JSE-listed petrochemicals company Sasol delivered solid financial results for the first three months of the 2014 financial year, despite ongoing global economic uncertainty and industrial action in South Africa, Sasol CFO Paul Victor said on Monday.

“The group benefited from a weaker rand/US dollar exchange rate, as well as improved product prices. The average Brent crude oil price for the three months improved slightly and chemical prices were also higher compared with the prior year,” he noted in an update statement to shareholders published on the JSE’s Stock Exchange News Service.

Victor added that the group’s Sasol Synfuels division had delivered a strong operational performance during the three months ended September 30, despite a planned total and phased shutdown of the East factory, which took place in September. The division’s quarterly production amounted to 1.7-million tons, which was a year-on-year decrease of 5%, or a year-on-year increase of 2% when normalised to take consideration of the total shutdown.

“Our Oryx gas-to-liquids (GTL) operation continues to exceed our expectations and the utilisation rate for the period remained above 100% during the first three months of the 2014 financial year. Our other foundation businesses continue to perform in line with 2014 targets,” he said.

Meanwhile, Sasol Mining’s production for the three months ended September 30, showed a 1% year-on-year increase to 9.7-million tons, while export coal sales increased by 13% relative to the prior corresponding period.

Sasol Oil’s production volumes declined by 7% year-on-year, as a result of the Natref refinery operating at lower crude rates in an attempt to reduce the high ULP 93 stock levels experienced at the end of the 2013 financial year.

Sales volumes decreased by 3% compared with the first quarter of the previous financial year, mainly owing to lower diesel supplies resulting from the lower throughput at the Natref refinery. This decrease was partially offset by higher sales into the aviation market as a result of the division having secured additional airline contracts.

Further, Sasol Solvents recorded a pleasing result this quarter owing to improved margins, higher sales volumes, as well as benefits realised from the implementation of a turnaround plan in 2013, while the South African polymers business is still experiencing margin pressure owing to higher-than-expected feedstock prices, and lower yields. 

Sasol expected the polymers business’ operating loss for the full 2014 financial year to be around R800-million, compared with a loss of R1.79-billion during the previous financial year.

Meanwhile, the disposal of Sasol’s investment in Arya Sasol Polymer became effective on August 16, and Sasol no longer had any investments in Iran, Victor said. 

US MEGAPROJECTS
The front-end engineering and design (FEED) phase of Sasol’s US megaprojects and ethane cracker were also progressing according to plan, he added.

Sasol noted in a seperate statement that it had appointed Technip as the primary contractor for the FEED phase of its proposed GTL facility in Louisiana.

“The selection of Technip as FEED contractor is a milestone in the advancement of our GTL facility,” said Sasol executive VP of US megaprojects Johan du Preez. “With experience as the execution contractor for our Oryx GTL plant in Qatar and the primary FEED contractor for our proposed GTL plant in Uzbekistan, Technip has the expertise to help us deliver this first-of-its-kind project for the US.”

Sasol expected to conclude the FEED phase and reach a final investment decision for the GTL project in 2016. The estimated project cost is between $11-billion and $14-billion.

Meanwhile, Victor noted that the group had, during the period under review, made sufficient progress on the FEED phase of its Uzbekistan GTL project with all technical activities having been completed.

He added that, as the demand in the chemicals market continued to remain soft, Sasol would continue to focus on the factors within its control, which included cost containment, operational efficiencies and margin improvement.

“Our current cost inflation is expected to be above the indicative South African producers’ price index trends for the 2014 financial year.

“We are making real progress on our business performance enhancement programme, as evidenced by the recent announcement we made regarding our revised group executive committee and related management structures,” Victor said, adding that the announcement of the new structures was an essential step toward transitioning to the group’s new operating model, which would ensure that Sasol was “fit for the future”.

He also stated that Sasol remained confident that it would deliver strong earnings growth for the 2014 financial year compared with the reported attributable earnings of R26.3-billion in the 2013 financial year, based on a solid business performance of the group and favourable macroeconomics.