Sasol seeks to fuel performance in Africa

SASOL has held discussions with various entities in Africa outside of SA on the long-term potential for a chemicals plant, the group’s executive, vice-president for chemicals Fleetwood Grobler, said on Thursday.

The chemicals and energy group has production facilities in SA, Mozambique and North America. It is investing $8.9bn in the state of Louisiana in an ethane cracker and processing plant that will treble its US chemicals capacity.

 

Mr Grobler said in its last financial year Africa, the Middle East and India contributed just under a third of the R105bn turnover of Sasol’s chemicals business. The short-to medium-term focus in Africa was on improving the performance of agents and distributors and selecting the best locations for a sales office.

The focus in Africa is on countries with the fastest growth in gross domestic product (GDP), including Angola, Mozambique and Nigeria.

The effect on the South African business from forecast GDP below 1% this year would be mixed, Sasol’s senior vice-president for base chemicals Brad Griffith, said.

Mining was under pressure, which would affect demand for explosives. Sasol was working with its mining customers to improve their cost position through better planning.

The polymers division, which sells to manufacturing and packaging firms, should benefit from continued consumer spending but building applications would be affected by the capacity problems in municipalities. Sasol was working with government departments and municipalities to bring projects together.

In Sasol’s 2015 financial year its chemicals business contributed 57% of group turnover.

Mr Grobler said the group would report on March 7 on its interim results to December, when it would also update the market on the progress of the Louisiana project. He said the group was reassessing the project’s timelines, but was confident the Gemini joint venture with Ineos to make high-density polyethylene would be completed this year.

As oil prices have slumped in the past two years, naphtha cracker plants in Europe and Southeast Asia have become less competitive than ethane crackers, which use feedstock from shale gas, Mr Grobler said. The Louisiana ethane cracker project would give Sasol a competitive advantage in selling products to China.

Asked about the effect of lower oil prices on the group’s chemicals business, Mr Grobler said it would vary. On some products margins would be squeezed but the performance chemicals division was more robust.