Volumes, Currency Buoy Sasol Profit
Sasol Ltd. (SSL) announced slightly improved results for the six months ended Dec 31, 2012, aided by higher sales volumes and a favorable exchange rate, partially offset by lower oil and product prices.
The South Africa-based petrochemicals group reported headline earnings per share, excluding one-time items, of R23.89 (US$2.81), up from R23.34 earned during the corresponding period last year.
Segmental Analysis
South African Energy Cluster: Within its South African energy cluster, Sasol Mining's operating income increased 30% to R1.3 billion, buoyed by increased sales prices and favorable currency fluctuations. These were partially offset by reduced U.S. dollar export coal prices and lower output.
Sasol Gas generated an operating profit of R2.0 billion, up 39.0% year over year. The positive comparison can be attributed to higher gas prices and sales volumes.
Sasol Synfuels' operating profit jumped 26% to R12.5 billion, mainly reflecting higher production volumes and positive foreign exchange movements that more than made up for cost escalation.
Sasol Oil reported an operating profit of R907 million as against R1.1 billion in the prior-year period. The decline primarily resulted from reduction in volumes. To some extent, this was offset by higher margins.
International Energy Cluster: Sasol Synfuels International recorded an operating profit of R1.2 billion, up from R1.0 billion earned during the previous half-year period. The improvement was due to stronger performance at the Oryx gas-to-liquids plant in Qatar and favorable currency fluctuations.
Sasol Petroleum International incurred an operating loss of R707 million, as against an income of R121 million a year ago, mainly reflecting depreciation of the company’s Canadian assets on the back of lower North American gas prices. This was partially offset by increased production from Sasol’s Mozambique and Canada operations.
Chemical Cluster: Sasol Polymers dived to operating loss of R2.4 billion, from a profit of R546 million in the prior year comparable period. The segment results were adversely affected by domestic margin pressure and international translation losses, partially offset by better volumes from South African operations.
Sasol Solvents' operating income was down to just R48 million, from the previous year's level of R1.1 billion. Segment results were affected by weak product prices and margins, whose effects were partly mitigated by higher production volumes.
Sasol Olefins & Surfactants reported an operating profit of R1.6 billion, a slight decrease from the income of R1.7 billion during the corresponding period of 2011. The negative comparison came on the back of margin pressure in the company’s European operations, almost offset by low U.S. ethane prices.
Operating Cash Flow & Capex
Sasol generated R21.4 billion in operating cash flows, a 5.7% year-over-year decrease, primarily due to higher working capital, somewhat nullified by higher operating income. The world's largest producer of motor fuels from coal spent R14.4 billion in capital expenditures during the period.
Dividend
Sasol announced an interim dividend of R5.70 per share. The dividend will be paid on Apr 15 to shareholders of record as on Apr 12, 2013. The holders of American Depositary Receipts (“ADRs”) will be paid on Apr 25, 2013.
Stocks to Consider
Sasol currently carries a Zacks Rank #3 (Hold).
Meanwhile, one can look at downstream operators like Calumet Specialty Products Partners L.P. (CLMT) and NGL Energy Partners L.P. (NGL), as well as domestic energy explorer like Memorial Production Partners L.P. (MEMP) as attractive investments. All these firms – sporting a Zacks Rank #1 (Strong Buy) – offer value and are worth accumulating at current levels.
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