Sasol trading update ahead of consensus

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!


The company released a trading statement at 16:30 exactly, HEPS for the full year to end June are expected to be higher, in the 20-30 percent range. EPS for the same time period are expected to be higher by 7 to 17 percent. So what does that translate to? EPS was 3910 cents this time last year, and HEPS was 4228 cents. Translate forward to the middle of the range and you get 5285 cents for HEPS (25 percent) and 4379 for EPS. Why the massive divergence?


Simple really, there are two impairments, one in their wax expansion project here and the other in their Iranian chemicals business, Arya. The difference is 9.06 ZAR a share, or multiplying by the number of shares in issue (644.8 million) you get 5.841 billion Rand, most of that being Arya, by as much as 3.6 billion over the last year. Paul winced when I told him. That is a BIG number. Plus, 1.6 billion ZAR in operating profits that might not be recovered in the disposal process of the Iranian asset (currently valued at 2.3 billion Rand, or 230 million Dollars). As much as another 100 million Dollars, or 1 billion Rand may be written off when Sasol eventually sells the asset, as a result of the weakening Iranian Rial. 2 billion Dollars worth of losses have been recognized in these full year results.


In order to be taken more than seriously in North America and in order to get the re-rating, Sasol have to get rid of this asset. And if that means short term (medium term) pain for all of their shareholders, then so be it. Full year results are expected on the 9th of September, which is a Monday. Nearly five weeks time. The all time high for Sasol is 518 ZAR, reached in May 2008, remember those days my friends....... the stock has reached a high of 479.98 ZAR this morning, there has been a big move upwards since yesterday. Nearly 4 percent yesterday and another percent this morning.