Sasol CFO letter

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.

Back to Sasol however. The big projects seem on track and that will require the level of gearing to rise sharply over the coming years, but not too much:

Our balance sheet still reflects an under-geared position. The low gearing is supported by continued healthy cash flow generation, particularly from our foundation businesses. This low level of gearing is expected to be maintained in the short term, but is likely to return to within our targeted gearing range of 20% to 40% in the medium term, taking into account our capital investment programme as well as our progressive dividend policy.

As we have said a few times however, when the initial announcement this time last year came of the US strategic investment, the piece went as follows Sasol. This changes everything. The way we saw it then, and now: Why does this change everything in our opinion? Because if you do not have a serious presence in the US, even though you posses world class technology at that sort of scale, then prepare for a lower valuation. I guess that is the sad way of looking at it. But it may be sad to think that you have a lower valuation here, in fact many of the oil majors all trade on very low valuations. And Sasol will have to change their profile away from integrated oil and gas company to a technology company, in that space. That is a challenge in itself.