South African fuel producer Sasol Ltd. – the world’s biggest producer of motor oil from coal – has announced that its full-year profit will drop as much as 30 percent following writedowns. This is the biggest drop in profits for the Johannesburg-based company in more than 17 years.
The company blamed the fall in profits on impairments on its share of a shale-gas asset in Canada (worth $770 million) and on a decline in natural-gas prices. The company’s shares fell 11 percent to 432.52 rand by the close, the biggest plunge since Oct. 1, 1998.
“The volatile macroeconomic environment, in particular lower crude-oil prices, has had a significant impact on earnings,” Sasol said Monday in a statement. Headline profit will fall by 10 percent to 30 percent in the year through June from 49.76 rand a share a year earlier, it said. Analysts surveyed by Bloomberg had estimated a 26 percent slide to 36.58 rand.
Despite the news, Sasol remains committed to the chemicals complex in Lake Charles, Louisiana – currently under construction – even increasing the project cost from about $8.9 billion to $11 billion. At the same time the expected returns from the project have been reduced to around its weighted average cost of capital, which stands at about 10.6 percent (according to Bloomberg).
Plans to build another gas-to-liquids plant in the U.S. have been delayed.
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