Sweeping structural changes are coming thick and fast inside South Africa’s globalising petrochemicals giant Sasol under the direction of a newish CEO, the American David Constable.
Constable’s touch was made clearly visible in the latest Sasol financial update, the results for the six months ended December 2013. Constable took over in 2011 and his tenure caused some noise with news that his remuneration package was almost doubled to be about R53m in the 2012/13 financial year.
Updates from the past 12 months or so suggest he is shaking things around and promising to save the company billions of rands. Financial performance has not suffered with the company showing a massive 30% growth in operating profit, excluding once-off items, to R19.4 billion and 26% growth in headline earnings per share. Dividend was up 40%.
The financial report for six months ended December 2013 makes for interesting reading for watchers of Constable promises.
The report notes that “Since launching our business performance enhancement programme in 2013, we have finalised the design of our new group-wide operating model including its related top management structures, which will become effective on 1 July 2014.”
By the end of the 2014 financial year, we expect to have reorganised most of our senior management structures and refined our financial reporting processes, in line with the new operating model. Focus on safety, operational stability and compliance will remain key during this period.
Together with the implementation of our new management structures and related corporate governance framework, we are introducing key systems and process changes, to ensure a simplified, cost-effective, efficient, competitive organisation.
At our 2013 year-end results announcement we confirmed that through this programme, we expect to generate sustainable annual savings of more than R3 billion.
Based on our current analyses, we are confident that we will exceed this savings target, 30% to 40% of the savings expected to be realised by the end of the 2015
financial year. The full benefit of our management interventions will be evident from the 2016 financial year. Cash fixed cost trends are expected to follow inflation.”
The report added that “The majority of the savings identified related to optimising external spend, improving operational productivity and restructuring the organisation. The new operating model will also result in simplified and fit-for-purpose functional support. Our 2014 financial year savings is trending to be more than R200 million.”
The cost of implementation approximates R1,2 billion for the 2014 financial year, which includes project costs, costs associated with the reconfiguration of our
enterprise resource planning (ERP) systems and restructuring expenses. The costs associated with this programme are expected to be incurred over the next three years, with the majority being incurred in the 2014 and 2015 financial years.”
The report added that “Our new group executive committee structure is aligned with our future value chain-based operating model, comprising four distinct groupings:
- Operating Business Units, which comprise our mining and upstream oil and gas activities;
- Regional Operating Hubs, which include our operations in Southern Africa, North America and Eurasia;
- Strategic Business Units, which focus on our commercial and enhanced customer interfaces within the energy and chemicals arenas; and
- Group Functions, which will deliver fit-for-purpose business support services and solutions.