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Sasol says $11bn Louisiana project three-quarters complete

Johannesburg - Sasol [JSE:SOL], the world’s biggest producer of liquid fuel from coal, said its Lake Charles chemical project in the US is 74% complete and in line with the revised estimate.

Capital expenditure to date has reached $7.5bn of the projected $11bn total, the Johannesburg-based company said in a statement on Monday.

Sasol said last year the cost of the project in Louisiana had escalated by almost 25%, prompting the Johannesburg-based company to make cuts elsewhere. The chemicals complex, which includes a 1.5 million-tons-a-year cracker, will convert ethane into plastics and other products. The company said in February that the first units were on track to start operating in 2018.

The update on the plant comes as Sasol reported full-year earnings excluding one-time items that fell 15% to R35.15 per share. That beat the R34.66 average of analyst estimates compiled by Bloomberg. Profit was negatively affected by a stronger rand and lower oil price, the company said.

Rand strengthened

Sasol benefits when the rand is weaker because most of its products are sold in dollars, while its costs are mainly in the South African currency. The rand strengthened by 11% against the dollar over the 12-month period.

A strike over wages and benefits at the company’s coal-mining operations in South Africa in the first half of the financial year also impacted results.

Sasol expects the rand to trade in a range of R13 to R14.50 per dollar in the current financial year, it said in the statement. Average brent crude oil prices are seen at $45 to $55 a barrel.

Co-CEO Bongani Nqwababa said in February that the company had hedged 30 million barrels of oil at $47 a barrel for the rest of the year, but didn’t have currency-related protections in place.

The company has since hedged about 70% of its rand-US dollar exposure, with zero-cost collar instruments at a floor of about R13.46 for 2018, it said on Monday.

Sasol has submitted an objection to a revised assessment by the South African Revenue Service during 2013 to 2014 for a “potential tax exposure” of R11.6bn. The company disagrees with the assessment and has resolved with SARS to suspend payment.

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