Oil and chemical group Sasol has slashed its capital spending budget for the three years to June 2011 by 40 percent to R48 billion to conserve cash in expectation of volatile market conditions.

Chief executive Pat Davies said  recently that the firm had not finalised where the cuts would be made but it was not planning to cut jobs locally.

The company has, however, announced a delay in its Mafutha coal-to-liquid project near Lephalale in Limpopo. Davies said the completion of the prefeasibility study for this 80 000 barrels a day plant had been put back.

Sasol and the Industrial Development Corporation (IDC) would not complete the study in March as had been planned, but instead would issue an update on the project by June.

The IDC has a 49 percent stake in the Mafutha project.

Sasol chief fanancial officer Christine Ramon said the group cut 300 jobs at its chemical operations in Europe and shut seven production plants during the six months to December 2008.

Sasol ended December 2008 with cash of R22.7 billion, an eightfold increase compared with the end of December 2007.

Cash generated from operating activities in the half year rose 118 percent to R30.8 billion.

The group cut its interim dividend by 31.5 percent to R2.50 a share.

Davies said that Sasol might pay its final dividend in shares rather than cash.

"This is not the time to run to banks for debt," he added.

Daniel Sacks, head of resources at Investec Asset Management, said it was disappointing that Sasol had both missed the guidance that it gave on its earnings and that it had cut its interim dividend.

In January Sasol said its headline earnings a share were likely to increase by between 55 percent and 65 percent in the half-year to December 2008, compared with earnings in the six months to December 2007.

Yesterday Sasol posted a 51 percent rise in interim headline earnings a share to R21.92.

Sacks said it was "insignificant" that Sasol had cut its capital spending plans.

One analyst, who wished to remain anonymous, said that he thought it was "not necessary" for Sasol to cut its interim dividend.

As part of Sasol's decision to save cash, it has put a freeze on external hiring, cut its gearing range and suspended its buyback programme.

It has lowered its targeted gearing to between 20 percent and 40 percent from 30 percent to 50 percent. At the end of December Sasol had a gearing ratio of 2.3 percent.

The group's profit for the half year rose 36 percent year on year to about R13 billion.

Turnover jumped 50 percent to R83.1 billion on the back of higher crude oil prices, as well as a weaker rand exchange rate.

Davies said the six months to December 2008 had been a "good half" for the group.

Sasol shares fell 6.11 percent to R246.47 even as Brent crude hit highs for the year. The Top40 index lost 2.84 percent.