| Chief financial officer’s review Pages | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
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| The year under review has been very successful |
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 “The year under review has been very successful for the group. This has enabled us to consistently deliver on our financial targets and build value for our shareholders.
Our strong balance sheet, together with our sustained financial performance, provides a solid foundation for sustainable growth.” |
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| 1 |
Purpose |
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Stakeholders are advised to read this review in conjunction with the annual financial statements. The purpose of this
review is to provide further insight into the financial performance and position of the group in the context of the environments in which we operate. |
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| 2 |
Economic overview of the regions in which we operate |
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2.1 |
South Africa |
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The South African economy grew for the third consecutive year at a gross domestic product (GDP) growth rate of 5%. In the past year we
started to see a shift away from consumer-led growth towards producer- and investment-led growth. This is a welcome development that
will help to make the country’s growth more sustainable in the long term and could potentially raise the economy’s growth rate. Rising
interest rates and a weaker currency were the key triggers of this growth rotation. |
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With the prime interest rate increasing by 2,5% to 13,0% over the year, higher finance charges and higher import costs contributed to a
slowdown in new vehicle sales. Towards the end of the financial year, passenger vehicle sales began to contract on a year-on-year basis.
Sales of commercial vehicles, however, have remained firm – emphasising the shift in internal growth dynamics and contributing to rapid
growth in the domestic distillate market. Preliminary data from the South African Petroleum Industry Association show that the growth in
diesel consumption probably exceeded 10% over the 2007 financial year. The weaker rand, against the euro and US dollar also positively
affected manufacturing production in general, which grew by nearly 5,5% over the financial year, well above the 4% growth in the prior year. |
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The economy has experienced a general tightening in resource utilisation. A number of industries, including liquid fuels, have run out of
spare capacity. Increased demand will therefore have to be met through higher imports. Skilled labour is increasingly in short supply, with
skilled services demanding a premium. |
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2.2 |
United States of America (USA) |
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GDP growth in the USA slowed sharply over the financial year. This was largely the result of a sharp contraction in residential construction.
For now the impact of the downturn in the USA housing market appears to be contained within that industry. Consumer spending has held
up remarkably well in the face of weaker wealth effects and higher energy prices. In our view, however, the risk of a spill-over into
employment and slower growth in US consumer spending remains. |
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The US dollar weakened against most major currencies over the past year, bar the Japanese yen, while the Federal Reserve kept interest
rates largely unchanged. |
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On balance, these developments made our businesses in the USA more competitive. |
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2.3 |
Europe |
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The Euroland economy performed above expectations over the year, with GDP growth accelerating to above 3%. However, the
contribution of consumer spending to GDP growth remained unchanged at about one percentage point notwithstanding falling
unemployment levels and rising consumer confidence. |
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The euro strengthened by 6% against the US dollar over the year, following the 5% appreciation in the prior year. European interest rates
moved sharply higher as the authorities sought to normalise monetary policy settings. This resulted in an increased cost of capital for our
European businesses in addition to the currency induced pressure on their competitive position. |
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In general, despite the strengthening of the euro versus the US dollar, our European businesses were positively impacted by these
developments. |
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2.4 |
China |
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The renminbi continued its steady appreciation against the US dollar over the past year on the back of steadily rising trade surpluses. This is
despite the various tightening measures introduced by the authorities over the past year, including the increased reserve requirement ratios
for financial institutions and the introduction of export taxes on a range of products. |
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The continued appreciation of the Chinese currency has a negative impact on the economics of the projects under investigation in China. |
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| 3 |
Financial performance |
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We measure our financial performance in terms of a number of economic ratios. These ratios relate to a number of performance areas including earnings growth, gearing and cash flow generation and are provided below for the year under review: |
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Profit attributable to
shareholders (R billion) |
Gearing (%) |
Cash flow from operations
(R billion) |
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Each of these areas is discussed in more detail in this review. |
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Sasol limited group