THE BOTTOM LINE
Sasol just idling before it really puts its foot on the gas
Shares are up 36% over the past three years and eight out of 14 analysts recommend the company as a buy
Sasol delivered an uninspiring set of annual results on Monday but investors live in hope that the synfuels company will deliver something spectacular in 2019, and beyond.
A lift in oil prices was a boon for Sasol, which produces fuel from coal at a break-even price of $40 a barrel, but a range of issues – many of them once-off items – caused earnings to more than halve for the year to the end of June. Next year will be a defining year for the company, or at least that’s the mantra for Sasol executives at the moment.Next year this time, Sasol’s investment in the long-awaited Lake Charles Chemicals Project in Louisiana is expected to begin to pay off. The R11.1bn mega-project which incurred delays and cost overruns (thanks in part to Hurricane Harvey), and proved a bugbear for Sasol investors, is expected to contribute between $250m and $300m to company cash flows.
Chemical sales volumes, which had been hit by interrupted electricity supply and slow economic growth this year, are expected to rise in 2019, despite a planned shutdown at the synfuels plant.
Next year the balance sheet will be geared to between 40% and 44%, but from 2020 it will begin deleveraging rapidly.
Sasol teams already are laying the groundwork for potential acquisitions so that when cash starts pouring in, it can be funneled quickly.
Sasol shares are up 36% over the past three years and eight out of 14 analysts recommend the company as a buy, according to Bloomberg. Four recommend to hold and two to sell.