Sasol Profit Gains 15% For the 1st half on higher oil prices

Sasol Profit Gains 15% For the 1st-Half on Higher Oil Prices

03-11-2008

Sasol Ltd, the world's largest producer of motor fuel from coal, said first-half profit increased 15 percent after oil prices climbed to a record.

Net income rose to 9.15 billion rand ($1.14 billion), or 14.85 rand a share, in the six months to Dec. 31, from 7.98 billion rand, or 12.60 rand, a year earlier, the Johannesburg- based company said today in a statement.

``Things are looking good for Sasol as a result of the oil price,'' said Abri du Plessis, who helps manage the equivalent of about $620 million at Gryphon Asset Management in Cape Town. ``It doesn't look like it's going to come to an end at this stage.''

Sasol climbed 7.60 rand, or 1.9 percent, to 416.60 rand in Johannesburg trading. The stock has gained 87 percent over the past year, compared with the 20 percent average return of an index of the 40 biggest companies traded on the bourse. Of companies with headquarters in South Africa, Sasol is the second- biggest by market value, after Anglo Platinum Ltd.

Sasol didn't get the full benefit of the jump in oil prices because it fixed the price of 45,000 barrels, or 30 percent of daily production of fuel from coal and natural gas. Prices were fixed at between $62.40 and $76.80 a barrel in the period, crimping earnings by 1.1 billion rand.

The company will give ``very serious attention'' over the next few months to its forward sales strategy, Chief Executive Officer Pat Davies said. Prices are fixed until May, the company said.

Sasol operates two so-called synthetic fuel plants, which transform coal and gas into oil products and chemicals, in South Africa and is considering building a third. It's also the country's third-biggest coal producer after BHP Billiton Ltd and Anglo American Plc.

The company operates the Oryx gas-to-fuel plant in Qatar, is building another in Nigeria and is considering locations for further plants. It also imports gas into South Africa from fields it runs in neighboring Mozambique. .

A ``material increase'' in the cost of the Nigerian plant is expected, Davies said, adding that the project was ``not so successful'' to date.

Production at the Qatari plant will rise in the second half from an average rate of about 9,000 barrels a day during the first six months, said Lean Strauss, a general manager at Sasol.

Half the Oryx facility was reopened yesterday after all output was halted for six weeks because a gas supplier closed its plant for maintenance. While the rest of the plant should be back in service by the end of this month, at least one more shutdown will be necessary in the current financial year, Strauss added.

In South Africa, Sasol plans a 190-megawatt gas-fired power project to avoid further production losses as a result of a national electricity shortage that is expected to last until at least 2012.

Sasol's earnings outlook is ``very promising,'' Citigroup Inc., which recommends investors buy the stock, said in an e- mailed statement today.

Chemical prices and oil-refining margins may ``soften'' in the second half, Davies said.

Full-year profit will be cut by a ``material'' accounting effect from the planned sale of a 10 percent stake to black investors for about 25 billion rand, Sasol said. Final terms of the sale will be announced in a ``couple of weeks,'' Davies said.

The company plans to spend about 12 billion rand in the current financial year as part of a 50-billion rand three-year program to expand production. It has committed 300 million rand to investigating the viability of a new coal-to-motor-fuel plant in South Africa.