In time it will become a share worth holding again. The chemical side is also going to suffer initially as the ingredients obtained from oil were probably expensed at a higher price than can be obtained now. The directors are like a buck caught in the headlights, that is blinded and not thinking straight. The shale oil project should be mothballed at best. Remember SOL was a state run business paid for by us tax payers in the past and when things went wrong the government picked up the tab for any bungling. Not so now. We should keep the petroleum business running just for our own use and not for export. It would pay to set up a gas turbines producing unit to drive electricity, but the government would have to come to the party as this will cost a great deal, but still cheaper than nuclear power.
Barry, as always very interesting thoughts. However the shale oil? project or rather then the GTL project, (if that is the approx. $8.1 billion plant in Louisiana U.S?) - that ship has sailed! Again I agree, could be a concern.
Glad to hear from you again Warhippo. As far as the shale thing and add-ons goes, it is interesting to note that several US oil companies ,including I think Chevron have mothballed their schemes in the same areas as Sasol. Further more according to some of my confidential friends, when Sol did their initial estimates to get the scheme to pay for itself and the timeframe it would take they were working on an average oil price per barrel of over US$100. There is considerable unease here about this independently run operation as South Africans have had a spotty record in operating in America in different fields where they tried it.
I will agree on Sappi - speculative, but with some exposure to US growth. SOL is fooksawled, IMO. I can't see them pulling off the GTL plant investment now. Be that as it may, I am not keen on investing in companies that have absolutely no control over the price of their products. That rules Implats out in my book as well - particularly considering the constant russian roulette they have to play with uncle Bob across the border
Actually - I was lumping SASOL with these companies - in that they all produce a commodity which has no certain future. They have huge overhead profiles and insane capex budgets. SAPPI at least has an asset - her forests. The other 2 have either a hole in the ground or a lot of s***** iron if one strips away the current use of the asset.
When your primary product has fallen by 60% and your capital commitments exceed your market capitalisation, the figures become somewhat meaningless. Remember when IMPLATS and the rest of the plat. stocks were trading at sub-10 PE's (ostensibly).. (?) Balance sheets were fortresses. They were going to fund their transition from Merensky to UG without tapping shareholders...