Third Annual Report : October 1998

Appendix 1

Aggregate Financial Results of SAPIA Members

  Years ended 31 December
1990 1991 1992 1993 1994 1995 1996 1997
Operating profit (R/m) 1 483 1 326 1 307 2 108 1 877 1 649 2 402 2 229
Interest paid (R/m) 11 (98) (53) (173) (250) (323) (447) (454)
Income tax (R/m) (691) (510) (503) (596) (582) (402) (568) (474)
Net income (R/m) 803 718 751 1 339 1 045 924 1 387 1 301
Total assets (R/m) 6 782 7 897 9 389 10 845 13 324 14 466 17 634 18 597
Capital Expenditure (R/m) 1 587 1 256 1 652 1 558 1 613 1 389 1 377 1 455
After tax return on assets (%) 11,8 9,1 8,0 12,3 7,8 6,4 7,9 7,0
Sales Volumes (bn litres) 19,3 20,1 21,1 23,6 24,7 28,0 29,4 33,8
Net income after tax (c/l) 4,2 3,6 3,6 5,7 4,2 3,3 4,7 3,8

The figures reflect the total profits the companies earn from their oil importing, refining and marketing activities, including their export trade. As the companies purchase their crude oil and any refined oil requirements on world markets at ruling international prices, they do not earn any further undisclosed profits.

SALES VOLUMES reached the level of 33,8bn litres in 1997, 75% above the 1990 level and 15% above the 1996 level. This increase in 1997 over 1996 reflects increased export trading as growth in the local market was limited to 2.2%.

NET INCOME AFTER TAX, after declining from R1,3bn in 1993 to R0,9bn in 1995 and rising in 1996 to R1,4bn again declined to R1,3bn. However, adjusting for stock profits in 1996 and stock losses in 1997, the figures are R0,8bn in 1996 and R1,5bn in 1997. This reflects the better rand denominated refining margins in 1997 and higher crude throughputs.

A 2,7 c/l MARKETING MARGIN INCREASE, equal to an amount of some R0,3bn after tax, was due to industry in 1996 in terms of the MPAR system (some 4,5c/l ­ R0,5bn after tax ­ was due in 1997). An interim increase of 2c/l was granted in November 1997.

TOTAL ASSETS increased from R17,6bn in 1996 to R18,6bn in 1997. This increase reflects the continued capital investment in the industry, amounting to R1,5bn in 1997.

AGGREGATE CAPITAL INVESTMENT for the eight years from 1990 to 1997 was R11,9bn. This exceeded the net income after tax, R8,3bn over the same period, by R3,6bn. 		TOTAL INCOME TAX PAYMENTS during the eight years were R4,3bn. In addition to this the members, during this period, collected R79,7bn in taxes and levies on behalf of the State.

AFTER-TAX RETURN ON ASSETS recovered from 6,4% in 1995, the lowest level in the decade, to 7,9% in 1996, but declined again to 7,0%. After tax profit, expressed as cents per litre, was 3,8c/l.

Adjusting for stock losses, 1997 profits represent a return on assets of 7,9% and a margin of 4,4c/l.

These returns, which are lower than inflation and the return on a bank deposit, do not adequately reward investment in the industry.

The ability of Sapia members to continue making the required large investments in fixed and working capital will be dependent on government setting clear policies, which encourage investment, in the industry.

Sapia consists of the six South African conventional oil refining and marketing companies, i.e. BP, Caltex, Engen, Shell, Total and Zenex. The aggregation of the financial results of their oil refining and marketing activities, shown in appendices 1 and 2, has been carried out on their behalf by Deloitte and Touche.

Deloitte & Touche aggregated the above financial information from amounts and statistics provided by the Sapia members. Deloitte & Touche did not perform any audit on the information supplied nor was the information verified by them in any way.