Johannesburg – Energy giant Sasol has completed the bulk
of its foreign exchange hedging programme for the 2018 year.
In a statement issued on Wednesday, the listed company
said it had hedged about 70 percent of its dollar exposure for the year to
June.
The company explains it has entered hedges with a total notional
amount of $4 billion, at an average of $1 billion per quarter, have been put
into place.
These hedges have an annual average floor of R13.46 to
the dollar, and an annual average cap of R15.51 per dollar. These levels approximate
the quarterly averages, it says.
These hedges follow its December announcement that it was
hedging against downside risks to the price of crude oil. Crude oil is
currently just above $52 to a barrel.
The Organisation of the Petroleum Exporting Countries has
sought to limit production of oil in a bid to push prices higher.
By the end of the half year, Sasol had hedged 12 percent
of its foreign exchange exposure.
The hedges were completed using zero-cost collar
instruments.
Read also: Sasol hedges oil
Sasol explains the hedges will provide it with some cash
flow and balance sheet protection, as gearing and net debt to earnings before
interest, tax, depreciation and amortisation levels are expected to peak during
the 2018 financial year.
“In addition, the financial risk mitigation strategy with
reference to currency hedges is expected to partially mitigate the negative translation
impact of valuing the balance sheet at each reporting date,” it says.
Sasol, which has seen its profit come under pressure due
to currency fluctuations and a lower oil price, says it will continue to review
financial market risks, and should additional material hedges be put into
place, appropriate announcements will be made.
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