softer demand and product prices.

Sasol said it expected product margins in this business to remain under pressure due to lower oil prices.

Sasol’s solvents business, which has facilities in Germany, Secunda and Sasolburg, also remained under pressure due to high feedstock costs and lower product prices because of weaker demand.

Ramon said Canadian shale gas assets were “in substantial loss position” because of low gas prices, higher-than-expected drilling and completion costs and high depreciation.

Ryan Seaborne, an analyst at 36One Asset Management, said in terms of volumes produced Sasol’s performance in the period was in line with market expectations.

However, the outlook for the North American shale gas operations had deteriorated and asset write-downs were likely, though none had been disclosed yet.

“I think because shale gas was seen as the new growth area, the outlook there is quite disappointing,” Seaborne said.

Ramon said Sasol’s $220 million (R1.8bn) gas project in Mozambique, which it completed recently, was going to increase the capacity of the central processing facility by 63 million gigajoules a year to 183 million gigajoules. The additional capacity would benefit South Africa by 27 million gigajoules a year through a gas sales contract with Sasol Gas.

Sasol was also looking at developing additional gas-fired electricity generation in Mozambique. It said it was on track to produce about 60 percent of its electricity requirements by 2013.

Last year Sasol said “abnormal increases” in the cost of electricity in its South African operations had negatively affected its cash fixed costs.

Sasol said its cash fixed costs, excluding once-off and growth costs, increased by 4 percent in real terms.

Seaborne said the fact that Sasol was looking to produce more of its own electricity was positive, however this was not going to offset the cost inflation in the balance of the costs. He said it would have to continue with cost rationalisation to prevent further margin pressure.

The shares fell 2.01 percent to R339.69 on the JSE.