Sasol lauded but share smacked

Johannesburg - Petrochemical giant Sasol's self-imposed audit of potential anti-competitive behaviour by its key gas and oil business units was lauded by analysts, who said the inquiry would help it avoid a repeat of the shock fine it received in 2008.

Sasol was fined €18m by the European Commission (EC) for participating in a paraffin wax cartel, a fine that stunned management by its magnitude.

According to Peter Major, a fund manager for Cadiz African Harvest, it was a "grossly unfair" outcome. Sasol was left with the lion's share of the EC penalty, he said, even though other industry players were also found guilty.

On Monday, South Africa's Competition Commission said it was investigating possible anti-competitive behaviour in South Africa's gas and oil industry. This was after Sasol initiated its own inquiry into such dealing.

Sasol's approach was that of acknowledging any potential misdeed in an effort to receive the lightest fine, said Major. "Those who spilt the beans first, got off the best."

Said Chris Wehmeyer, a portfolio manager for PSG Konsult: "It was better to ask for forgiveness." Sasol had to clean up its act now to prevent future problems, he added.

The Competition Commission's investigation represented "an opportunity for Sasol to clean out its closet," he said.

However, investors took a hard line on the petrochemical firm: the stock slumped more than 4% lower to R276.99 on the JSE against a 1.97% decline in the Resources 20 index. The oil price was unmoved at $46.18/barrel.

Commenting on the self-imposed inquiry into anti-competitive behaviour, Sasol CEO Pat Davies said it was better to take full responsibility "whether it's a deliberate non-compliance or an inadvertent non-compliance".

However, whether Sasol actually expected to receive a fine was a moot point. Davies said the group had not yet made provision in its balance sheet for any penalties. "We can't make provision at this time because it's still early days," he said in an interview.

Sasol couldn't be hurt more than in 2008, said Major. In any event, markets generally don't react in the short term but would do so if the investigation became a drawn-out affair. It also depended on "how big the 'find' is," he said.

To listen to the interview with Pat Davies, visit Fin24.com Podcasts.

- Fin24.com