http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.17Change: 0.02
R/$ = 10.94Change: 0.03
Au 1235.52 $/ozChange: -1.40
Pt 1365.00 $/ozChange: -3.00
 
 
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
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders 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.
Eskom|Flow|Gas|Sasol|Qatar|USD|Average Crude Oil Price|Chemicals Cluster|Chemicals Producer|Energy|Flow|Local Energy|Lucrative Oil Hedge Last Year|Maintenance|Oil Hedge|Oil Price|Christine Ramon|Power
Eskom|Flow||||Energy|Flow|Maintenance||Power
eskom|flow-company|gas-company|sasol|qatar|usd|average-crude-oil-price|chemicals-cluster|chemicals-producer|energy|flow-industry-term|local-energy|lucrative-oil-hedge-last-year|maintenance|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 (150 word limit)
 
 
 
 
 
 
 
 
Other Energy News
France's Total SA, Europe's second largest oil company, has put one of its offshore Nigerian oilfields up for sale again, the company said, after a 2012 deal with Sinopec Corp failed. Total has hired BNP Paribas to find buyers for its Usan deepwater oilfield located...
A subsidiary of global engineering and construction company and power equipment supplier Foster Wheeler has been awarded the engineering, procurement and construction management (EPCM) contract for the electrical expansion and fuel gas superheater project aimed at...
Tanzania has signed an agreement with French oil producer Maurel et Prom and Wentworth Resources for the supply of gas aimed at doubling the country's power generation capacity to 3 000 MW by 2016. Oslo Stock Exchange and London AIM-listed Wentworth Resources said in...
More
 
 
Latest News
Thembani Bukula
Updated 45 minutes ago National Energy Regulator of South Africa (Nersa) full-time member for electricity Thembani Bukula says the regulator is not anticipating an approach by Eskom for a “re-opener” of the current tariff determination, notwithstanding National Treasury’s indication that...
Updated 1 hour 47 minutes ago Leading South African aerospace company Aerosud Holdings announced on Wednesday that it had formed a strategic alliance with the Industrial Development Corporation (IDC). As a consequence, the IDC has taken a 26% shareholding in Aerosud Holdings. Aerosud Holdings has...
Updated 2 hours ago Eskom had failed to comply with a High Court order that it hand over documents related to the awarding of a R4 billion tender to Areva NP Proprietary, Westinghouse Electric Company said on Tuesday. "It is Westinghouse's view that Eskom has failed to comply with this...
More
 
 
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
The board of UD Trucks Southern Africa (UDTSA) has announced the resignation of MD Jacques Carelse.   Long-time UD employee, corporate planning and marketing GM, Rory Schulz, has been appointed as acting MD while the process started to appoint a new MD. The Japanese...
There is a need to start planning another pumped storage scheme in South Africa. Much work has already been done at a site in the Limpopo province and the project was very close to being put out to tender at one stage. In 2008/9 the National Energy Regulator of South...
The Coega Development Corporation (CDC) is preparing to leverage its strategic coastal position to develop the Eastern Cape economy through proposed aquaculture development zones (ADZs), with a proposed R2-billion project aiming to contribute $278-million to the...
Completion of the ongoing construction of the 102 km Zomba–Jali–Phalombe–Chitakale road, in southern Malawi, has been extended from June  to December 15 because of persistent rains and difficulties in paying the contractor. The project is being undertaken by Kuwait's...
The Malawi government has awarded South African firm  Fischer Consortium the  contract to upgrade the Malawi Road Traffic Information System. The Directorate of Road Traffic and Safety Services at Malawi's Ministry of Transport and Public Works says Fischer...
 
 
 
 
 
 
 
 
 
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