Dividend hike, new high watermark

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.

A significant part of today's results release was given to Sasol's organisational restructuring. The goal is to streamline the organisation in order to create cost savings, have cost-effective processes and put management in better position to make decisions. How much do Sasol think that they can save from the restructuring? In their 2013 results they stated that expect annual sustainable saving of R3 billion, which will probably work out to about 1 - 1.5% of revenue. They expect 30 - 40% of the savings to be realised by the end of 2015, with the full benefit being felt by the end of 2016.

The costs for the restructuring are not small though. The cost in the 2014 financial year will be around 1.2 billion, with more costs to come in following 3 years. From an investor's point of view, I like to see it when companies become more efficient, it means that they are stronger when things change/go wrong around them. There is a mismatch in terms of the cost outlay of the restructuring and then the recouping of the savings, in this case it has worked out well with the costs coming in this year where there are bigger returns due to the weak Rand (so you don't notice/feel the cost). When the savings come through in the next couple of years, I would assume that a large part of them will go to the bottom line, which could be about an 11% boot to earnings (based on today's earnings figure).

Sasol is still one of our favourite stocks, and their expansion into North America offers new opportunities and (holding thumbs) a possible earning rerating from the international market.