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Sasol Ltd. announced improved results for the fiscal year ended June 30, 2013, aided by enhanced operations and a favorable exchange rate, partially offset by lower oil and product prices.
The South Africa-based petrochemicals group reported headline earnings per share, excluding one-time items of R52.53 (US$6.00), up by 24.9% from R42.07 earned in the last fiscal year.
South African Energy Cluster: Within its South African energy cluster, Sasol Mining's operating income decreased 3.2% to R2.2 billion, affected by higher transportation, mining and other expenses. However, the sector witnessed increased output.
Sasol Gas generated an operating profit of R4.1 billion, up 36.3% year over year. This increase can be attributed to higher sale prices and output.
Sasol Synfuels' operating profit jumped 29.6% to R28.6 billion, mainly reflecting higher output and positive foreign exchange movements that significantly made up for cost escalation.
Sasol Oil reported an operating profit of R2.1 billion as against R1.6 billion in the last fiscal year. The improvement is aided by improved refining and marketing margins along with increased prices of petroleum products. To some extent, this was offset by the drop in output.
International Energy Cluster: Sasol Synfuels International recorded an operating profit of R1.6 billion, down from R1.9 billion in the prior fiscal year. The result was affected by a drop in output owing to the shutdown of the Qatar-based ORYX gas-to-liquids plant.
Sasol Petroleum International incurred an operating loss of R1.9 billion, narrowed from the loss reported in the prior fiscal year, mainly reflecting improved gross margin. This was however partially offset by increased exploration, operation and depreciation expenses.
Chemical Cluster: Sasol Polymers incurred an operating loss of R2.8 billion against a profit of R716 million in the prior fiscal year. The segment results were adversely affected by weak domestic margin.
Sasol Solvents' operating income was down to R916 million, from the previous fiscal year's level of R1.4 billion. The results were affected by weak product prices and margins.
Sasol Olefins & Surfactants reported an operating profit of R3.6 billion, up by 12.1% from the income of R3.2 billion during the corresponding period of 2012. The positive comparison came on the back of increase in margin from the company’s operations in the U.S. This was however partially offset by margin pressure in European activities.
Operating Cash Flow & Capex
Sasol generated R59.3 billion in operating cash flow, a 24.0% year-over-year increase, primarily due to higher flow of cash from operating activities somewhat nullified by increased working capital. The world's largest producer of motor fuels from coal spent R32.3 billion in capital expenditure during the period.
The company announced a final cash dividend of R13.30 per share. The dividend will be paid on Oct 14 to shareholders of record as on Oct 11, 2013. The holders of American Depositary Receipts (“ADRs”) will be paid on Oct 25, 2013.
Stocks to Consider
Sasol Ltd. currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at energy firms like Dril-Quip Inc. (DRQ - Analyst Report), Range Resources Corp. (RRC - Analyst Report) and Whiting Petroleum Corp. (WLL - Snapshot Report) that offer value. All the stocks sport a Zacks Rank #1 (Buy).