Oct 23, 2009
Competition-related fines dent 2009 profitsBack
Africa|Foskor|Gas|Inzalo|Kynoch|Nutri-Flo|Omnia Holdings|Petrochemicals|Profert|PROJECT|Sasol|Africa|South Africa|Gas-to-liquids|Liquid And Granular Fertiliser Producer|Petrochemicals|Petrochemicals Giant|Product|Products|Retail Market|Christine Ramon|Pat Davies|Bearing|Limpopo|LAN
© Reuse this
Sasol CEO Pat Davies said that the profits generated this year were on a par with last year’s figures of about R32,3-billion, but that with the one-off charges and the addi- tional year-on-year cost of new business and studies, the final operating profit figure for 2009 stood at R24,7-billion.
The one-off charges amounted to about R6,5-billion and the new business and studies at R1,1-billion.
The investigation into the Sasol Nitro division was prompted by a complaint from liquid and granular fertiliser producer Nutri-Flo and fertiliser solutions company Profert, which alleged that Sasol was abusing its dominance in the markets for fertilisers by charging excessive prices for certain products.
The complaint by Nutri-Flo was also extended to include Kynoch, now called Yara South Africa, and Omnia Holdings, which Nutri-Flo alleged had collaborated with Sasol to fix prices.
The Competition Board discovered docu- ments that indicated a possible collusion between Sasol and Kynoch in respect of the pricing of ammonia.
The Profert allegations specifically centred on activities in the limestone ammonium nitrate (LAN) market.
Kynoch and Omnia have denied allegations, despite Sasol’s agreement to pay the penalty.
Sasol and Omnia are manufacturers and suppliers of fertilisers. Sasol is the dominant player in the production of basic raw materials and intermediates for nitrogen-based fertilisers.
Nutri-Flo is a small fertiliser supplying firm that sources most of its raw materials and straight fertilisers from Sasol. It also competes with Sasol, Omnia and Kynoch in the retail market.
The Competition Commission deposition indicated that “Sasol had entered into a framework of agreements, arrangements and understandings, which had the effect of constructing and dividing the market, such that Sasol became the exclusive supplier of LAN to the wholesale market”.
The price of fertilisers was fixed and maintained at certain levels through committees, such as the Import Planning Committee and Nitrogen Balance Committee, comprising Sasol, Kynoch and Omnia.
The Commission’s deposition reports that these committees were responsible for the exchange of information about production, supply and demand; the allocation, redistribution and swapping of sales information and the prevailing market shares of the members of the committees and product availability; agreement on export volumes and prices, and directly or indirectly fixing prices and dividing markets by allocating customers, suppliers and territories. It indicated that the committees’ discussions extended to a range of nitrogenous fertilisers, such as ammonia, potash, urea, monoammonium phosphate, diammonium phosphate and LAN.
In a statement released at the time of the settlement, Sasol Nitro MD Marius Brand said: “The conduct, identified in these investigations of the Sasol Nitro business, is unacceptable, and runs counter to our Sasol values. “This settlement agreement is an important step and we are looking forward to concluding outstanding matters.”
Further, there were allegations of beha- viour that contravened the Competition Act in the phosphoric acid business.
Sasol reports that, in 2007, the Competition Commission initiated a complaint against it and Foskor, a South African phosphate and phosphoric acid producer. The complaint related to an agreement that Sasol had made with Foskor to ensure the con- tinued viability of the group’s phosphoric operations in Phalaborwa, in Limpopo province.
In a statement released earlier this year, Sasol indicated that, upon receiving external legal advice, it had concluded that certain provisions of its agreements with Foskor might be a contravention of the Competition Act. It added that the restrictive clause in its agreement with Foskor was terminated in 2007.
In August, the group announced that it was initiating plans with various stakeholders ahead of a possible closure of its Phalaborwa phosphoric acid plant. It cited high local and international feedstock prices and a decline in the phosphoric acid market as reasons for the possible closure. A final decision is expected before the end of the year.
The Competition Commission also announced earlier this year that it had started investigations into the piped gas and petro- leum industries, which include investigations into activities by Sasol Oil.
The investigation relates to alleged price fixing and market allocation.
Sasol Oil had applied for leniency in the matters being investigated. Sasol also instituted an internal review, which was expected to be completed during the first half of 2009, but which, the group reported in May, would only be completed towards the end of 2009.
In such cases, when an appeal is lodged, the money is set aside by the EC in an interest bearing bank account, until the appeal is settled.
At the group’s 2008 annual general meeting in November last year, Davies indicated that it would be appealing the fine. “We were outraged when we heard of the activity that led to the fine, and we were outraged when we heard of the quantum of the fine. We did not expect a fine of this magnitude or we would have provided for it. So we are taking action, as we have announced, to appeal this decision. We believe we have grounds for this,” he said.
Inzalo Share-Based Payment
The scheme, unveiled in September last year, is worth about R24-billion and aimed to introduce about 200 000 previously disadvantaged shareholders to Sasol’s register. The Inzalo offer relates to 10% of its issued share capital, which is divided between employees, members of the public, selected BEE groups and the Sasol Inzalo Foundation.
It was reported earlier this year that Inzalo had made a loss in its first six-month period as a result of a fall in the group’s share price in December 2008. However, at the results presentation, Sasol CFO Christine Ramon said that the group had set its final dividend payment for the year at R6 a share and that this brought the total dividend payment amount for the year to R8,50, which is in line with the group’s dividend policy.
Edited by: Brindaveni Naidoo© Reuse this Comment Guidelines (150 word limit)
Other Energy News
For two years, Italy-based industrial research and development company Sunchem have been working on producing jet fuel using a tobacco crop project in Marble Hall, Limpopo, which has proved to be successful in the small-scale trials, says Sunchem SA MD Joost van...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
While Ekurhuleni-based transformer manufacturer Reliable Transformers currently designs, manufactures and tests its products according to the SANS 780 specifications for distribution transformers and other applicable transformer specifications, it is working towards...
Global endpoint security solutions company Kaspersky Lab has introduced new measures to prevent cyber criminals from accessing sensitive data, alongside its malware-signature and heuristic device analysis detection methods. Threats to mobile devices have increased...
To ensure uptake and a positive impact, Wireless Fidelity (Wi-Fi) networks in cities must be provided at schools, community centres and commercial centres to enable citizens and government to access information that will improve access to and delivery of services....
Eco-estate Monaghan Farm, located near Lanseria airport, north-west of Johannesburg, has taken a new approach to modern living and sustainability with its 517 ha development, dedicated to farm living.
Forklift and lift-truck distributor Goscor Lift Hi-Reach launched the Genie SX-180, the tallest self-propelled super boom in Africa, in Johannesburg last month. “As the official distributor of the well-known Genie range of equipment in Southern Africa, we are pleased...