Sasol profits from rand's woes
AMID the economic chaos in the wake of the plunging rand, there are a number of companies reaping significant benefit from the currency's woes.
Sasol managing director Peter Cox said a sustained R1 drop of the rand's value against the dollar over a year would add R1.7-billion to pre-tax earnings.
He also warned that Sasol would walk away from its proposed R4.6-billion takeover of AECI if the Competition Board imposed "undue" conditions on the deal.
"We believe that at R30 a share we offered Amic (AECI's controlling shareholding) a fair price which includes a premium for control and recognises the benefits that AECI brings to Sasol in economies of scale.
"We expect the Board to add conditions, but if they are too onerous we will walk away from the deal," Cox said.
This would apply if the Board ruled that AECI must sell its fertiliser and/or explosives business before the takeover. The Board has until mid-September to complete its inquiry.
With Sasol's year-end just completed, analysts estimate that the rand was 50c weaker than in the 1996/97 financial year - adding an estimated R850-million alone to pre-tax profit. In the year to end-June 1997, profit was R4.2-billion.
The market on Friday recognised Sasol's rand hedge qualities and pushed the share up by 9% to a close of R40. It reached a R44 high at one point.
Two weeks ago hit a low of R29, almost 50% down from its April high, amid low oil prices and its cautionary announcement warning of lower profits in the 1997/98 financial year.
Analysts said companies like Sasol which made most of their earnings in foreign currency stood to benefit.
"People have woken up to the fact that Sasol is a good rand hedge and it is now looking cheap," an analyst told Reuters. Some of Sasol's petroleum and chemical products are sold for dollars on the world market.
Dealers also said Sasol was benefiting from OPEC's recent decision to restrict oil supplies in a bid to push oil prices up.
Analysts doubt whether the R850-million estimated boon from the weak rand will be enough to offset the impact of lower oil prices and falling exports to the Asian market.
In the six months to December Sasol's attributable earnings fell to R1.1-billion and for the 12-month period they could be down by 10% to R2.3-billion.
Cox said in his opening address the SA chemical industry was now predominantly a commodity industry, exporting chemical commodities without adding value. "By stimulating the development of a downstream industry in SA, at least R6-billion could be saved in foreign currency by replacing speciality chemical imports."