Cape Town - On Monday petrochemical giant Sasol's share price rose 0.74%, climbing back to R269.99 after having fallen R5.05 or 1.8% on Friday in reaction to a trading update in which an earnings decline of 50% to 55% for the half-year to end December 2009 was expected.
Sasol [JSE:SOL] warned in December that its earnings would be at least 45% down on 2008.
Cadiz portfolio manger Kurt Benn says that in a company the size of Sasol many factors might have contributed to the greater decline in earnings.
At face value it could mean that costs grew faster than initially expected, especially with the dollar strengthening against the rand.
Without seeing the actual figures of, for instance, the production volumes for synthetic fuel, it's difficult to speculate, says Benn.
He declined to venture a forecast about what Sasol's share price might do. The announcement of the results on March 8 will give a better indication.
Shoaib Vayej of Sanlam Investment Management says the trading update is simply a confirmation of what was said in December, but that an even larger decline of 57% to 61% is in fact anticipated.
Sasol, with its market capitalisation of R171bn, says the expected sharp decline should be viewed in the light of the record high earnings achieved in the first half of 2009.
At that time Sasol was also supported by oil-price hedging contracts that were in place, which had contributed a net profit of R5bn.
The past six months, however, were characterised by the rand strengthening against the dollar, which is negative for Sasol because a large part of its earnings is earned in dollars.
Average crude oil and fuel prices also declined during the period.
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