http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.69Change: -0.20
R/$ = 10.62Change: -0.11
Au 1285.38 $/ozChange: 3.76
Pt 1401.50 $/ozChange: 1.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Nelson Mandela 1918 - 2013   Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science & Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Oct 22, 2010

Strong rand restrains profit margins

Back
Sasol chief financial officer Christine Ramon discussing the company's strong financial results.
Energy|Eskom|Flow|Gas|Power|Sasol|Qatar|USD|Average Crude Oil Price|Chemicals Cluster|Chemicals Producer|Energy|Flow|Local Energy|Lucrative Oil Hedge Last Year|Oil Hedge|Oil Price|Christine Ramon|Power
energy-company|eskom|flow-company|gas-company|power-company|sasol|qatar|usd|average-crude-oil-price|chemicals-cluster|chemicals-producer|energy|flow-industry-term|local-energy|lucrative-oil-hedge-last-year|oil-hedge|oil-price|christine-ramon|power
© Reuse this



The strong rand is restraining local synthetic fuels (synfuels) and chemicals producer Sasol’s ability to realise potential profit margins, chief financial officer Christine Ramon reports.

However, despite the strong performance of the local currency and global markets still being volatile, following the economic crisis, the company posted solid financial results for the 2009/10 financial year ended June 30, with all its business clusters returning to profit.

Ramon, the youngest member of Sasol’s executive council, says that the 16% stronger rand outweighed the benefit of improved commodity prices and improved production volumes, impacting on the company’s turn- over and operating profit negatively.

However, the strong rand also benefits the company, owing to reduced cash fixed costs brought about by lower inflationary trends. “We do, however, remain sensitive to economic variables on the global market,” she says.

The company reports that, for every change of one dollar in the average crude oil price, its operating profit is impacted on by about R615-million and a similar situation is seen in every 10c change in the rand:dollar exchange rate.

She says that, although there has been a gradual strengthening of the oil price over the past year, it is still 5% down on the price for the corresponding period last year.

Sasol’s local energy business is the primary contributor to the company’s profitability, although hampered by the strong rand. The chemicals cluster contributed 23% to the group’s profit, which is proportionately larger than its 2008 ‘record year’ performance.

“Despite these negative impacts, we have delivered on an improved operational performance, reflected in the company’s healthy operational margins of about 20%. Management’s continued focus on operational performance and cost discipline has boosted the bottom line,” Ramon reports.
An improvement in production volumes contributed R1,9-billion to the operating profit. The company says that the profit was not affected by the one-off administrative penalties implemented by the Competition Commission, remeasurements and Sasol Inzalo interest charges.

The company also benefited from a lucrative oil hedge last year, which was not repeated this year. Ramon says that no decision has been made on an oil hedge for 2011.

Further, Sasol has managed to reduce its absolute cash fixed costs on a sustainable basis, by about R800-million, compared with figures for last year.

Meanwhile, offshore investments have shown growth within both the energy and the chemicals businesses. Ramon reports that the company’s strategy of geographical diversification has enhanced the robustness of the business.

In Qatar, the Oryx gas-to-liquids plant has made a noteworthy contribution to current results and has the potential to contribute even more in the coming year. “Oryx continues to perform well at 90% capacity, despite a maintenance shutdown, as well as an unforeseen technical shutdown. During 2011, we plan to realise planned operating rates,” Ramon adds.

With regard to the electricity tariff increases being implemented by State-owned utility Eskom, and labour costs rising above the consumer price index, the company reports that it has had a good cost performance. “We aim to contain rising costs within the inflation range,” she notes.

Sasol currently generates about one-half of the electricity it uses. The company reports that it plans to increase its own-generation capacity to about 60% by 2012.

Further, Ramon reports that a power purchase agreement with Eskom, effective July 1, will mitigate further electricity cost increases in future.

During 2011, Ramon expects synfuels production to maintain the 7,3-million-ton baseline production, taking into account a one-in-eight-year full factory outage.

Further, Sasol reports that it expects its total capital expenditure (capex) to rise steadily during the next two years. The company plans to spend about R19-billion on capex during 2011, and a further R22-billion during 2012.

“Our strong financial position and cash flow gives us a competitive advantage in the current environment to respond quickly and effectively to new opportunities,” Ramon concludes.

Edited by: Brindaveni Naidoo
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
Other Energy News
Updated 2 hours 14 minutes ago Nigeria has awarded most of its long-term oil contracts worth an estimated $40-billion a year to local companies, according to a confidential list seen by Reuters, meaning global traders need to partner with them to access crude from Africa's top producer. Global...
NAIROBI – Kenya will negotiate the import of natural gas from Qatar Gas to fuel a power station it wants built in the Indian Ocean port city of Mombasa, the President's office said on Tuesday. The gas-powered power plant was part of the government's plans to add 5...
JSE- and NYSE-listed Camac Energy on Tuesday expected its Northern Offshore Energy Searcher drillship to arrive at the Oyo oilfield by the end of April as it awaited “imminent” Nigerian Department of Petroleum Resources clearance to enter Nigeria and kick off...
Article contains comments
More
 
 
Latest News
Updated 0 minutes ago Property industry bodies the South African Property Owners Association (Sapoa) and the Kruger Lowveld Chamber of Business and Tourism (KLCBT) have signed a memorandum of understanding aimed at fostering improved policy and communication between the private property...
Updated 2 hours 25 minutes ago Nigeria has awarded most of its long-term oil contracts worth an estimated $40-billion a year to local companies, according to a confidential list seen by Reuters, meaning global traders need to partner with them to access crude from Africa's top producer. Global...
Updated 2 hours 42 minutes ago JSE-listed Sephaku founding member Christiaan Rudolph de Bruin has resigned as a nonexecutive director and a member of the company’s remuneration and nomination committee, effective April 21. De Bruin, along with CEO Dr Lelau Mohuba and David Twist, founded the...
More
 
 
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
 
 
 
 
 
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
MORE IN SA Phase 2 should see local content on the mainline locomotive increase from 65% to 80% by the end of 2014
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...
 
 
 
 


 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks