The Total picture
INVESTORS IN ENERGY giant Sasol don’t have many points of comparison on the JSE to measure performance. Ever since the delisting of Engen and Energy Africa there’s really been no comparative countermate for Sasol (no disrespect intended to illiquid Nigerian oil company Oanda).
However, Remgro’s latest annual report does provide some key insight into the performance of South Africa’s oil industry via its 24,9% investment in Total South Africa. Interestingly, Remgro reveals that Total’s contribution (for the year to end-December 2007) to group profits was down markedly at R207m from R246m previously – which is somewhat surprising considering the firm crude price over that period.
Remgro disclosed that Total’s SA market share for main fuels reduced slightly during the year to December 2007 but that sales volumes and gross profits had increased 5%. The reason profits stumbled at Total was due to a 10% drop in refining gross profits in Natref (in which Total has a 36% interest) – mainly due to the stronger rand against the US dollar.
Natref was also shut down for six weeks from May 2007 for planned maintenance and that was also followed by a number of unplanned shutdowns. Remgro says the reduced gross profit contribution from refining was compensated for by an increased marketing margin.
Despite the slightly underwhelming performance from Total, Remgro marked up its investment in the oil group to R2,6bn (last year: R2,2bn). That would give Total an enterprise value of roughly R10,5bn. As such Total remains one of Remgro’s smaller investments – slightly bigger than Transvaal Sugar (which has its own energy joint venture under way) and roughly a third of the size of Remgro’s 4,4% holding in Impala Platinum.
Remgro may now have held a far bigger energy sector exposure if it had held on to its stake in Engen. Remgro was one of the major shareholders that facilitated the sale of Engen to Malaysian oil giant Petronas in the late Nineties.
However, the higher crude price and slightly weaker US dollar/rand exchange rate could make Total SA a much bigger factor in Remgro’s fortunes in the year ahead.