Integrated energy and chemicals company Sasol reports that its sharpened strategic focus and significant progress in relation to its US megaprojects and its initiation of a complete organisational redesign have influenced its all-round good perfomance in 2013, despite the challenging rand:dollar exchange rate.

Speaking at the year-end financial results presentation last month, Sasol CEO David Constable said the company’s focus on operational performance in 2013 resulted in improved plant stability and higher production volumes. He added that, in the year ahead, Sasol aimed to implement initiatives that addressed cost creep and organisational complexity to ensure that Sasol became a more effective, efficient and competitive organisation over the long term.

“We continue to make progress on the execution of the front-end engineering and design (FEED) phase of an integrated, world-scale ethane cracker and on downstream derivative units. We will start with FEED for the US gas-to-liquids (GTL) and chemicals value-add facility at the Lake Charles chemicals complex, in Louisiana, in the US, during the second half of 2013,” said Constable.

He further pointed out that, by the end of June 2013, earnings attributable to shareholders increased by 11% to R26.3-billion from R23.6-billion in the previous year. Sasol also recorded an operating profit – excluding share of profit of associates – of R40.6-billion for the year. Besides the impact of the net one-off charges, which amounted to R8.5-billion, operating profit increased by 26%, compared with the previous year, indicating an overall improved operational performance.

Internationally, Sasol’s operating profit, relating to olefins and surfactants, increased by 23% to R3.5-million, excluding the gain realised in the previous year on the sale of the Witten operations, in Germany. “While our US operations continued to benefit from the low US ethane prices, our Europe-based businesses came under increased pressure because of reduced volumes, owing to softer demand, coupled with continued high petrochemical feedstock prices,” Constable highlighted.

Sasol Synfuels International’s operating profit decreased by 15% to R1.6-million from last year, as a result of lower volumes from the Oryx GTL plant in Qatar, owing to the planned statutory shutdown in February. Also, higher US GTL study costs, compared with those of the previous year, played a role in the decrease in profit, noted Constable.

Sasol reported that, locally, increasing mining costs, external coal purchases and increased transport costs led to Sasol Mining’s operating profit being 3% lower than in the previous year at R2.2-million. However, production volumes increased by 1%, compared with those of the previous year. Sasol Mining also recorded a no-fatalites period for the first time during this year and reduced its recordable case rate from 0.67 in 2012 to 0.57 in 2013.

“The increased sales volumes for Sasol Gas, which supports the company’s initiatives to increase energy efficiencies and decrease its carbon footprint, played an important role in Sasol Gas’s operating profit, which increased by 36% to R4.09-million.

“A weaker average of the rand:dollar exchange rate, which resulted in favour- able product prices, margins and increased sales volumes, led to a 30% increase in Sasol Synfuels’ projects to R28.6-million this year. Production volumes of 7.44- million tons were 4% higher than last year,” added Constable.

The company highlighted that the negative impact on the operating profit was the result of the impartial impairments of Sasol’s Arya Sasol Polymer Company investment and the wax expansion project of R3.3-million and R2.03-million respectively. The write-off of an unsuccessful exploration well in Mozambique, which amounted to R442-million, also contributed to the negative impact. The operating profit for the current year was also negatively impacted on by net one-off charges, totalling R8.5-billion, compared with the net one-off charges in June 2012 of R2.1-billion.

Sasol outgoing CFO Christine Ramon pointed out that cash flow generated by operating activities increased by 24% to R59.3-billion, compared with R47.9- billion last year. However, this was offset by increased working capital, as a result of price and volume effects. Capital investments for the year totalled R32.3-billion.

She added that the cash fixed costs – excluding one-off and growth costs and the impact of a weaker exchange rate – increased by 7% in real terms, primarily owing to a challenging South Africa cost environment in respect of labour, maintenance and electricity.

However, Sasol noted that it remained committed to a progressive dividend policy, barring significant economic variables such as abnormal fluctuations in the oil price and exchange rates.

“Through our business performance enhancement programme, we expect to generate sustainable yearly savings of at least R3-billion over the next two to three years. The drivers for the savings target will be a combination of efficiency benefits stemming from our new operating model, productivity improvements in our operations, designing fit-for-pur- pose group functions and procurement cost-reduction strategies,” highlighted Ramon.

The economic recovery in the global environment was expected to remain fragile and unbalanced and the European debt crisis had continued to weaken demand in that region, while Constable said global economic growth would likely remain modest, particularly in light of the uncertainties in the European and US markets.

“Despite this, Sasol still remains committed to act responsibly and continuously improve on its operations and future projects,” he concluded.