Sasol Poised at Neutral - Analyst Blog
23 Ottobre 2012 - 5:30PM
Zacks
We are holding on to our Neutral
recommendation on Sasol Ltd. (SSL) over the long
term based on the company’s various strategic initiatives, superior
technical expertise and compelling investment program. However,
these positives are somewhat negated by the effects of exchange
rate fluctuations and unfavorable macro conditions.
Based in South Africa, Sasol is an integrated energy and chemicals
company that provides liquid fuels within the domestic region. The
company – which enjoys business collaboration with Canadian energy
explorer Talisman Energy Inc. (TLM) – is also a
major international producer of chemicals.
Sasol is a world leader in the unique coal-to-liquids (CTL)
technology, owning and operating the largest integrated commercial
facility of its kind. The company has been manufacturing synfuels
and chemical feedstock from coal for over 50 years.
We appreciate Sasol’s focus on bolstering its chemicals portfolio
and the commercialization of its gas-to-liquids (GTL) technology by
constructing GTL plants in gas-rich regions of the world. The GTL
technology, an offshoot of Sasol’s years of commercial experience
with its South African synthetic fuels operations, plays a critical
role in the group’s long-term growth plans.
Additionally, Sasol’s deleveraged balance sheet and strong cash
position (operating activities generated R47.9 billion in fiscal
year 2012) keep the group well equipped to weather the global
economic storm and fund its growth program in tough credit
markets.
However, the company’s weaker-than-expected results for the fiscal
year ended June 30, 2012, is a concern. Sasol’s earnings per share,
excluding one-time items, came in at R42.07 or $5.05, lagging the
Zacks Consensus Estimate of $5.74.
The results were impacted by high costs and poor contributions from
the Chemical Cluster, arising from the slowdown in the
international polymers market and margin pressure in the local
polymer industry, partially offset by increased output.
We also expect that Sasol’s difficult operating environment,
characterized by a fluctuating domestic currency and weaker
refining margins will keep near-to-mid-term earnings under
pressure.
Moreover, with operations in various overseas regions, Sasol
remains exposed to risks such as embargoes and/or expropriation of
assets, exchange rate risks, terrorism and political/civil
sentiment, etc.
Taking into account these factors, we believe that Sasol has
limited upside potential and will perform in line with the broader
market.
SASOL LTD -ADR (SSL): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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