Sasol's good times deferred

Johannesburg - An expected 45% drop in Sasol's interim earnings to end-December might have been what the market expected, but investors will have to wait till the middle of 2011 for the firm to get back on track, said an analyst.

The petrochemical giant warned investors on Thursday of its lower earning expectations on the back of the strengthening rand (against the dollar), a decrease in average crude oil prices and lower product prices. "A more accurate estimate will be given once the half-year has closed and we have greater certainty," Sasol said.

In an interview with Fin24.com Mani James, chemicals programme manager at Frost & Sullivan, said he anticipates mid-2011 to be a good time for investors to pick up Sasol shares.

According to James, for the time being the petro giant will be marred by its many competition issues and high capex investments. "It's [Sasol's performance is] going to be a sticky situation."

Commenting on its capex plans, Sasol's chief financial officer Christine Ramon said despite the group's expected lower earnings, its capital expenditure guidance of R15bn for the 2010 financial year remains unchanged. She forecast capital expenditure of R17bn in 2011.

Oil hedge

Sasol has consistently hedged 30% of its synfuels production over the past five years, but the firm has still not renewed the oil hedge for the 2010 financial year.

"This is subject to ongoing review, especially in the light of current market volatility and our low gearing levels," said Ramon.

"We currently expect to be at the upper limit of our previously disclosed average oil price forecast of $65 to $70 per barrel for financial year 2010."

On Thursday afternoon, Sasol was trading down 2.53% at R289.00 per share.

Broker consensus compiled by data supply firm McGregor BFA has Sasol on a "buy".

- Fin24.com