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Sasol a little shy

15 September 2004 Angelo Coppola

PSG Fund Mangers provides some insights into the Sasol numbers.

The difference wasless due to the cost of sponsoring the Springbok rugby team and more due to the influence of our rogue currency.

Operating profit at R9.3bn was down 22% on the previous year and management indicated that the currency alone gave rise to a R6bn hit. The silver lining in an otherwise dark cloud was the maintenance of the dividend at 450 cents, though this entailed cutting cover to 2.2 and raising gearing to 41%.

Capital expenditure during the year was close on R11bn with this due to creep up to R15bn in the year ahead. A strong increase in earnings in the second half versus the first half and in the fourth quarter on the previous three quarters, lends weight to management's prediction of a material increase in earnings in 2005.

A stubbornly high oil price, remembering that 30% of oil production has been sold forward at a price of $33, and the probability of a more stable and possibly slightly weaker rand is likely to provide the underpin.

Margins in the chemical business are in a healthier state and volumes are on the up in the more important lines. The growth vectors for the future include the development of sizeable global gas-to-liquids operations, expansion of the chemicals portfolio and potential upside from the joint venture with Engen.

Clearly, the curren

The difference wasless due to the cost of sponsoring the Springbok rugby team and more due to the influence of our rogue currency.

Operating profit at R9.3bn was down 22% on the previous year and management indicated that the currency alone gave rise to a R6bn hit. The silver lining in an otherwise dark cloud was the maintenance of the dividend at 450 cents, though this entailed cutting cover to 2.2 and raising gearing to 41%.

Capital expenditure during the year was close on R11bn with this due to creep up to R15bn in the year ahead. A strong increase in earnings in the second half versus the first half and in the fourth quarter on the previous three quarters, lends weight to management's prediction of a material increase in earnings in 2005.

A stubbornly high oil price, remembering that 30% of oil production has been sold forward at a price of $33, and the probability of a more stable and possibly slightly weaker rand is likely to provide the underpin.

Margins in the chemical business are in a healthier state and volumes are on the up in the more important lines. The growth vectors for the future include the development of sizeable global gas-to-liquids operations, expansion of the chemicals portfolio and potential upside from the joint venture with Engen.

Clearly, the currency will be the largest determinant of future earnings, but given our expectation that earnings have bottomed we are of the opinion that Sasol remains a key component of any long-term portfolio.

Investors should take note of the increase in proportion of the share capital being held in the US and the exceptional performance of the share price in dollar terms on the New York Stock Exchange over the past year.

cy will be the largest determinant of future earnings, but given our expectation that earnings have bottomed we are of the opinion that Sasol remains a key component of any long-term portfolio.

Investors should take note of the increase in proportion of the share capital being held in the US and the exceptional performance of the share price in dollar terms on the New York Stock Exchange over the past year.

Quick Polls

QUESTION

The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

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Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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