Research archive for SOL

Yesterday Sasol released their trading statement for the first 9 months of their financial year. Below is their operational performance.

Yesterday The Competition Tribunal announced a R534 million penalty on Sasol for overcharging within their chemical division between January 2004 and December 2007. Before we go into the details of the fine lets just put that value into perspective. In the 6 months ended December 2013 Sasol's energy cluster alone made R21bn operating profit. The Chemicals cluster made R3.6bn. When this news was announced the share price barely shrugged. The point I am getting at is that the amount is not significant. But it is important to evaluate for the future of Sasol as well as the kind of rhetoric to expect from influential institutions like the Competitions Tribunal.

On Friday there was an article out about scientists that have developed a new way of converting Natural Gas into fuel. The new process has three key breakthroughs in its process. The first is that they can use "Main group" metals like lead in the conversion process instead of the rarer metals currently used, which makes the process cheaper. The second breakthrough is that the process only requires a fraction of the heat, 180 degrees Celsius instead of the current standards of about 1500 degrees Celsius, so again making the process cheaper. Then the last break though is that it requires less steps to transform the Natural Gas, so again making the process cheaper.

As Sasha mentioned Sasol came out with results this morning, at 07:05 to be exact. The results were in line with the trading statement that they released on Valentine's Day, so there has not been much movement in the share price today. I will repeat two of the main numbers for investors, Sasha has already mentioned the others. HEPS are up 26% off an already record base, and dividend per share is up 40% to R8.00, so two very good numbers for investors. According to Sasol their dividends will not go backwards, so the 40% increase should be permanent.

Sasol results for the half year hit the screens this morning. This is a record half year, juiced up by the weaker Rand and steady oil prices. It is both a giant of the South African corporate landscape, because of the well known brand association (and excellence!) but equally at the same time as a global company a mid tier operator. A giant in the small pond and medium fry in the ocean. Sasol is one quarter of the market cap of BP plc, that is not small fry, which is why I classify it as medium fry, that is fair.

On Friday just before the market closed Sasol released a trading statement for their 6 months ending 31 December. In the office we agree that the statement is "balanced", with the following statement highlighting the extremes of the results "Excluding the impact of the impairment of our Canadian shale gas assets, EPS is expected to increase by between 44% and 50%." Actual EPS is expected to be between 0 and 6% higher than the previous comparable period.

Sasol released their biannual CFO letter update yesterday, the first by interim CFO Paul Victor, who is in the job temporarily after Christine Ramon quit in August, leaving after the full year numbers on the 9th of September this year. So I suspect that we should see the appointment of either Paul Victor as a permanent person, or perhaps someone high profile who has left the corporate world to take up the top job. Some of the more recent departures have been as a result of personal reasons, or simply retirements. I guess the most high profile retirement coming, in a South African context, must be Brian Joffe. He is 65 years old, and founded the empire in 1988, and I guess he cannot run the place forever.

Reviewing Sasol's annual report I was impressed that they have grown revenue while increasing their operating margins, but something else stood out to me.

Sasol released numbers for the full year to end June 2013, and they were pretty good. HEPS up 25 percent to 52.62, total dividend up 9 percent to 19 ZAR a share, post 15 percent dividend tax that is 16.15 ZAR. EPS increased 11 percent to 43.38 ZAR. The stock has traded over 490 ZAR this morning, simple metrics suggest that the stock is still fairly cheap. BUT, and this is something that you must always take into consideration when buying the company, the sector always trades at a discount to the rest of the market. Exxon Mobil trades on an 11 multiple, last week we pointed out that the S&P 500 forward was less than 14 times. Chevron trades on a less than 10 times earnings. Royal Dutch Shell around eight and a half times earnings. So...... you get the point that I make often enough here, Sasol trades at a discount because all of the stocks globally trade at a discount, in the associated industry.

Yesterday Sasol announced that CFO and executive director Christine Ramon was set resign when results are released in September. This is big news, especially if you have been following Sasol for the last 8 years or so while Christine has been there. She has been very visible and often writes interesting operational updates to investors. Here is what CEO David Constable had to say in the announcement.

Yesterday we saw this big announcement from Sasol titled, Sasol Disposes of its Investment in the Iranian Joint Venture Arya Sasol Polymer Company. This is great news because Sasol were trying desperately to get rid of this asset as a requirement to operate in the US according to US sanctions against Iran. This Moneyweb Article gives a good analysis and goes through the details of the announcement. Because it was a forced sale I am sure they got a terrible price for it but in the long term interests of the company, this is good news.

There was a trading update from one of the firm favourites here at Vestact, a stock that has been mostly in our client portfolios for the better half of ten years, Sasol. Higher volumes at the end of the day is what you want to see, that is good for the company, their shareholders and the country. The more fuel that Sasol produces here, the better for all South Africans, that means that we have to import less oil. As it stands, oil makes about 22-23 percent of all imports, imagine if Sasol did not produce fuels for the local market!

I am outraged! It is laughable. But sad at the same time, because it is your money in the end. I am going to try and spell it out for you as absolutely best as I can, the difference between a private business and a State Owned Corporation. This has to do with something that is really important to all of us, and in particularly if you happen to live within the borders of this great country of ours. Power. For the people. Of the electrical kind. Eskom released results yesterday, for their year to end March 2013. First difference, as a listed entity accountable to shareholders (of all sorts) you are obliged to meet parameters that the exchange has put in place to report within 3 months of your reporting period end.

On Friday we received a business update from Sasol for the 9 month period up to April. One thing I can confirm from this very long report is that this is a very busy business. They have so many things going on at the moment it is hard to keep up. Here +is the release if you want to read the details. Below I will cover the points I thought were important.

This morning we have interim results from Sasol, one of South Africa's biggest home grown companies. On the by market capitalisation ranking tables Sasol is in 8th place, 260 billion Rands. Just, and I mean just behind Naspers (265 billion), which have overtaken them in recent days. MTN is comfortably ahead of those two with a market cap of 331 billion Rand. And then there are the big 5, all with primary listings offshore. BATS, SABMiller, BHP Billiton, Richemont and Anglo American are those big five, remarkably SABMiller's market cap is more than double that of Anglo American. Over ten years SABMiller in Rand terms is up 872 percent, whilst Anglo American in the same time is up 97 and a half percent. A shrinking giant (relative) and a new giant, dominant in our home market.