Sasol interim financial results for second half 1998

Sasol announced its interim financial results for the half-year ended December 25, 1998.
-- Turnover up 19 %
-- Headline earnings per share increased by 12 % to 200 cents ($ 0.34)
-- SAS reactors successfully commissioned
-- Unit production costs contained significantly below inflation

Headline earnings increased by 12 %, despite the current depressed international crude oil and petrochemical prices.
To counteract the downward pressure on the Group's profitability, optimisation initiatives have been intensified. These are focussed on improving profitability through cost reductions, improving yields and efficiencies and optimising capital expenditure and working capital.

Turnover increased materially by 19 % and operating profit increased by 6 % to R 1,808 mm ($ 305 mm) despite the difficult prevailing trading conditions. Net interest earned was significantly lower at R 16 mm ($ 3 mm). The profit after tax amounted to R 1,255 mm ($ 212 mm) after adjusting for the reduction of 5 % in the company tax rate. The lower company tax rate has resulted in a reduction in the provision for deferred tax of R 502 mm ($ 84 mm).
Headline earnings increased by 12 % to 200 cents ($ 0.34) per share.
The balance sheet of the company remains sound with gearing at 10 %.
The Group was able to meet its funding requirements from cash flow and the utilisation of cash surpluses. Cash funds reduced from R 2,341 mm ($ 395 mm) to R 912 mm ($ 154 mm).
An unchanged interim dividend of 65 cents ($ 0.11) per share has been declared.

Sasol Synthetic Fuels
The highlight for the period was the successful commissioning of the new Sasol Advanced Synthol (SAS) Reactors, within budget and on schedule. The full impact of the SAS Reactors will only materialise during the next financial year. Operating profit increased from R 680 mm ($ 115 mm) to R 804 mm ($ 136 mm), mainly due to increased production and increased income resulting from the weaker exchange rate. Production increased by morethan 3 % while the average R/$ exchange rate weakened from R 4.66/$ 1 to R 5.91/$ 1.
Lower crude oil prices and consequently chemical feedstock prices had a significant negative effect on profits. The average derived crude oil price fell from $ 16.56 per barrel to $ 10.70 per barrel. Crude oil and chemical feedstock prices in the second half are expected to be even lower than those of the first half and consequently operating profits for the second half of the year are forecast to be lower than those of the first, for this division.

Sasol Mining
The improvement in the performance of the mines continued with operating profits increasing from R 108 mm ($ 18 mm) to R 168 mm ($ 28 mm). The increase was mainly the result of increased sales. Operating profit during the second half will be lower than that of the first, largely due to non-recurring costs incurred in connection with the mines' renewal program and closures at the Sigma mine.

Sasol Oil
Sasol Oil's operating profit amounted to R 288 mm ($ 49 mm) compared with R 344 mm ($ 58 mm). The fall of R 56 mm ($ 9 mm) was largely due to lower average dollar refining margins, partially offset by the impact of the weaker R/$ exchange rate. Operating profit for the second half of the year is expected to be similar to that of the first.

Sasol Chemical Industries
It is the intent to increase earnings from chemicals. To this end the shareholding in Polifin was increased to more than 50 % through purchases on the open market. The Securities Regulation Panel ruled that an offer to the minorities is not required. Sasol's share of the operating profit of Polifin, after the increased shareholding, amounts to R 131 mm ($ 22 mm) (1997/98: R 189 mm ($ 32 mm)). The operating profit of the remaining businesses of Sasol Chemical Industries, excluding Polifin, increased by 9 % to R 440 mm ($ 74 mm), largely as a result of continued growth in volumes. Overall operating profit was 4 % lower at R 571 mm ($ 96 mm).
The forecast pricesof several chemical products, notably ammonia and acrylonitrile, are expected to be lower than those which prevailed during the first six months of the year. However, improved contributions from several of the other business units are forecast and operating profits in the second half of the year are expected to be slightly higher than those of the first.

Profit outlook
Growth in earnings for the year can be anticipated, provided that no material changes take place in international crude oil and chemicals prices as well as the R/$ exchange rate.

Year 2000 compliance
A full time project team is addressing the millennium issue in respect of all the Group's computer related equipment. The Group is on target to have all known non-compliant systems either replaced or upgraded to be fully year 2000 compliant before the end of the 1999 financial year.