Sasol delivers strong financial results, underpinned by higher crude oil and product demand

Sasol delivers strong financial results, underpinned by higher crude oil and product demand

photo: Sasol’s Joint President and Chief Executive Officer, Mr Bongani Nqwababa.

Johannesburg  – Sasol today (Monday, 26 February 2018) delivered a largely strong set of interim financial results, underpinned by higher crude oil and product prices, increased demand for our specialty chemical products and a satisfactory operational performance across the value chain.

 

For the six months ended 31 December 2017, earnings attributable to shareholders decreased by 20% to R6,9 billion from R8,7 billion in the prior period.  Headline earnings per share (HEPS) increased by 17% to R17,67 and earnings per share (EPS) decreased by 21% to R11,29 compared to the prior period.   EPS was negatively impacted by the scrapping of the company’s US gas-to-liquids (GTL) project mounting to R1,1 billion (US$83 million) and a partial impairment of the Canadian shale gas assets of R2,8 billion (CAD281 million).  Core HEPS, which is reflective of our sustainable profitability, was up 5% to R18,22. The Board has declared an interim gross cash dividend of R5,00 per share based on Core EPS, from R4,80 per share in the prior period.

 

Average Brent crude oil prices moved higher by 19% and since December 2017, spot prices have moved closer to the US$70/bbl mark, which if sustained at these levels, are expected to positively impact the company’s results during the second half of financial year 2018. Similarly, Natref refining margins increased by 16% to US$9,73/bbl.

 

In the chemicals business, there has been a steady increase in most commodity chemical prices and the average margins for most of Sasol’s specialty chemicals products, in dollar terms, have remained resilient.

 

Excluding the effect of the hedging programme, the average rand/US dollar market exchange rate strengthened by 4% from the prior period to R13,40, and the closing rand/US dollar market exchange rate strengthened by 5% from R13,06 in June 2017 to R12,37. This resulted in translation losses of R1,2 billion on the valuation of the balance sheet compared to translation losses of R341 million in the prior period.

 

The results were, however, constrained by unfortunate economic conditions in South Africa, which impacted demand for Sasol’s products, operational challenges at its Natref operations, a much stronger closing rand/US dollar exchange rate and the negative impact of re-measurement and once-off items.

 

Despite the challenging macroeconomic environment, Sasol continued to deliver a strong operational performance.

 

Operational and financial performance highlights

 

Performance Chemicals sales volumes increased by 3% mainly due to increased market demand. Normalised Base Chemicals sales volumes decreased by 1% mainly due to lower volumes from Secunda Synfuels Operations (SSO).

 

Production volumes from Eurasian Operations increased by 2% due to stronger demand and increased plant availability.

 

Natref’s production volumes were down 21% owing to planned plant shutdowns and an unexpected Eskom electricity supply interruption at the start of the financial period. This, together with softer market demand, lowered our liquid fuels sales volumes by 3%.

 

Production volumes from SSO decreased by 1% due to a planned shutdown. Based on the current plant performance, Sasol expects to produce 7,7 million tons for the full financial year.

 

At Mining, stabilising operations post the strike in FY17 has been a challenge. There has been some improvement in production run rates and management will maintain focus on reaching the productivity rates achieved prior to the strike.

 

“Our sustained focus on cost, cash and capital conservation drove a largely strong set of results, notwithstanding continued macro-economic volatility.  The recent recovery in global oil and product prices positively impacted our results.  However, this was offset by operational challenges at our Natref and mining operations, currency effects and poor economic conditions in South Africa.

“Encouraging recent developments signal a more stable political and investor friendly outlook for the country, in addition to a more positive global growth outlook with stronger demand in markets where we operate.  Our recent safety performance has regrettably been marred by tragic fatalities in our mining operations.  We are committed to the safety and health of our employees, communities and the environment.  Safety, as one of our core values and number one priority will receive our constant and unwavering attention,” said Sasol’s Joint President and Chief Executive Officer, Bongani Nqwababa.

 

“We are making steady progress in delivering the Lake Charles Chemicals Projects (LCCP) within the revised schedule, as we place increased emphasis on business readiness.  Once fully operational, the LCCP will transform Sasol’s earnings profile.  The start-up of this world-scale chemicals facility and the implementation of our broad-based black economic empowerment ownership structure, Sasol Khanyisa, are landmark milestones to be delivered this calendar year.  Guided by our clear strategic choices, we will continue to enhance our robust foundation to deliver on our refined value-based growth strategy.  To this end, exercising disciplined capital allocation remains paramount to ensure we deliver sustainable growth and on-going value to our shareholders,” said Sasol’s Joint President and Chief Executive Officer, Stephen Cornell.

 

Sustained cost, cash and capital conservation focus

 

Sasol’s low oil Response Plan achieved capital conservation and cash savings of R6,2 billion for the period.  This brings the total capital and cash conserved since January 2015 to R75,6 billion, which exceeds the target of R65 – R75 billion.

 

It has also delivered sustainable annual cash savings of R3,5 billion. Together with the Business Performance Enhancement Programme (BPEP) saving, it achieved at least R8,9 billion in sustainable cash cost savings.

 

Cash fixed costs, excluding capital growth and once-off business establishment costs, increased by 2% in real terms.   However, it still expects to track an inflation assumption of 6% for the full year.

 

Looking ahead, Sasol will maximise value from its existing portfolio of diversified assets through robust asset reviews, continuous improvement and digitalisation initiatives.  This will ultimately enhance the company’s competitiveness, reduce its cost base and improve the return on invested capital.

 

Delivering on growth projects

 

The company’s focus for the Lake Charles Chemicals Project (LCCP) remains commissioning, operations and business readiness.  To this end, the progressive start-up of utilities is on-going and gaining momentum.   As at 31 December 2017, the project was 81% complete with construction execution around 54%.  Capital expenditure is currently at US$8,8 billion.

 

With the priority on business readiness, Sasol continues to engage new markets and prospective customers, with around 90% of LCCP’s specialty chemicals products to be placed with existing customers.  Contracts are also in place for all major distribution channel partners.

 

In Mozambique, US$285 million has already been invested on the Production Sharing Agreement (PSA) field development plan, largely comprising drilling and surface facilities.  Nine wells have been successfully drilled and tested relating to the first phase, while drilling the first of two delineation wells relating to the second phase are underway.

 

Sasol anticipates oil production to be between the mid -to-lower-ends of the range presented in the field development plan.  The gas wells have confirmed that there is sufficient gas to cover initial downstream opportunities.

 

Several capital projects also reached beneficial operations during the period under review, such as the world’s largest oxygen train in Secunda and the Gemini High Density Polyethylene (HDPE) joint venture in the US. The FT Wax Expansion Project in Sasolburg is also progressing well.

 

Continued sustainability and heightened investment focus in Southern Africa

  Through high impact skills and social investment programmes, Sasol said it’s continually responding to the needs of employees and fence line communities.  In the past six months, the company disbursed R680 million globally in skills and social investment programmes, of which the majority was in Southern Africa.

 

Sasol has invested more than R20 billion on capital projects over the past 12 years to minimise its environmental footprint.   The company is also diligently implementing its air quality improvement roadmaps for its South African operations as a key instrument to sustain compliance and apply for further postponements to help in implementing our roadmaps by 2025.

 

Sasol management is particularly encouraged by recent developments in South Africa that signal a more stable political and investor friendly outlook.  A more conducive business environment will create even greater opportunities for Sasol to be a force for good, where our capital investments have totalled over R20 billion over the past three years.

 

The year ahead

 

The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign exchange movements are outside the company’s control and may impact results, management’s focus remains firmly on managing factors within its control, including volume growth, cost optimisation, effective capital allocation, focused financial risk management and maintaining an investment grade credit rating.

 

Sasol expects an overall strong operational performance for the year ending 30 June 2018, with:

 

1)            Liquid fuels sales volumes for the Energy business in Southern Africa to be below 59 million barrels due to lower production at Natref and slower South African economic growth;

2)            Base Chemicals sales, excluding merchant ethylene, to be between 1% to 3% higher than the prior year, with US dollar product prices recovering during the year;

3)            Performance Chemicals sales volumes, excluding merchant ethylene, to be between 2% to 3% higher, with average margins for the business remaining resilient;

4)            Gas production volumes from the Petroleum Production Agreement to be between 114 bscf to 118 bscf;

5)            An average utilisation rate at ORYX GTL in Qatar to exceed 92%; into account two planned plant shutdowns in the second half of the financial year;

6)            Normalised cash fixed costs to remain in line within our inflation assumption of 6%;

7)            The RP cash flow contribution to be close to the upper end of our targeted range of R22 billion to R26 billion by the end of FY18;

8)            Capital expenditure, including capital accruals, of R54 billion for 2018 and R38 billion in 2019 as we progress with the execution of our growth plan and strategy. Capital estimates may change as a result of exchange rate volatility;

9)            Our balance sheet gearing up to 44%,

10)          Rand/US dollar exchange rate to range between R12,50 and R14,00; and

11)          Average Brent crude oil prices expected to remain between US$55/bbl and US$65/bbl.

 

The salient dates for holders of ordinary shares and Sasol BEE ordinary shares are:

 

Declaration date Monday                                                                                                             26 February 2018

Last day for trading to qualify for and participate in the final dividend (cum dividend)                 13 March 2018

Trading ex dividend commences Wednesday                                                                              14 March 2018

Record date Friday                                                                                                                       16 March 2018

Dividend payment date (electronic and certificated register) Monday                                          19 March 2018

 

The salient dates for holders of our American Depository Receipts are1:

Ex dividend on New York Stock Exchange (NYSE) Wednesday                                     14 March 2018

Record date Friday                                                                                                          16 March 2018

Approximate date for currency conversion Wednesday                                                   21 March 2018

Approximate dividend payment date Friday                                                                      30 March 2018

 

All dates approximate as the New York Stock Exchange ( NYSE) sets the record date after receipt of the dividend declaration.

 

Comprehensive additional information is available on Sasol’s website: www.sasol.com

Court sentences robbers

BETHAL – The Bethal Magistrates Court this week sentenced Nhlanhla Mkhabela (21) and his co-accused to seven years imprisonment for attempted robbery with aggravating circumstances.   This is after a lengthy trial that took almost two years.

The sentencing follows an attempted robbery that occurred at about 8:00 in the morning of Friday, 21 August 2016 in Bethal at a speedy cash loans business when a 70 year-old female was attacked by Mkhabela and his co-accused Elias Trevor Mhlongo (29) while she was opening the business for trade.

According to the spokesperson of the Bethal SAPS, Constable Mahlatse Thomas Mogadime, the attackers entered the premises and forcefully opened the security door.

“They suddenly pushed the old victim to the ground and demanded keys to the safe from her,” Constable Mogadime told the Village Voice News.

“During the incident, the victim sustained slight injuries and however managed to overpower the suspects for she threw the safe-keys into another office that contained a safety-door, which prevented the suspects to access them and rob-off the cash.

“While busy fighting the attackers, fortunately passers-by came to her rescue.  Then the attackers left her and started to flee from the scene.  However, community members who have by now seen the incident gave chase and managed to apprehend one suspect and handed him over to the police.

“Following the information gathered during the investigation, Detective Victor Nkadimeng of the Bethal Police managed to arrest the second suspect later on the same day.

“The suspects were then charged and appeared at Bethal Magistrates Court on several occasions facing charges of attempted robbery where on their first appearance regarding the said case, both suspects were released on bail pending investigations,” Constable Mogadime said.

He also added that during the court proceedings all witnesses were summoned to testify, though Elias Trevor Mhlongo, accused number two did not pitch, therefore a warrant of arrest was issued for him and the court found it satisfactory to convict the accused.

The court also declared the accused unfit to possess a firearm.

“The station Commander for Bethal Police, Lt. Col. Petrus Nzima welcomed the sentence and thanked the investigating officer for the hard work and dedication in securing the conviction,” he concluded

Police arrest trio for drug dealing in Bethal

Police arrest trio for drug dealing in Bethal

BETHAL – Three people were arrested in Bethal for possessing and dealing in drugs.  The suspects were arrested on Friday, 16 February near Station Road.

According to Bethal Police’s spokesperson, Constable Thomas Mokgadime, the trio includes one Nigeria man and two of his female accomplices, a white woman and black woman.

“The Secunda Directorate for Priority Crime Investigation (DPCI) received information about the trio’s illegal activities and they followed it promptly, for before the arrival of the police the suspects were busy moving in and out of their apartment which raised suspicions of hiding drugs.  The apartment is also suspected of being used as a brothel,” Constable Mokgadime told the Village Voice News.

He said while the police where approaching the apartment, they noticed a white female (21 years-old) who was wearing a brown army jacket.  They requested her to take it off so they can search it, of which she compiled.  “The police found a black plastic bag in the suspect’s jacket, which had heroine inside,” Constable Mokgadime said.

Inside the apartment, the police also found a black female aged 21 in the bathroom while she was trying to flush away a black plastic bag.  They got the plastic bag before it could be flushed away, which also had drugs inside.

“Furthermore, the police found two other black plastic bags in the drain also containing drugs.  The police seized a total 42 packs of heroin, two packs of Tik from the apartment with an estimated street value of R141 000.  The trio were arrested on the scene.

The suspects will appear at the Bethal Magistrates Court today (Monday 19 February 2018) facing charges of illegal drug dealing and possession.

Trio arrested for illegal dealing in drugs.  Photo by: SAPS

Sexual Harassment in the workplace and schools

Sexual Harassment in the workplace and schools

By: Reston Jena (LLB) – University of Fort Hare (Lawyer at  SIPETO MDUBA ATTORNEYS offices in BETHAL (078 684 9728 or 017 647 1338)


Being the good citizen that l am, one day on my way from the Middleburg court, l found myself offering transport to a lady who was standing by a hiking spot on her way to Bethal. Five minutes into the journey, we were chatting gaily about the unpredictable weather when the lady received a message on her phone. Through the rear view mirror l saw her throwing the phone on the vacant seat and her face threatened to go up side down in tears. Sympathetic enquiries from me and my colleague showed that this lady was employed at a local engineering firm as a welder but for the eight odd months that she had been with this company, she was continually subjected to nude and partially nude pictures posted by her male co-workers in common areas, through Bluetooth and in places where she would have to encounter them, including her tools box. The men referred to Philisiwe(not her real name) as “baby,” “sugar,” “momma,” and “sweety.” In addition, the men wrote obscene words directed at the victim all over the plant. The men also made numerous suggestive and offensive remarks to the victim concerning her body and the pictures of a voluptuous black lady posted on the walls. She had had lodged complaints about this atmosphere of harassment on a number of occasions, but the company’s supervisory personnel provided little or no assistance and this was putting a strain on her marriage. Quitting the job was not an option because she was the bread winner but these happenings at the work place were also draining her emotionally and psychologically.

Sexual harassment in schools or in workplaces has become so unbridled and is now perceived in the eyes of many victims (who choose to remain aloof) and harassers (who find contentment in it) as a conduct not contrary to the legal convictions of the community. Yet the conduct is not just contra bones mores (illegal) but it undermines the ability to work and has a negative impact on production resulting in undesired consequences. Sexual harassment is an entirely deplorable conduct which undermines the magnitude of esteem needs (need for status, recognition and self-respect). The legal position in South Africa is that employees are afforded the right to equal treatment, privacy and the all-encompassing right which is the right to dignity. Both the revered Constitution of the Republic of South Africa, which is the supreme law of the land and the current labour legislation, protects the employees

But what is sexual harassment?

Conduct which can constitute sexual harassment ranges from innuendo(a derogatory suggestion about a person or a thing with the intention to insult), inappropriate gestures, suggestions or hints or fondling without consent or by force in its worst form, namely rape.

Forms of sexual harassment, inter alia, are:

repeated requests for dates that are turned down, or unwanted flirting,  posting e-mails or pictures of a sexual or degrading nature, displaying sexually suggestive objects, pictures, indecent exposure, fondling, sexual assault and rape, strip search by or in the presence of the opposite sex, unwelcome innuendoes, sex-related jokes or insults or unwelcome graphic comments about a person’s body made in their presence or directed toward them,  unwelcome and inappropriate enquiries about a person’s sex life, Unwelcome whistling directed at a person or group of persons.

Quid pro quo harassment occurs where an owner, employer, supervisor, member of management or co-employee, undertakes or attempts to influence the process of employment, promotion, training, discipline, dismissal, salary increment or other benefit of an employee or job applicant, in exchange for sexual favours.

Another form of sexual harassment is sexual favouritism. This, as is indicated in the Code of Good Practice, exists where a person who is in a position of authority rewards only those who respond to his/her sexual advances, whilst other deserving employees who do not submit themselves to any sexual advances are denied promotions, merit rating or salary increases.

It is crystal clear that a number of human rights entrenched in the Constitution of the Republic are infringed in the conduct of sexual harassment. In a chain of case law it has been reiterated that Constitutional rights which accrue to the citizens and residents of the Republic, which include but not limited to right to privacy, right to freedom and security, dignity are violated every time an employee is sexually harassed. The Constitution protects all people from any form of sexual harassment by affording them rights. The current labour legislation plays a pivotal role in protecting employees from sexual harassment. The Employment Equity Act prohibits discrimination in the workplace, either directly or indirectly.

Sexual attention becomes sexual harassment if the recipient or victim has made it clear to the harasser that the behavior is unacceptable, or if the perpetrator should have known that the behavior is unacceptable and if the behavior is persistent although a single act would result in sexual harassment. Two tests are used by the courts to prove sexual harassment, the subjective test and the objective test. The subjective test would be whether the victim found the sexual attention unwelcome, that is whether or not the behavior was sexual harassment in the eyes of the complaint and the effect that it has on her. The objective test is where the surrounding circumstances of the case are considered and then decide whether a reasonable person would consider such conduct as sexual harassment.

Victims of sexual harassment are advised to file a grievance with their supervisors, approach the CCMA but the best would be to get expert advice from an attorney who specializes in employment issues. Victims should confront the harassers. The victims should not delay reporting the incident and should have a detailed report of the incident so that they would be able to respond to the Who, When, Why, What and the How questions. Do not hesitate.

RASTON JENA (LLB DEGREE)

Legal advisor at  SIPETO MDUBA ATTORNEYS with offices in BETHAL (078 684 9728 or 017 647 1263)