The Bottom Line: Qatar hiccup puts Sasol investors on their guard
Posted to the web on: 23 May 2007
businessday.co.za
IN SASOL’s worst single day since the national treasury mooted the prospect of a windfall tax a year ago, the company’s shares plummeted 5,9% on the JSE yesterday, wiping R9,5bn off its total market value.
The inspiration for the bloodletting was a carefully worded warning from Sasol that suggested all was not quite what it should have been in its landmark gas-to-liquids plant in Qatar.
This came after Sasol warned that its expected output from its Oryx gas-to-liquids plant in Qatar was “lower than expected” during the first quarter.
This is another disappointment in Qatar, following the original delays in getting production going at the plant last year.
Despite the roaring oil price — which touched $70 a barrel on Monday — Sasol’s shares fell from R276,10 to R261 on the JSE. This means that the recent upward march of Sasol’s share price, from about R220 in March to the R276 level, has been halted, and it suggests a note of caution for investors.
As you would expect, Sasol sought to limit the damage yesterday, explaining that these were run-of-the-mill “start-up operational challenges, most of these limited to individual pieces of equipment”.
But Sasol said it was looking to “eliminate” or remedy the biggest problem “over the coming months” — and the question is, how much larger are these problems than initially expected?
For some time, cynics have been questioning whether the Sasol story of gas-to-liquids and coal-to-liquid has been overhyped, and whether it is all a lot more difficult than initially thought. For the cynics, yesterday’s announcement will come as some sort of vindication, and keep alive the questions over the sustainability of Sasol’s long-term plans.
Whether this hiccup is any indicator of future trends remains to be seen, but it is notable that while not a unanimous recommendation, Sasol is still rated as a “buy” from most of the analysts who cover the stock.
But what is certain is that after yesterday’s warning, investors will have their eyes keenly peeled for any further signs that the Sasol story isn’t quite as sweet as they had initially believed.
Viwe Tlaleane edits The Bottom Line. E-mail to: bottomline@ bdfm.co.za |
