Sasol rises despite oil price decline

SASOL rose the most in more than three months after the world’s biggest producer of liquid fuels from coal said profit would fall by less than analysts estimated.

Earnings per share excluding one-time items probably declined by as much as R11.43 in the year to June 30, the Johannesburg-based company said on Friday. That equates to as little as R48.73, which exceeds the average estimate of R42.67 by 15 analysts polled by Bloomberg.

The company said in March it would conserve as much as $4.2 billion (R53bn) in cash after a drop in the price of oil, to which Sasol’s revenue is linked. The cuts are in addition to a programme that entails cost savings of at least R4.3bn annually from July 2017. Sasol exceeded its cost-savings target for the 2015 financial year and said implementation costs remain within forecasts.

Sasol countered a 33 percent decline in the average Brent crude price with “good refined product sales, performance and base chemicals sales volumes”, said Mohamed Kharva, a research analyst at Nedbank Capital. A weaker rand also helped, he said. Sasol derived 52 percent of 2014 revenue from South Africa, whose currency lost 13 percent against the dollar in the year to June 30.

Shares rise

Sasol shares climbed as much as 4.5 percent to R440.29 and traded 2.1 percent higher at R430.10. By the close on Friday, the Sasol’s shares ended up 0.31 percent .at R422.52.

Sasol increased liquid fuel sales volumes by 5 percent to a record 61.5 million barrels, while base chemicals climbed 2 percent and performance chemicals increased 3 percent, it said.

A R1.3bn credit on cash- settled share-based payments boosted profit, as did lower depreciation charges after the useful life of southern African operations was extended, and the reversal of a provision for a R534 million fine, Sasol said.

The country’s antitrust appeals court in June overturned a decision by the Competition Commission to fine Sasol for overcharging customers for chemicals.

Sasol will take a further R1.3bn partial impairment of a share in the Montney shale-gas assets in Canada because of poor conditions in the North American gas market, it said.

It wrote off R5.3bn on the asset last year.

Sasol delayed plans to build a US gas-to-liquids plant, the nation’s first, which would have cost as much as $14bn, it said in January.