Petrochemical giant Sasol unveiled details of long-awaited plans to grow in the Middle East, and possibly China, this week, against the troubled backdrop of a devastating accident and labour dissidence at Secunda.
Unveiling Sasol’s results up to June, CEO Peter Cox put a brave face in reaction to the blast that had claimed seven lives by Wednesday and left hundreds injured. Commenting on the Department of Labour’s ongoing investigation into the explosion, Cox said “we will learn from the accident”.
At the same time, 1 000 members of the largely white Solidarity union went on strike at Sasol’s coal mine in Secunda demanding a 10% wage increase — 4% more than management has offered. They have also called for safer working conditions.
Reint Dykema, spokesperson for Solidarity, the largest union at Sasol, complained that the company had refused it access to the investigation of the accident. The union said it had been part of a probe into an earlier accident in June, when an employee, Dyllan Ward, was killed after a tank he was welding exploded.
From this, it had learned that Sasol had cut the number of days spent on maintenance of its ageing plant, reduced the number of people who work on it, and that the budget “had been trimmed too much”.
Sasol communications manager Johan van Rheede rejected the claims. He said that “Solidarity has conducted its investigation through the media”. As the inquiry was being conducted by the labour department, the union was casting doubt on the government’s investigative abilities by demanding access to it.
Cox said the past financial year had been a “momentous” one. The company had benefited from higher oil and other product prices, while the strong rand had wiped R6-billion off its profits.
For the year to June, the average rand-dollar exchange rate was R6,88, compared with R9,03 the year before, contributing to a 23% drop in operating profit to R9,3-billion.
Cost-cutting measures had saved the group R890-million — a key strategy in countering the rand’s strength. Van Rheede said there had been retrenchments in non-essential services, but not in core businesses. He would not give figures.
Cox took heart from the fact that earnings had grown 39% in the second half of the year, ensuring for the first time since the second half of 2002 that earnings defied rand strength.
He announced that the company would drive growth with capital expenditure of R15-billion. In the third quarter of next year, it will construct an ethane cracker plant with one million tons annual output in Iran. It will also bring two polymer plants, each producing 300 000 tons per annum, on stream in Iran in 2006. In the same year a gas-to-liquid fuel plant in Gulf state Qatar would commence production. Another such plant for Nigeria is also in the pipeline.
The group is also running a pre-feasibility study for two ground-breaking coal-to-liquid fuel plants in China, a huge oil consumer. Sasol’s aim was to help China use its rich coal reserves to meet its energy needs and ultimately ease pressure on world prices, said Cox. The project would also help China industrialise its impoverished interior, which houses the coal reserves.
Sasol is holding thumbs that the proposed merger of its liquid fuel business with Engen’s is approved later this year.
The merger will create a monolith with operations in 14 countries. In South Africa, it will merge the procurement of crude oil, Sasol’s 64% interest in Natref refinery and Engen’s refinery in Durban, as well as marketing and distribution interests.
Sasol aims to have a 15% share of the retail market by 2007. Engen, with its 1 500 outlets, is the dominant player with more than 60% of retail market.
Commentators said it would be interesting to see how the competition authorities treated the application, arguably the most audacious since Nedbank’s bid to buy Standard Bank in 1999, which was rejected.