Share price: R432,25 JSE code: SOL
SELL THIS IS A BIG GROUP WITH BIG numbers and pioneering technology. But the past year has not been easy for it, mainly because of the plunging price of oil. That’s reflected in the share price, which has lost nearly a third of its value.
Operations look okay, according to a lengthy trading statement with as many repetitions as DStv. The drop in the oil price, to which Sasol’s revenue is linked, saved it around $4,2bn as an offset. Sasol says it increased liquid fuel sales volumes by 5% to a record 61,5m barrels, while base chemicals climbed 2% and performance chemicals 3%.
Nevertheless, the trading statement, for the year to end June, indicates that the numbers are going to be bad. Heps, for instance, is expected to decrease by 14% to 19%. Sasol offers a litany of reasons for this, and a longer list of factors supporting profitability. But looming in the background is a Competition Commission investigation into the company’s alleged overcharging of customers for chemicals. Sasol won the appeal at the competition appeal court, and accordingly reversed the R0,5bn it had set aside for a possible fine, taking the amount into the income statement. But it isn’t over yet. The Competition Commission has since indicated that it plans to appeal against the decision.
Long-time CEO David Constable is leaving, having decided not to extend his contract. He will still be around for a while, while a replacement is sought. But changing CEOs can have a big effect on a group such as Sasol.