Sasol Ltd. (SOL), the world’s largest producer of motor fuels from coal, forecast higher earnings in the fiscal year ending this month after oil prices rose.
“The high oil price combined with a weakening of the rand- dollar exchange rate resulted in a 31 percent rise in average domestic fuel prices,” it said today in a statement. Fixed-cost gains will be in line with producer-price inflation, it said.
The Johannesburg-based company gets most of its profit from South African synthetic fuel, or synfuel, operations that use the company’s proprietary Fischer-Tropsch technology to produce gasoline and diesel from coal. Sasol is the largest fuel producer in the country, where prices are regulated based on factors including oil and currency rates.
Oil has traded at an average $94.99 a barrel since June 30 from $84.41 a year earlier. The rand has averaged 7.78 a dollar since June 30, 9.9 percent weaker than a year earlier.
“We will deliver solid operational results and increased earnings for the 2012 financial year,” Sasol said. It reported profit of 19.8 billion rand ($2.4 billion), or 32.85 rand a share last year. Excluding one-time items, the earnings were 33.85 rand a share. In comparison, the median estimate of 15 analysts surveyed by Bloomberg is for 48.21 rand this year.
Sasol produced 5.26 million metric tons of synthetic fuels in South Africa’s fiscal year ended in March and expects that to increase to 7.1 million tons this year. The company, which also produces fuel from crude oil in a venture with Total SA (FP), said it has stopped buying oil from Iran. Iran accounted for 20 percent of input at the Natref refinery in South Africa, Sasol said.
Sasol’s Canadian shale-gas assets showed a “substantial loss,” it said, adding they’re under pressure partly because of low gas prices. The company will write off $56.8 million of capitalized costs after studies showed developing the Mozambican Njika gas field isn’t economic.
Talisman Energy Inc. won’t proceed with a feasibility study for a proposed gas-to-fuels plant in Canada, the company said separately today. There are “better ways to allocate capital in support of our strategy,” Calgary-based Talisman said.
The study was part of an accord last year in which Sasol agreed to spend $2 billion for a stake in Talisman’s Montney shale-gas fields in British Columbia.
Sasol dropped by 2 percent to 339.69 rand, the lowest since Oct. 11, by the close of trading in Johannesburg.
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