S&P: Sasol unchanged

Standard & Poor's said its ratings on South Africa-based Sasol Ltd. (BBB+/stable/A-2) are unchanged by the government's announcement of a potential windfall tax on Sasol's synthetic fuel profits. South Africa's finance minister stated that the government plans to form a task force to investigate the issue, but that it would not impose any tax recklessly.

Sasol's synthetic fuel division generated R7.67 billion of operating income in fiscal 2005 ended June 30 - 47% of group total - helped by rising crude oil prices, the agency said. This was up 38% from a low R5.5 billion in 2004, but only slightly above the 2003 level of R7.4 billion. The strong operating environment in 2005, underpinned by sustained favorable crude oil and chemical prices, is expected to continue this year, S&P predicted.

Sasol indicated in its trading statement that it expects a 65% to 75% rise in net income for the six months ended Dec. 30. The group, therefore, enjoys some financial flexibility for a BBB+ rating, S&P said. However, while the agency said it does not expect any windfall tax to be large, if one is imposed it could negatively affect Sasol's credit quality: the synthetic fuel division accounted for 47% of group operating income and 50% of group free operating cash flow in fiscal 2005, and the group is facing high capital expenditures in the years ahead to fund its various international projects.

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