STOCK WATCH
Sasol’s positive headline earnings update does little to support shares
Chemical conglomerate’s investors backed off in 2013 when its share price reached its best, but oil prices fell and costs increased at the Lake Charles project
Chemical conglomerate Sasol’s update last week has failed to support its share price, with investors still waiting for better days. Sasol said headline earnings per share for the six months would rise 34%-44%. Since 2013, when the share price reached its best at R520, investors have backed off as oil prices fell, the rand recovered and costs increased at the Lake Charles project in the US. Investors have not been in the money with Sasol over the past four years. The share price fell 16.2% in 2014, 2.7% in 2015 and 4.9% in 2016. In 2017 it has risen 0.24%. Apart from still relatively low oil prices, it is mainly the Lake Charles project that is weighing on Sasol’s share price. The cost of the petrochemical complex in Louisiana has ballooned from an effective ungeared position in 2015 to R75bn, or gearing of between 25% and 35%. Takunda says Sasol has aggressively normalised costs. And its projections in the trading update were based on a low oil price of below $50 on average. Lapping...
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