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Sasol Limited - Reviewed Condensed Consolidated Interim Financial Report And

Release Date: 08/03/2004 07:00:02      Code(s): SOL
SASOL LIMITED -     REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT AND
                    DECLARATION OF DIVIDEND NUMBER 49 FOR THE SIX MONTHS ENDED  
                    31 DECEMBER 2003                                            
SASOL LIMITED                                                                   
Company registration number: 1979/003231/06                                     
Incorporated in the Republic of South Africa                                    
Share code: JSE-SOL      NYSE-SSL                                               
ISIN: ZAE 000006896                                                             
Reviewed condensed consolidated interim financial report and declaration of     
dividend number 49 for the six months ended 31 December 2003                    
Comprehensive additional information is available on our website at:            
www.sasol.com                                                                   
- Severe adverse impact of stronger rand                                        
- Chemical margins remain weak                                                  
- Good operational performance                                                  
- Capital projects successfully advanced                                        
- Better second half expected, signalling new growth phase                      
31 Dec      31 Dec                             31 Dec      31 Dec               
2002        2003                               2003        2002                 
Turnover                                     Operating profit               
    R million         Businesss unit                 R million                  
513         432       Mining                   521         701                  
556         649       Synfuels                 2 207       4 572                
10 667      10 115    Oil and Gas              841         995                  
21 175      18 382    Chemical businesses      525         1 355                
9 552       8 349       O&S                   (38)         154                  
3 150       3 040       Polymers               244         428                  
3 281       2 812       Solvents               87          382                  
2 472       2 012       Wax                    97          31                   
2 258       1 835       Nitro                  52          237                  
462         334         Other chemicals        83          123                  
108         288       Other businesses        (115)       (373)                 
33 019      29 866                             3 979       7 250                
Balance sheet at                                                                
                                      31 Dec     31 Dec     30 June             
2003       2002       2003                
                                      Reviewed   Reviewed   Audited             
                                                 Restated                       
                                      Rm         Rm         Rm                  
Assets                                                                          
Property, plant and equipment         44 325     40 405     42 363              
Goodwill and negative goodwill       (50)       (365)      (314)                
Other long-term assets                4 649      4 110      4 473               
Current assets                        21 711     22 544     23 097              
Total assets                          70 635     66 694     69 619              
Equity and liabilities                                                          
Shareholders" equity                  33 454     33 446     33 518              
Minority interest                     262        276        300                 
Total equity                          33 716     33 722     33 818              
Long-term debt                        6 390      4 859      4 581               
Long-term provisions and                                                        
obligations                           5 082      5 309      5 075               
Other non-current liabilities         6 162      5 884      6 209               
Short-term debt                       6 467      6 003      6 481               
Other current liabilities             12 818     10 917     13 455              
Total liabilities                     36 919     32 972     35 801              
Total equity and liabilities          70 635     66 694     69 619              
Income statement for the six months ended                                       
                                      31 Dec     31 Dec     30 June             
2003       2002       2003                
                                      Reviewed   Reviewed   Audited             
                                                 Restated                       
                                      Rm         Rm         Rm                  
Turnover                              29 866     33 019     64 555              
Cost of sales and services rendered  (19 692)   (18 716)   (39 347)             
Gross profit                          10 174     14 303     25 208              
Other operating expenditure          (5 594)    (6 079)    (11 589)             
Translation losses                   (601)      (974)      (1 708)              
Operating profit                      3 979      7 250      11 911              
Dividends and interest received       105        93         167                 
Income from associates                34         30         60                  
Borrowing costs                      (137)      (74)       (225)                
Net income before tax                 3 981      7 299      11 913              
Taxation                             (1 454)    (2 352)    (4 007)              
Net income after tax                  2 527      4 947      7 906               
Minority interest                    (41)       (93)       (89)                 
Attributable earnings                 2 486      4 854      7 817               
Earnings per share (cents)                                                      
- attributable earnings basis         408        797        1 283               
- headline earnings basis             397        797        1 280               
Diluted earnings per share (cents)                                              
- attributable earnings basis         404        783        1 262               
- headline earnings basis             393        783        1 259               
Dividends per share (cents)                                                     
- interim                             215        215        215                 
- final                                                     235                 
changes in equity statement for the six months ended                            
31 Dec     31 Dec     30 June             
                                      2003       2002       2003                
                                      Reviewed   Reviewed   Audited             
                                                 Restated                       
Rm         Rm         Rm                  
Opening balance                                  30 070     30 070              
Effect of change in accounting policy            1 245      1 245               
Restated opening balance              33 518     31 315     31 315              
Shares issued                         60         57         77                  
Shares purchased                     (33)       (112)      (185)                
Attributable earnings                 2 486      4 854      7 817               
Dividends paid                       (1 431)    (1 524)    (2 835)              
Decrease in foreign currency                                                    
translation reserve                  (1 022)    (1 143)    (2 570)              
Decrease in cash flow hedge                                                     
accounting reserve                   (124)      (1)        (101)                
Closing balance                       33 454     33 446     33 518              
Comprising                                                                      
Share capital                         2 843      2 763      2 783               
Share buyback programme              (3 647)    (3 541)    (3 614)              
Accumulated earnings                  36 096     33 389     35 041              
Foreign currency translation                                                    
reserve                              (1 374)     1 075     (352)                
Non-trading financial assets                                                    
reserve                               2          2          2                   
Cash flow hedge accounting reserve   (466)      (242)      (342)                
Shareholders" equity                  33 454     33 446     33 518              
cash flow statement for the six months ended                                    
31 Dec     31 Dec     30 June             
                                      2003       2002       2003                
                                      Reviewed   Reviewed   Audited             
                                                 Restated                       
Rm         Rm         Rm                  
Cash generated by operating                                                     
activities                            6 929      7 836      15 997              
Investment income                     134        103        178                 
Borrowing costs paid                 (737)      (529)      (1 286)              
Dividends paid                       (1 431)    (1 524)    (2 835)              
Tax paid                             (1 841)    (4 164)    (5 527)              
Cash retained from operating                                                    
activities                            3 054      1 722      6 527               
Additions to property, plant                                                    
and equipment                        (4 515)    (5 377)    (10 272)             
Acquisition of businesses            (323)      (145)      (155)                
Other net expenditure in investing                                              
activities                           (245)      (693)      (294)                
Cash utilised in investing                                                      
activities                           (5 083)    (6 215)    (10 721)             
Share capital issued                  60         57         77                  
Share buyback programme              (33)       (112)      (185)                
Dividends paid to minority                                                      
shareholders                         (26)       (64)       (65)                 
Increase in debt                      1 877      3 748      3 210               
Cash effect of financing activities   1 878      3 629      3 037               
Decrease in cash and cash                                                       
equivalents                          (151)      (864)      (1 157)              
Cash and cash equivalents                                                       
- opening balance                     583        1 995      1 995               
- arising on translation             (76)       (412)      (255)                
Cash and cash equivalents             356        719        583                 
Comprising                                                                      
- cash                                2 761      2 484      3 186               
- cash restricted for use             338        731        665                 
- bank overdraft                     (2 743)    (2 496)    (3 268)              
356        719        583                 
salient features                                                                
                                     31 Dec     31 Dec     30 June              
                                     2003       2002       2003                 
number     number     number               
                                     of shares  of shares  of shares            
Share statistics                     million    million     million             
Total shares in issue                670,2      668,2      668,8                
Treasury shares (share buyback                                                  
programme)                            60,1       58,9       59,7                
Weighted average number of shares    609,4      609,3      609,3                
Fully diluted shares                 616,0      620,3      619,6                
Significant financial information       Rm         Rm         Rm                
Total debt (including bank overdraft)                                           
- interest bearing                   15 543     13 310     14 277               
- non-interest bearing               57         48         53                   
Capital commitments                                                             
- authorised and contracted          7 979      7 204      9 562                
- authorised, not yet contracted     16 961     11 496     8 510                
Guarantees and contingent                                                       
liabilities                                                                     
- total guarantees                   17 851     11 116     16 313               
- reflected as liabilities           7 487      3 967      5 155                
Significant items in                                                            
operating profit                                                                
- employee costs                     4 467      4 447      9 055                
- depreciation of property,                                                     
plant and equipment                  2 207      2 023      4 468                
Borrowing costs capitalised          600        455        1 061                
Effective tax rate (%)               36,5       32,2       33,6                 
Number of employees                  30 800     31 100     31 150               
Net asset value per share (cents)    5 484      5 489      5 503                
Reconciliation of headline earnings  Rm         Rm         Rm                   
Attributable earnings                2 486      4 854      7 817                
   Impairment of assets              109        203        83                   
   (Profit)/loss on disposal                                                    
of assets                         (68)       (90)        159                 
   Amortisation of goodwill          9          13         42                   
   Amortisation of negative                                                     
      goodwill                      (112)      (123)      (301)                 
Tax effect on reconciling items  (4)         2         (2)                   
Headline earnings                    2 420      4 859      7 798                
The reader is referred to the definitions contained in the 30 June 2003 annual  
financial statements. Please note:  A billion is defined as one thousand        
million.                                                                        
Forward-looking statement: In this report we make certain statements that are   
not historical facts and relate to analyses and other information based on      
forecasts of future results and estimates of amounts not yet determinable,      
relating, amongst other  things, to volume growth, increases in market share,   
total shareholder return and cost reductions. These are forward-looking         
statements as defined in the U.S. Private Securities Litigation Reform Act of   
1995. Words such as "believe", "anticipate", "expect", "intend", "seek", "will",
"plan", "could", "may", "endeavour" and "project" and similar expressions are   
intended to identify such forward-looking statements, but are not the exclusive 
means of identifying such statements. Forward-looking statements involve        
inherent risks and uncertainties and, if one or more of these risks materialise,
or should underlying assumptions prove incorrect, actual results may be very    
different from those anticipated.                                               
The factors that could cause our actual results to differ materially from such  
forward-looking statements are discussed more fully in our most recent annual   
report under the Securities Exchange Act of 1934 on Form 20-F filed on October  
27, 2003 and in other filings with the United States Securities and Exchange    
Commission.                                                                     
Stronger rand - lower profits                                                   
Profits were substantially reduced by the stronger Rand and margin pressures in 
a challenging international environment. From an operational perspective, most  
of Sasol"s businesses performed satisfactorily.                                 
The average exchange rate during the six-month period ended 31 December 2003, of
R7,08 : US$1 was 29% stronger than the comparable rate (R10,03 : US$1) of the   
previous reporting period. Including the effect of lower translation losses at  
the end of the period (R0,6 billion versus R1,0 billion), the net adverse impact
on operating profit of the strong rand amounted to about R3,4 billion. The      
associated impact on attributable earnings was R2,4 billion or a decrease of    
about 394 cents per share.                                                      
Attributable earnings of R2,5 billion was R2,4 billion (49%) below the          
comparable result of the previous period. Apart from negative currency effects, 
the adverse impact of lower chemical margins and inflationary effects on costs  
were partly offset by the benefit of higher average international oil prices    
(dated Brent US$28,73 versus US$26,87) and productivity improvements.           
Attributable earnings per share of 408 cents was 49% lower than earnings of the 
previous comparable reporting period. Headline earnings per share of 397 cents  
was 50% lower. In the period under review, impairment charges relating mainly to
non-performing foreign activities of Sasol Nitro and Sasol Wax amounted to R109 
million.                                                                        
Capital expenditure during the reporting period amounted to R4,8 billion.       
The main projects advanced were:                                                
- the Mozambique Natural Gas Project - gas reached Secunda, through the 865     
kilometre pipeline from the Central Processing Facility in Mozambique, on       
schedule during February 2004;                                                  
- Project Turbo - the fuels enhancement and polymers expansion project which is 
scheduled for commissioning from the last quarter of 2005;                      
- the Gas-to-Liquid (GTL) fuels projects in Qatar and Nigeria which are         
scheduled for start-up in December 2005 and July 2007 respectively;             
- the Arya Sasol Polymers joint venture to build a world-scale ethane cracker   
and polyethylene plants in Iran, which are scheduled for commissioning from the 
fourth quarter of 2005; and                                                     
- the Acrylic Acid project which was commissioned during the first quarter of   
2004.                                                                           
Gearing (defined as net debt as a percentage of shareholders" equity) was 38% at
31 December 2003.                                                               
The interim dividend declared of 215 cents is the same as the previous year and 
represents a dividend cover of 1,9 times.                                       
Sasol Mining                                                                    
Although production (26 million tons) was the same as in the comparable         
reporting period of the previous year, the operating profit of R521 million was 
26% lower, mainly because of higher costs and the adverse effect of the strong  
Rand more than offsetting the benefit of higher export coal prices.             
Sasol Synfuels                                                                  
The operating profit of R2 207 million was R2 365 million (52%) lower than the  
comparable previous six-month period. Substantial adverse currency effects (R2,8
billion) were partly offset by the benefit of higher oil prices. From an        
operational perspective, the Secunda complex performed well and a major planned 
shutdown was successfully completed.                                            
Sasol Oil and Gas                                                               
From July 2003, Sasol Oil was reconfigured to include the tank farm and blending
facilities of Sasol Synfuels, in addition to its previous fuel marketing and    
distribution and crude oil refining activities.                                 
The operating profit of R841 million was R154 million (15%) lower than the      
previous reporting period after adjusting for the beneficial inclusion of the   
Secunda tank farm and blending facilities. This decrease was mainly because of  
adverse currency effects. The contribution to operating profit of Sasol Gas     
(R197 million) was 39% below the comparable result of the previous reporting    
period, primarily because of lower sales volumes and selling prices and once-off
income in the previous reporting period from an asset sale.                     
On 19 February 2004, it was announced that Sasol and Petroliam Nasional Berhad  
(Petronas) had agreed broad principles relating to a merger of equals between   
Sasol"s liquid fuels business and Engen Limited, to create a leading South      
African liquid fuels business which will also incorporate significant Black     
Economic Empowerment shareholding. Further announcements will be made in due    
course.                                                                         
Sasol"s Chemical Businesses                                                     
Sasol Nitro                                                                     
The operating profit of R52 million was 78% below the comparable result of the  
previous reporting period. While the explosives business achieved a major and   
pleasing turn-around, the fertilizers" business performance was a disappointment
and more than offset the gains in explosives. Late summer rains impacted        
severely on fertilizer demand and the phosphates range incurred losses because  
of input costs not being recovered in selling prices.                           
The foreign explosives ventures have not met expectations and are in the process
of being sold. The related impairment charges have been raised.                 
Sasol Olefins and Surfactants (o&s)                                             
The substantial pressure on margins experienced by this business in the previous
financial year continued. The operating loss of R38 million was R192 million    
worse than the previous comparable reporting period, despite expectations that  
improvements would be forthcoming.                                              
As was experienced in the previous reporting period, the alkylates business was 
a major disappointment with high oil-related (kerosene and benzene) input costs 
continuing and not being recovered from customers. The monomers business also   
disappointed, primarily because of adverse currency effects impacting on        
margins.                                                                        
Portfolio scrutiny resulted in Sasol Servo being offered for sale because of its
non-core nature and presently a sale transaction is well-advanced. It should be 
completed during the remaining months of the financial year. Strategic analysis 
of the entire O&S portfolio is continuing and is nearing completion.            
Through these difficulties it is important to note that, as part of the drive to
improve performance and increase margins, cash fixed costs have been reduced by 
about euro 50 million (13% in real terms) since the business (Condea) was       
acquired in 2001.                                                               
Sasol Polymers                                                                  
The operating profit of R244 million was R184 million (43%) below the comparable
result of the previous six-month period. The entire shortfall can be attributed 
to the strengthening of the Rand. Productivity initiatives continued and yielded
pleasing results. The division"s integrated investment in ethylene and          
polyethylene production in Malaysia performed satisfactorily and met            
expectations.                                                                   
Sasol Solvents                                                                  
This business was particularly affected by the strong Rand because of its very  
high level of exports relative to total turnover. The operating profit of R87   
million was 77% below the comparable result of the previous reporting period,   
although in euro terms it was close to the previous result. Strict cost         
management is a notable feature of this business.                               
Sasol Wax                                                                       
The operating profit of R97 million was R66 million above the result of the     
previous reporting period, mainly due to a gain of R34 million realised on the  
disposal of an asset in the USA, improved margins in South Africa and the       
benefits of the newly acquired wax emulsion business in Europe, partly reduced  
by adverse currency effects. Margins in Europe were pressurised by low-price    
Chinese and Russian imports.                                                    
The poor performance of certain investments in Venezuela and the USA and careful
scrutiny of their future potential, led to a decision to dispose of them and    
impairment charges on the investment in the former arose as a result. Strategic 
evaluation of the business in Europe is underway and joint-venturing            
opportunities to bolster performance are being considered.                      
Effective tax rate                                                              
The increase in the effective tax rate from 32,3% to 36,5% is mainly a result of
the effect of an increased STC charge relative to earnings, deferred tax assets 
written off and translation losses on integrated foreign operations which are   
not subject to tax.                                                             
Foreign currency translation reserve                                            
Losses of R1 022 million arising from the conversion to Rand of the net assets  
of foreign entities such as Sasol Wax, Sasol Chemie and Merisol are recognised  
in the changes in equity statement as a foreign currency translation reserve.   
The movement in the current year is primarily attributable to the strengthening 
of the Rand against both the euro and the US dollar.                            
Capital commitments                                                             
Significant approved capital projects totalling R25 billion of which R8 billion 
has been contracted for include:                                                
- Project Turbo - the fuels enhancement and polymers expansion project;         
- the Mozambique Natural Gas Project ;                                          
- GTL projects in Nigeria and Qatar; and                                        
- the Arya Sasol Polymers joint venture                                         
Net Asset value per share                                                       
The decrease in net asset value per share from 5 503 to 5 484 cents is mainly as
a result of the losses arising on conversion to Rand of the net assets of       
foreign entities and the increase in total debt.                                
Profit outlook                                                                  
The prevailing volatility of the Rand continues to make forecasting difficult.  
While relatively high oil prices are expected to continue and certain           
international chemical prices have strengthened, it remains likely that earnings
for the full financial year will be substantially lower than the previous year. 
It is anticipated, however, that earnings in the second half-year will be better
than the first six months.                                                      
The adverse influence of the strong Rand is expected to be less severe in the   
second six months and a major cost reduction initiative across all businesses is
expected to yield significant benefit relative to the first half of the         
financial year.                                                                 
Basis of preparation and accounting policies                                    
The condensed consolidated interim financial report for the six months ended 31 
December 2003 has been prepared in compliance with the Listings Requirements of 
the JSE Securities Exchange, South Africa, International Financial Reporting    
Standards and the South African Companies Act, 1973, as amended.                
The accounting policies applied in the presentation of the interim financial    
report are consistent with those applied for the year ended 30 June 2003.       
Comparative figures for the six months to 31 December 2002 have been restated to
take into account the change in the accounting policy on borrowing costs and    
change in accounting treatment of revenue as reported in the 30 June 2003 annual
financial statements.                                                           
Related party transactions                                                      
The group, in the ordinary course of business, enters into various sale and     
purchase transactions on an arm"s length basis at market rates with related     
parties.                                                                        
Acquisition of businesses                                                       
During the period, Sasol acquired a 50% share in Sasol-Huntsman Verwaltungs GmbH
from RWE-DEA and the remaining 48% interest in G.D. Portbury Limited (Dubai).   
Post-balance sheet date events                                                  
With effect from 1 January 2004 Sasol acquired Naledi Petroleum Holdings (Pty)  
Limited, the holding company of Exel Petroleum (Pty) Limited.                   
On 19 February 2004, it was announced that Sasol and Petroliam Nasional Berhad  
(Petronas) had agreed broad principles relating to a merger of equals between   
Sasol"s liquid fuels business and Engen Limited, to create a leading South      
African liquid fuels business. Further announcements will be made in due course.
principal foreign currency conversion rates                                     
One unit of foreign                                                             
currency equals                31 Dec 03   31 Dec 02   30 June 03               
Rand:US$ -closing              6,69        8,57        7,50                     
Rand:US$ -average              7,08        10,03       9,03                     
Rand:euro -closing             8,42        9,00        8,63                     
Rand:euro -average             8,18        9,95        9,41                     
Independent review by the auditors                                              
The condensed consolidated balance sheet at 31 December 2003 and the related    
condensed consolidated statements of income, changes in equity and cash flow for
the six months then ended have been reviewed by our auditors, KPMG Inc.  Their  
unmodified review report is available for inspection at the registered office of
the company.                                                                    
Declaration of interim dividend number 49                                       
The directors of Sasol Limited have declared an interim dividend of 215 cents   
per share (2002: 215 cents per share) for the half-year to 31 December 2003. The
dividend has been declared in the currency of the Republic of South Africa.     
In accordance with the settlement procedures of STRATE, the following dates will
apply to the interim dividend:                                                  
Last day for trading to qualify for and participate in the interim dividend     
(cum dividend)                           Thursday, 1 April 2004                 
Trading ex dividend commences            Friday, 2 April 2004                   
Record date                              Thursday, 8 April 2004                 
Dividend payment date                                                           
(electronic and certificated register)   Tuesday, 13 April 2004                 
Dividend cheques in payment of this dividend to certificated shareholders will  
be posted to shareholders on or about Tuesday, 13 April 2004. Electronic payment
to certificated shareholders will be undertaken simultaneously. Shareholders who
have dematerialised their share certificates will have their accounts at their  
Central Securities Depository Participant or Broker credited on Tuesday, 13     
April 2004.                                                                     
In the case of certificated shareholders, notice of any change of address of    
shareholders must reach the transfer secretaries, Computershare Limited, on or  
before Thursday, 8 April 2004. Share certificates may not be dematerialised or  
rematerialised between Friday, 2 April 2004 and Thursday, 8 April 2004, both    
days inclusive.                                                                 
Dividends payable to US shareholders                                            
We believe that Sasol Limited is a "qualified foreign corporation" in terms of  
the US Jobs and Growth Tax Relief Reconciliation Act of 2003 ("the Act").  It   
therefore follows that dividends paid by Sasol Limited to US individual         
shareholders are eligible to be taxed at a maximum rate of 15% as permitted     
under the Act.  We recommend that you consult your US tax advisor in this       
regard.                                                                         
On behalf of the board                                                          
P du P Kruger                                                                   
Chairman                                                                        
P V Cox                                                                         
Deputy chairman & chief executive                                               
Sasol Limited                                                                   
8 March 2004                                                                    
Registered office: Sasol Limited, 1 Sturdee Avenue, Rosebank, Johannesburg 2196 
P O Box 5486, Johannesburg 2000                                                 
Transfer Secretaries: Computershare  Limited, 70 Marshall Street, Johannesburg  
2001                                                                            
P O Box 61051, Marshalltown 2107, South Africa Tel: +27 11 370-5000    Fax: +27 
11 370-5271/2                                                                   
Directors: P du P Kruger (Chairman), P V Cox (Deputy chairman and chief         
executive), E le R Bradley, W A M Clewlow, B P Connellan, L P A Davies          
(Executive director), J H Fourie, M S V Gantsho, A Jain (Indian), S Montsi, T S 
Munday (Executive director), S B Pfeiffer (US) , J E Schrempp (German), C B     
Strauss                                                                         
Company secretary: N L Joubert                                                  
Company registration number: 1979/003231/06                                     
Incorporated in the Republic of South Africa                                    
American Depositary Receipt ("ADR") program: cusip number 543210 ADR to ordinary
share 1:1                                                                       
Depositary: The Bank of New York, 22nd floor, 101 Barclay Street, New York, N.Y.
10286, U.S.A.                                                                   
information agent: Taylor Rafferty.                                             
www.sasol.com                                                                   
email: investor.relations@sasol.com                                             
Date: 08/03/2004 07:00:13 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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