Sasol to grow retail presence
• Conglomerate is talking to local groups in an attempt to increase market share at the pumps, says joint CEO
Energy and chemicals conglomerate Sasol was talking to other South African fuel retail groups about possible partnerships to expand its presence in the sector, joint CEO Stephen Cornell said on Monday. Sasol dropped out of the bidding for Chevron’s local assets in 2016.
Energy and chemicals conglomerate Sasol was talking to other South African fuel retail groups about possible partnerships to expand its presence in the sector, joint CEO Stephen Cornell said on Monday.
Sasol dropped out of the bidding for Chevron’s local assets in 2016. Over the past few years Caltex (the majority owner of Chevron SA) and Petronas (the majority owner of Engen), have sought buyers for their local assets. Government-owned PetroSA was one of the bidders for Engen. Suitors for Chevron SA are understood to include Total, Glencore, Gunvor, Puma and Sinopec.
Cornell said Sasol produced about 30% of SA’s liquid fuels, but its retail market share was only 11%. It would grow organically and through acquisitions.
Kobus Nell, a portfolio manager at Stanlib, said that although fuel retailing was a low-margin business, it delivered a relatively steady margin. It would make sense for Sasol to build up more critical mass in the sector.
Sasol’s dividend for the six months to December fell 16% to 480c a share compared with the same period in 2015, as headline earnings slid 38% to R15.12.
Although most of Sasol’s business units delivered a good operating performance, headline earnings came under pressure from the strengthening of the rand against the dollar and certain one-off items, including a strike at the coal mines in Secunda, which cost R1bn.
Chief financial officer Paul Victor said rand strength would affect Sasol’s profit in the second half of its financial year.
Sasol has a substantial capital investment programme under way in North America and Mozambique. In Louisiana, it is building the $11bn Lake Charles Chemicals Project. The cost has risen from original estimates.
Cornell said $6bn had been spent to date and the project was 64% complete. It was within the revised budget and on schedule to deliver the first units in the second half of 2018.
Joint CEO Bongani Nqwababa said drilling in the production sharing agreement licence area in Mozambique was on track and within budget, with four wells drilled out of the 13-well programme due for completion by the end of 2018. Tests so far had produced encouraging results.
Nqwababa said management intended to reduce the discount at which Sasol’s shares were trading compared with other fuel and chemicals producers by defining and sharing its longterm strategy and capital allocation plans with the market.
Nell said Sasol’s shares had traditionally traded at a 9-10 times earnings multiple, mostly as a proxy for the rand oil price. Since the launch of the Lake Charles project to increase the chemicals contribution, that simple correlation had started to show some decoupling.
Sasol’s shares gained 1.5% to R376 after the results.