Sasol: Cash position strong

Johannesburg - Synthetic fuel group Sasol's cash position remains positive and the group's deleveraged balance sheet remains strong, similar to the half-year, keeping the group well positioned to fund its growth programme, Sasol chief financial officer Christine Ramon said on Tuesday.

In an update to investors, she said the group's strong cash position was enhanced by instituting a cash conservation approach last October, at the onset of the global economic crisis.

Capital expenditure (capex) for the next three years has been reprioritised and reduced by some 35% to about R15bn per annum over the next three years.

"Most of the capex reductions apply to numerous smaller projects ranging up to R1bn. Importantly, these capital reductions will not affect our pipeline of growth projects, where our pre-investment studies continue unabatedly, ensuring that our shareholder value propisition remains intact," Ramon said.

"In addition, our focus remains on sustainable unit cost reduction and effciciency improvements through our operational and functional excellence initiatives," she added.

"We have realised benefits from opportunities that the current environment presents in our procurement strategy and in the renegotiation of contracts. We have also seen significant working capital improvements across our businesses which has positively impacted the group cash position," Ramon stated.

She added that fluctuations in the rand/dollar exchange rate and crude oil price impact on the group's financial results, with the recent trends of comparatively low oil prices reducing the group's margins as well as the prices for most its other energy and chemical products.

But she added: "Oil prices have risen in recent weeks as policy measures seemingly stablise the financial system. The oil market is affected by the same optimism driving an upward move in many equity markets.

"Market sentiment is generally more positive and some return of risk appetite is visible. The strength in crude oil prices and other commodities is based on expectations of economic recovery. However, we remain cautious on the shorter-term outlook for oil prices, but believe we could see prices rising back to the marginal cost of production in the medium-term."

Sasol issued a trading statement earlier this month stating that it expects attributable and headline earnings per share for the year ended June June to decrease by between 40% and 50% compared to the prior year - mainly due to the lower oil and chemical prices, together with a considerable reduction in refining margins, a much stronger rand and a further deterioration in chemical markets.

- I-Net Bridge