South African alternative and not-so-alternative energy play Sasol (NYSE:SSL) reports its "interim" (read "first-six-months") 2007 earnings results on Monday. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Ten analysts follow Sasol, giving it seven buy ratings and three holds.
  • Revenues. Only half of the analysts are based in the U.S., however, and none of these publishes quarterly or semiannual estimates. For the year ending in June, however, they're predicting 43% sales growth to $12.77 billion.
  • Earnings. Profits are predicted to rise 19% this year, to $3.76 per share. Seeing as how Sasol's ADRs come packaged 1-to-1 with its common shares, that means $3.76 for each ADR trading on the New York Stock Exchange, too.

What management says:
Every six months, Sasol publishes a newsletter for investors interested in its stock -- Investor Insight. I've just read the December issue, and I've got to tell you: I like this company. It "had me at 'hello' " -- or more specifically, Sasol won my respect right from the get-go, with the headline: "a satisfactory performance as major capital projects near completion."

How often do you hear a U.S. company calling its performance "satisfactory?" "Strongest revenues ever," sure. "Record earnings," right. "Best gross margin in our history," uh-huh. But merely "satisfactory?" Almost never does a U.S. company publicly describe itself thusly, with a word implicitly stating: "We did good, but we can do better." Love it.

What management does:
Which begs the question: Just what kind of performance does Sasol consider "satisfactory?" Rolling gross margins that have grown fully 11 percentage points over the last 18 months, for one thing. Rolling operating margins that are up 12 points for another, and a net that's grown a good 530 basis points for a third -- and all this in a year in which oil prices finally rediscovered the laws of gravity.

Margins

12/04

3/05

6/05

9/05

12/05

6/06

Gross

37.2%

38.3%

45.7%

41.4%

43.0%

48.2%

Operating

20.2%

21.4%

27.6%

24.6%

26.7%

32.2%

Net

10.9%

12.8%

18.0%

16.2%

17.7%

16.2%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Sasol is in the process of starting up or exploring several "large, complex capital projects," including gas-to-liquids plants in Australia, Algeria, Nigeria, and Qatar, a "polymers project" in Iran, a possible 80,000 barrels-per-day coal-to-liquids facility in South Africa, and other potential coal-to-liquids operations in China, India, and right here in the U.S.

Now, these kinds of projects don't just pay for themselves (at least, not at start-up) -- it takes investment to make, well, investments. In this regard, Sasol described making $1.82 billion in capital expenditures in fiscal 2006. Of that amount, about 41% was spent just to keep operations going and equipment fresh (what we call "maintenance capex" here in the States, and what the South Africans more poetically term "sustenance capex" -- the nutrients needed to keep the company healthy). The remaining 59%, or roughly $1.07 billion, went to finance the firm's numerous development projects.

Going forward, Sasol tells investors to expect capex to ramp up to nearly $2 billion in each of fiscal 2007 and 2008, and reach $2.34 billion in 2009. Although the firm did not come out and say it, my read on the situation is that much, if not all, of the increase will be going to expand and improve the business, keeping profits flowing to investors far into the future.

To read more about Sasol, check out:

Bill Mann likes Sasol, as well, and recommended it to Motley Fool Global Gains subscribers in the newsletter service's inaugural issue. To find out which other international companies have made the cut, consider a free trial today.

Fool contributor Rich Smith does not own shares of any company named above.