10 September 2013 17:11 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--Sasol’s underlying full-year operating profits were up 26%, the company said on Monday with the growth of its domestic synfuels business pushing group profits higher.
The company reached synfuels production levels last seen in 2006 in the latest financial year and said it is on track with major investments in Louisiana in the US which are likely to see it build gas-to-liquids (GTL) facilities as well as an ethane cracker.
Chemicals cluster profits were down 70% largely on write downs but also because of adverse currency exchange rate movements, particularly the Iranian rial against the US dollar.
Sasol has stepped away from its Arya Sasol Polymers joint venture in Iran, partly to more easily pursue its ambitions in the US, and booked a partial impairment on the sale in its 2013 accounts.
Volumes from the international polymers business dropped by 19% in its 2013 financial year, which ended on 30 June, because of logistical problems at the joint venture.
The South African polymers business reported a full-year operating loss almost reversing the year before profit level. The market was difficult in the 2013 financial year but Sasol talked of a slow recovery.
“Margins continue to be squeezed in the South African polymers business, where feedstock price increases outweighed the increases in selling prices,” it said.
The large olefins & surfactants segment, which at one time was the driving force behind Sasol’s attempts to build a stronger international presence, reported improved margins from the US but weaker margins in Europe. Operating profits for the segment were up 23% excluding a gain made in fiscal 2012 on the sale of some operations in Germany.
“While our US operations continued to benefit from the low US ethane prices, our European based business, whilst still profitable, came under increased pressure as a result of reduced volumes due to softer demand, coupled with continued high petrochemical feedstock prices,” Sasol said.
The business environment for Sasol Solvents was described as “challenging”. Profits from the company’s other chemical businesses were hit by an impairment charge on the wax business from an expansion project. Disregarding this charge, profits for the wax business more than doubled on the back of the weaker rand to US dollar exchange rate.
The Sasol Nitro business reported an operating loss for the year on higher feedstock costs, labour unrest and lower customer demand.
Sasol continues to invest in its core synfuels business while pursing GTL and NGLs (natural gas liquids) ethane-based opportunities.
“With a sharpened strategic focus, significant progress in relation to our US mega projects, and the initiation of a complete organisational redesign, this past financial year will be seen as a watershed for Sasol,” CEO David Constable said.
But Sasol is relatively circumspect in its guidance for the current financial year, expecting overall solid production performance but pressure from the rand/US dollar exchange rate.
“Global economic growth is expected to remain modest in light of the uncertainties in the European and US markets in particular. Crude oil prices are expected to remain stable over the near term. Product prices are expected to remain volatile. The rand/US dollar exchange rate remains one of the biggest external factors impacting our profitability,” Sasol said.
A new cost control programme will focus on organisational efficiency.
The company is adding 48,000 tonnes/year of ethylene capacity in an ethylene purification unit in Sasolburg, South Africa. The unit is to be officially opened later this month, the CEO said.
Orders for long lead-time equipment have been placed for the ethane cracker planned for Louisiana and environmental permit applications have been made.
“We’ll be commencing the FEED phase [of the US GTL project] later this year,” Constable said. “A final investment decision is expected within 18 to 24 months after that of the cracker.
“Following detailed assessments and discussions with our partners we took the decision to reduce our participation in the Uzbekistan GTL joint venture from 44.5% to 25.5% at the end of the FEED phase. This notwithstanding, the Uzbekistan GTL project remains an important development in Sasol’s GTL growth portfolio, and the business case for the proposed facility remains robust.”
The Oryx GTL plant in Qatar has managed to run at 80% of design capacity over the past 18 months, he added, and achieved an average run rate of 106% in May and June this year – “proof that our GTL technology is fully commercialised and ready to roll-out elsewhere in the world.”
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