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Sasol resignation of CFO and executive director
Shareholders were advised that Ms Christine Ramon has resigned as Chief Financial Officer and Executive Director from Sasol as well as from all other directorships and offices she holds at the company and its subsidiaries and/or affiliated entities.
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Sasol-disposes of its investment in the Iranian JV
On 16 August 2013, Sasol Investment Company (Pty) Limited, a wholly owned subsidiary of Sasol, entered into a definitive sale and share purchase agreement pursuant to which Main Street 1095 (Pty) Limited, a South African subsidiary of an Iranian investor, completed and effected the acquisition of 100% of the shares of SPI International (Pty) Limited (SPII)(Transaction). SPII is the indirect owner of a 50% interest in Arya.
As described in our most recent trading statement of 1 August 2013, the fair value of Sasol’s investment in Arya was written down to R2,3 billion. This was based on our assessment of the fair value of Arya as well as the accounting requirement to recognise operating profits of approximately R1,6 billion for the second half of the 2013 financial year.
As a result of this Transaction, Sasol has no on-going investment in Iran. The Transaction is not a categorised transaction in terms of the JSE Limited Listings Requirements.
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Sasol anticipates higher earnings
Sasol's headline earnings per share (HEPS) for the financial year ended 30 June 2013 are expected to increase by between 20% and 30%, and earnings per share (EPS) for the financial year ended 30 June 2013 are expected to increase by between 7% and 17%, compared to the previous financial year.
The strong financial results, underpinned by higher than anticipated Sasol Synfuels' production volumes, were affected by an impairment in respect of the Sasol Wax business related to the Fischer-Tropsch wax expansion project (FTWEP) that is currently under construction, as well as an impairment related to the pending disposal of our share in Arya Sasol Polymer Company (ASPC).
In the update from the chief financial officer released on 7 June 2013, Sasol stated that the company remained confident that, based on the production guidance and macroeconomic indicators, Sasol would deliver solid operational performance and earnings for the 2013 financial year compared to the previous financial year, excluding major once-off items. At the time, the currency and commodity price volatility to which Sasol's earnings are particularly sensitive, as well as any adjustments arising from Sasol's financial year end closure process, and specifically in regard to ASPC and FTWEP, made it difficult to be more precise in the company's profit outlook statement.
Sasol's profitability for the financial year ended 30 June 2013 compared to the previous financial year benefited from the improved production performance of its foundation businesses, with Sasol Synfuels' production volumes increasing by 4% to 7 443 million tons compared to the previous financial year, as well as the effect of a 14% weakening of the average rand/US dollar exchange rate during the year. This has been partially offset by a 3% lower average Brent crude oil price for the year, depressed chemical prices and continued lower demand at Sasol's chemical businesses. In addition, cost inflation was compounded by a weaker rand and higher labour and maintenance costs. Sasol previously indicated that there was a risk of a potential impairment of the FTWEP due to the volatile macroeconomic environment and increased costs relating primarily to construction delays and poor labour productivity. After a robust reassessment of the project economics, FTWEP was impaired by approximately R1.5 billion net of tax at 30 June 2013. All efforts are being made to monitor and mitigate the risks identified on the project and to improve the economics thereof.
Sasol continues to progress towards concluding the disposal of our share in ASPC. The investment's fair value was further written down by approximately R1.6 billion net of tax at 30 June 2013, in addition to the impairment of R1 974 million net of tax previously recognised at 31 December 2012, reducing the carrying value of the investment over the financial year by R3.6 billion to R2.3 billion. This is based on Sasol's assessment of the fair value of the asset as well as the accounting requirement to recognise operating profits of approximately R1.6 billion for the second half of the 2013 financial year which might not be recovered through the disposal process. Estimates at 30 June 2013 indicate that additional write offs of approximately USD100 million may still be required at the date of disposal relating to the foreign currency translation reserve as a result of a deteriorating Iranian environment and further operating profits which might not be recovered through the disposal. Despite a solid operational performance by ASPC, results for the current financial year have been negatively impacted by the devaluation of the Iranian currency which resulted in translation losses of approximately R2.0 billion being recognised.
Sasol remains a strong cash generator and maintains its low gearing and solid financial position. Sasol continues to focus on those factors within its control including cost containment, operational efficiencies, margin improvements and improved project execution. Sasol has launched a project to sustainably reduce its cost base in the future. Further details of this cost reduction project will be shared at Sasol's next financial results announcement.
Sasol's results may be further affected by any adjustments resulting from the year end closure process. This may result in a change in the estimated earnings.
Sasol's financial results for the year ended 30 June 2013 will be announced on Monday, 9 September 2013.
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