SASOL LIMITED SASOL LIMITED
FINANCIAL RESULTS
for the year ended 30 June 2020
POSITIONING FOR A
SUSTAINABLE FUTURE
SALIENT FEATURES
for the year ended 30 June 2020
Safety Recordable Case
Rate (RCR) of
0,27
excluding illnesses;
regrettably six fatalities
Core HEPS* down
61%
to R14,79
Adjusted EBITDA*
down 27% to R35,0 billion
* Pro forma financial information
US ethane cracker
producing
above 80%
of nameplate capacity
LCCP cost tracking
US$12,8 billion;
- 86% production capacity in use
Base Chemicals
sales volumes up
19%
Performance
Chemicals
sales volumes up
8%
Liquid fuels
sales volumes down
12%
Cash generated by operating activities
down
18%
to R42,4 billion
Cash fixed cost
remained flat
Achieved
Level 3
B-BBEE status
GHG emission
reduction
roadmap to 2030
finalised
Exceeded
2020 cash conservation
target of US$1 billion
Accelerated asset
disposals progressing
Balance sheet management
Net debt: EBITDA of
4,3 times
Covenants
renegotiated
Future Sasol
strategic reset
commenced
Pursuing rights issue
POSITIONING FOR A
SUSTAINABLE FUTURE
Fleetwood Grobler
President and
Chief Executive Officer
President and Chief Executive Officer, Fleetwood Grobler said:
"Financial year 2020, which we indicated would be our peak gearing period, saw our stretched balance sheet come under significant pressure initially with the collapse in the Brent crude oil price to 21-year lows and then the onset of the COVID-19 pandemic.
The virus spurred a sudden drop in commodity prices, while also suppressing product demand and causing general economic decline. Additionally, we suffered credit rating downgrades as a result of the volatile macro environment.
Safety of our employees is our foremost priority, and the loss of life during the year has been most painful, with six tragic fatalities recorded. This has strengthened our resolve to drive our prevention of fatalities and high- severity injuries programme with greater urgency in pursuit of our zero harm aspiration.
Responding to these challenges required a deliberate and swift pivot in our priorities to stabilise the business in the short-term, while charting a path forward to long-term sustainability under a revised strategy and operating model.
In the short-term, our robust response focused on protecting the balance sheet. This we did by conserving cash in operational and capital expenditure through self-help management actions, expanding and accelerating our asset divestment programme. We will pursue a rights issue during the second half of financial year 2021.
Inevitably, our financial results were impacted by the pandemic. Despite this headwind, Team Sasol delivered a satisfactory set of results within a very challenging environment. We also progressed the Lake Charles Chemicals Project (LCCP) to the cusp of completion with the commissioning of our specialty chemical units. Six of the seven units at the LCCP are now online.
Beyond near-term measures, a crucial part of Sasol's response plan is to position the business for sustained profitability in a low oil price environment. This entailed reviewing and updating our strategy to bring greater focus to our portfolio and to transition Sasol to a lower-carbon future.
Our revised strategy will enable a more responsive energy transition in South Africa and leverage powerful megatrends to grow our specialty chemicals business. Future Sasol will be a leaner, focused and more competitive business delivering long-term stakeholder value. "
Sasol is a global integrated chemicals and energy company spanning 30 countries. Through our talented people, we use selected technologies to safely and sustainably source, manufacture and market chemical and energy products globally.
Sasol Limited Financial Results 2020 | 1 |
Sasol Limited Group
Introduction
Sasol faced significant challenges during the past financial year. The oil price collapse and spread of COVID-19 came at a time when our balance sheet was already highly geared. This placed the Company's viability at serious risk, especially as oil prices collapsed and product demand for some commodities evaporated. The COVID-19 storm thrust a sudden and unprecedented set of challenges on us. In the face of these dire threats, the Board supported the management team in rapidly activating a comprehensive response plan. We have taken immediate steps to respond to this crisis but realise that we have to reset Sasol to become sustainably profitable in a lower oil price environment. This is underpinned by a repositioning in our strategy and revised operating model. This plan is aimed to stabilise the business in the short-term, while preparing for a strategic reset to ensure a sustainable Company in a continuing low oil price environment and carbon constrained world.
Macroeconomic environment
Our business was severely impacted by lower oil prices, averaging at US$51,22/bbl for the year at a high of US$69,96/bbl and a low of US$13,24/bbl coupled with a moderately weak Rand/US dollar average exchange rate. The further softening of global chemical prices and the economic consequences of the COVID-19 pandemic, resulted in a further decline in both our sales volumes and margins in an already soft macroeconomic environment.
% change | 2020 | 2019 | |
Rand/US dollar average exchange rate | 10 | 15,69 | 14,20 |
Rand/US dollar closing exchange rate | 23 | 17,33 | 14,08 |
Average dated Brent crude oil price (US dollar/barrel) | (25) | 51,22 | 68,63 |
Average rand oil (Rand/barrel) | (18) | 803,64 | 974,55 |
Refining margins (US dollar/barrel) | (42) | 4,61 | 8,00 |
Base Chemicals average sales basket price (US dollar/ton) | (18) | 681 | 830 |
Average ethane feedstock (US cents/gallon) | 46 | 17,23 | 31,92 |
Earnings performance, ,
Sasol delivered a satisfactory set of business results for the first half of the year, driven by oil prices averaging US$62,62/bbl and a solid production performance. During the second half of the year our earnings was severely impacted by the sudden collapse in oil prices and the economic consequences of the COVID-19 pandemic.
The combined effects of unprecedented low oil prices, destruction of demand for products and impairments of R111,6 billion resulted in a loss of R91,3 billion for the year compared to earnings of R6,1 billion in the prior year. Within a volatile and uncertain macroeconomic environment, our foundation businesses still delivered resilient results with a strong volume, cash fixed cost and working capital performance.
The 18% decrease in the rand per barrel price of Brent crude oil coupled with much softer global chemical and refining margins negatively impacted our realised gross margins especially during the second half of the year.
The LCCP delivered an improved earnings before interest, taxation, depreciation and amortisation (EBITDA) performance in the second half of the year of approximately R100 million (US$8 million), despite a very challenging macroeconomic environment. This compares to a loss before interest, taxation, depreciation and amortisation (LBITDA) of R1,1 billion (US$70 million) recorded in the first half of the year.
Earnings were further impacted by R3,9 billion in additional depreciation charges and approximately R6,0 billion in finance charges for the year as the LCCP units reached beneficial operation.
Our Energy business's gross margin percentage decreased from 43% in the prior year to 38% due to the significant impacts of supply and demand shocks that led to lower crude oil prices and product differentials. We expect that oil prices will remain low for the next 12 to 18 months as the impact of COVID-19 becomes better understood. Oil markets also continued to remain exposed to shifts in geopolitical risks as well as supply and demand movements.
Despite experiencing softer commodity chemical prices across most of our sales regions due to weaker global demand and increased global capacity, our Base Chemicals and Performance Chemicals businesses, including LCCP, reported increased sales volumes of 19% and 8% respectively, and maintained robust results on certain products, ensuring a level of resilience in our cash flows.
Total cash fixed costs for the first half of the year were trending above 10% compared to the prior period, however, in the second half, we significantly improved our total cash fixed cost performance resulting in the full year cost remaining flat when compared to the prior year. This was largely attributable to the implementation of our comprehensive response plan focusing on cash fixed cost reduction and enhanced cash flow.
2 Sasol Limited Financial Results 2020
As a result our key metrics were impacted as follows:
- Working capital managed to optimal levels achieving an additional benefit of R9,2 billion relative to our internal plans. This resulted in a historical low working capital ratio of 12,5% compared to 14,8% for the prior year. Investment in working capital decreased by R5,8 billion during the year;
- Capital expenditure optimised by approximately R6,0 billion by deferring certain expenditure without compromising on safety and the reliability of our operations;
- Loss before interest and tax (LBIT) of R111,0 billion compared to earnings before interest and tax (EBIT) of R9,7 billion in the prior year;
- Adjusted EBITDA declined by 27% from R47,6 billion in the prior year to R35,0 billion;
- Basic earnings per share (EPS) decreased to a R147,45 loss per share compared to earnings per share of R6,97 in the prior year;
- Headline earnings per share (HEPS) decreased by more than 100% to a R11,79 loss per share compared to the prior year; and
- Core headline earnings per share (CHEPS) decreased by 61% to R14,79 compared to the prior year.
Earnings analysis
Adjusted EBITDA reconciliation to (LBIT)/EBIT
2020 | 2019* | ||
% change | Rm | Rm | |
Adjusted EBITDAiv | (27) | 34 976 | 47 637 |
Remeasurement items¹ | (110 834) | (18 645) | |
Share-based payments² | (1 741) | (1 218) | |
Unrealised hedging (losses)/gains3, 4 | (4 758) | 839 | |
Unrealised translation losses4, 5 | (7 405) | (260) | |
Change in discount rate of environmental provision | 1 307 | (688) | |
(LBITDA)/EBITDA | (88 455) | 27 665 | |
Depreciation and amortisation | (22 575) | (17 968) | |
(LBIT)/EBIT | (>100) | (111 030) | 9 697 |
- Includes impairments totalling R111,6 billion, mainly the impairment of R72,6 billion (US$4,2 billion) of our Base Chemicals portfolio within Sasol Chemicals USA which have been classified as disposal groups held for sale at 30 June 2020 and impaired to its fair value less cost to sell and impairment of our Base Chemicals foundation business in the Southern African value chain of R18,1 billion.
- Share-basedpayments includes both cash-settled and equity-settledshare-based payments charges.
- Consists of unrealised net (losses)/gains on all derivatives and hedging.
- The comparative years have been restated to include all unrealised translation gains and losses and all realised and unrealised gains and losses on derivative and hedging activities.
- Unrealised translation losses arising on the translation of monetary assets and liabilities into functional currency.
- Sasol adopted IFRS 16 'Leases' with effect from 1 July 2019 using the modified retrospective approach. Comparative years have not been restated.
Core headline (loss)/earnings per share reconciliation
2020 | 2019 | ||
Rand per | Rand per | ||
% change | share | share | |
Basic (loss)/earnings per share | (>100) | (147,45) | 6,97 |
Net remeasurement items | 135,66 | 23,75 | |
Headline (loss)/earnings per share | (>100) | (11,79) | 30,72 |
Translation impact of closing exchange rate1, 2 | 11,34 | (0,79) | |
Realised and unrealised net losses on hedging activities2, 3 | 7,87 | 3,06 | |
Implementation of Khanyisa B-BBEE transaction4 | 1,30 | 1,26 | |
LCCP operating losses during ramp-up5 | 6,07 | 4,73 | |
Provision for tax litigation matters6 | - | (1,33) | |
Core headline earnings per share | (61) | 14,79 | 37,65 |
- Translation losses/(gains) arising on the translation of monetary assets and liabilities into functional currency.
- The comparative years have been restated to include all unrealised translation gains and losses and all realised and unrealised gains and losses on derivative and hedging activities.
- Consists of realised and unrealised net losses on all derivatives and hedging activities.
- Sasol Khanyisa equity-settledshare-based payments charges recorded in the employee-related expenditure line in the income statement.
- Losses totalling R4,9 billion relating to negative EBITDA of R1,0 billion and depreciation of R3,9 billion attributable to the LCCP while still in ramp-up phase.
- Sasol Oil tax matter settlement including interest and penalties relating to the prior year.
Sasol Limited Financial Results 2020 | 3 |
Sasol Limited Group
Effective tax rate
Our effective corporate tax rate decreased from 34,2% to 22,3%. The effective corporate tax rate is 5,7% lower than the South African corporate income tax rate of 28%, mainly due to the fact that deferred tax was not fully recognised on certain impairments and on translation losses, and due to non-deductible finance costs incurred as a result of increased funding required for the LCCP.
Balance sheet management
Cash generated by operating activities decreased by 18% to R42,4 billion compared to the prior year. This was largely due to the softer macroeconomic environment during the first six months of the year which was further impacted by the severe economic consequences from the COVID-19 pandemic and lower oil prices during the second half of the year, coupled with the LCCP still being in a ramp-up phase. The decrease was partially negated by another strong working capital and cost performance from the foundation business. Investment in working capital decreased by R5,8 billion during the year due to focused management actions, resulting in a working capital ratio of 12,5%.
To create flexibility in Sasol's balance sheet during our peak gearing period, we have successfully engaged with our lenders to waive our covenants as at 30 June 2020 and to lift our covenants from 3,0 times to 4,0 times of Net debt: EBITDA (bank definition) as at 31 December 2020. This provides additional flexibility, which is subject to conditions, consistent with our capital allocation framework, prioritising debt reduction through commitments to suspend dividend payments and acquisitions while our leverage is above 3,0 times Net debt: EBITDA. We will also reduce the size of our facilities as debt levels reduce. Our Net debt: EBITDA ratio at 30 June 2020, based on the revolving credit facility and US dollar term loan covenant definition, was 4,3 times. The weaker Rand/US$ dollar exchange rate at 30 June 2020 impacted Net debt: EBITDA by 0,6 times.
During the year we secured incremental US dollar liquidity through a US$1 billion syndicated loan facility for up to 18 months, and bilateral facilities (with a combined quantum of US$250 million) with a tenure of two years. These facilities enhance our US dollar liquidity position during the peak gearing phase as the LCCP ramps up. In the South African market, we have both bank loan facilities and an R8,0 billion Domestic Medium-Term Note Programme (DMTN) which was established in 2017. In August 2019, we issued our inaugural paper to the value of R2,2 billion in the local debt market under this DMTN programme.
As at 30 June 2020, our total debt was R189,7 billion compared to R130,9 billion as at 30 June 2019, with approximately R174,6 billion (US$10,1 billion) denominated in US dollar. Our balance sheet is highly geared, requiring a reduction in US dollar denominated debt in order to achieve a targeted Net debt: EBITDA of less than 2,0 times and gearing of 30%, which we believe would be sustainable with oil at approximately US$45 per barrel (in real terms). Through our comprehensive response plan we have taken immediate steps to reset our capital structure by targeting to generate at least US$6 billion by the end of 2021.
Our gearing increased from 56,3% at 30 June 2019 to 114,5% mainly due to remeasurement items (39%) recognised, a weaker closing Rand/US dollar exchange rate (6%) and the adoption of the IFRS 16 'Leases' accounting standard (4%). Deleveraging the balance sheet is one of our highest priorities to ensure business sustainability to position us for the future to deliver value to our stakeholders.
Consistent with our long-term commitment to return to an investment grade credit rating, we are engaging with ratings agencies regarding the progress on our comprehensive response plan.
As at 30 June 2020, our liquidity headroom was in excess of US$2,5 billion well above our outlook to maintain liquidity in excess of US$1 billion, with available Rand and US dollar based funds improving as we advance our focused management actions. We continue to assess our mix of funding instruments to ensure that we have funding from a range of sources and a balanced maturity profile. We have no significant debt maturities before June 2021 when the US$1 billion syndicated loan becomes due. In accordance with IAS 1 'Presentation of Financial Statements', the recent conditions which underlie the covenant waiver requires an assessment of our debt maturity that resulted in a further US$1 billion being classified to short-term debt at 30 June 2020.
Our net cash on hand position increased from R15,8 billion as at 30 June 2019 to R34,1 billion mainly due to proceeds received from the US$1,0 billion syndicated loan as well as draw downs on the revolving credit facility negated by LCCP capital expenditure for the year.
Actual capital expenditure, including accruals, amounted to R35 billion. This includes R14 billion (US$0,9 billion) relating to the LCCP and is in line with our internal targets.
In line with our financial risk management framework, we continue to make good progress with hedging our currency and ethane exposure. For further details of our open hedge positions we refer you to our Analyst Book (www.sasol.com).
Our comprehensive response plan
During March 2020, we announced a comprehensive response plan designed to mitigate the impact of the disruption to our business as a result of the sharp fall in the oil market and the subsequent economic impact of the COVID-19 pandemic. The very sudden impact of these events galvanised Team Sasol to ensure the Company responded with flexibility and agility. Collectively these measures target generating cash proceeds of at least US$6 billion by the end of 2021. This is expected to reshape Sasol's balance sheet and provide the platform to deliver a globally competitive business with high cash yielding assets. Our comprehensive response plan focuses on four strategic pillars.
4 Sasol Limited Financial Results 2020
Self-help management actions
We implemented a cash conservation programme focused on enhancing cash flow and cost competitiveness in a low oil price environment, with US$2 billion cash delivery compared to our plans to 30 June 2021. We also proactively managed our debt maturity profiles to provide us with some flexibility as we navigated the worst of the economic shocks. For 2020, we exceeded our cash conservation target of US$1 billion, largely through cash fixed cost reduction, and capital expenditure and working capital optimisation. We already have committed plans in place to deliver against our US$1 billion target for 2021.
Asset disposal programme
Consistent with the comprehensive response plan announced on 17 March 2020, we are continuing to execute against our expanded and accelerated asset disposal programme.
We are making good progress and recently announced that we had entered into exclusive discussions with Air Liquide in relation to the sale of 16 air separation units at Secunda for R8,5 billion. A further announcement will be made when terms have been finalised with any transaction expected to be subject to customary conditions precedent.
As part of the comprehensive response plan it was also announced that we would explore the potential for partnering options at our Base Chemicals assets in the US. This process has seen strong global interest and is now at an advanced stage. As a result of the decision to undertake a partnering process, the assets and liabilities relating to our Base Chemicals portfolio within Sasol Chemicals USA have been classified as disposal groups held for sale at 30 June 2020. An impairment of R72,6 billion (US$4,2 billion) has been recognised, reducing the carrying value of the disposable asset down to its fair value less cost to sell.
A divestment process is also well underway with respect to our equity interests in the Republic of Mozambique Pipeline Investment Company (Pty) Ltd (ROMPCO) pipeline.
Further updates on these and other disposals will be provided as and when appropriate.
Strategic reset
We are undertaking a purposeful and systematic review of our global cost competitiveness and business structure. This strategic reset (Future Sasol) aims to deliver a more profitable and more sustainable business for the future. The intention is to be able to deliver attractive shareholder returns even if oil prices remain low. In June 2020, we announced that this revised strategy would include sharpened focus on our Chemicals and Energy businesses with a discontinuation of all oil growth activities in West Africa. We are in the process of developing targets to achieve our aspiration of Future Sasol. We expect to enhance our cash flows and improve the returns on our assets through gross margin improvements, cost reduction, capital expenditure optimisation and achieving optimal working capital levels. These targets will be announced later this year.
Rights issue
Consistent with the intent of the comprehensive response plan a rights issue will be pursued as the final deleveraging initiative to reset the capital structure. The exact amount to be raised by such a rights issue remains subject to the progress made on the self-help measures and asset disposals. It is our expectation that this will be determined by further progress on these measures within the next half year. This progress, together with further detail on Future Sasol, should enable Sasol to undertake such a rights issue from a stronger strategic and financial position. On that basis, we will pursue a rights issue of up to US$2 billion which will be executed in the second half of financial year 2021, subject to prevailing operating and market conditions.
Further cautionary announcement
In light of the above-mentioned, Shareholders of Sasol (Shareholders) are referred to various cautionary announcements regarding the expanded and accelerated asset disposal programme and the rights issue, the last announcement released on the Stock Exchange News Service on 28 July 2020. Accordingly, Shareholders are advised to continue exercising caution when dealing in the Company's securities until full terms announcements on the disposal of the air separation units, the US Base Chemicals partnering process and the rights issue are published.
Dividend
Dividend payments are an important part in our capital allocation framework. However, given our current financial leverage and the risk of a prolonged period of economic uncertainty, the Board believes that it would be prudent to continue with the suspension of dividends. This will allow us to continue to protect our liquidity in the short-term and focus on reducing leverage in order to create a firm platform to execute our strategy and drive long-term shareholder returns. In addition, in accordance with the covenant amendment agreement with lenders, we will not be in a position to declare a dividend for as long as Net debt: EBITDA is above
3,0 times. We expect the balance sheet to regain flexibility following the implementation of our comprehensive response plan.
Sasol Limited Financial Results 2020 | 5 |
Sasol Limited Group
Update on the Lake Charles Chemicals Project (LCCP)
Ongoing focus as we ramp up all units to beneficial operation
At the LCCP, we maintain our focus on safely improving productivity and bringing all the units to beneficial operation. The LCCP continued with its exceptional safety record with a recordable case rate (RCR) of 0,11.
After the ethoxylates (ETO) expansion achieved beneficial operation in January 2020, the alcohol expansion and the alumina expansion, as well as the new Guerbet unit, achieved beneficial operation in June 2020. As a result, 100% of the LCCP's Specialty Chemicals units are online, and 86% of total nameplate capacity of the LCCP is operational.
The last remaining unit to come online will be the low-density polyethylene (LDPE) unit, which was damaged during a fire in January 2020. The unit is expected to achieve beneficial operation before the end of October 2020. Some challenges in restoring the unit have resulted in a slight delay to the previous market guidance of the end of September 2020. During the time of the delay in the LDPE unit start-up, the ethylene produced by the cracker and destined for the unit is being sold to third parties. As a result, projected earnings for the LCCP complex in this financial year will be impacted only by the loss in the margin of ethylene to LDPE. In addition, the insurance claims process is underway, and the first insurance proceeds have been received.
The overall LCCP cost estimate is tracking US$12,8 billion as per our previous guidance. The new ethane cracker produced at an average rate of above 80% of nameplate capacity during the fourth quarter of the year.
COVID-19 had a limited impact on the LCCP construction and commissioning activities during the fourth quarter of the year, and mitigation plans are in place to minimise potential impacts going forward. The close-out and demobilisation of the LCCP is progressing according to plan with the remainder of the work limited to the removal of scaffolding. Site demobilisation of construction equipment, infrastructure and services will be completed after the last unit achieves beneficial operation. The people on site have reduced to less than 400 and follows the demobilisation plan. This includes the LDPE restoration resources.
- Forward-lookingstatements are the responsibility of the Directors and in accordance with standard practice, it is noted that this statement has not been audited and reported on by the Company's auditors.
- All comparisons to the prior year refer to the year ended 30 June 2019. All numbers are quoted on a pre-tax basis, except for earnings attributable to shareholders. Sasol implemented IFRS 16 'Leases' with effect from 1 July 2019. This impacts the comparability of EBITDA, Adjusted EBITDA and EBIT. Refer to page 20 and note 1 of the consolidated annual financial statements explaining the impact of the adoption of IFRS 16 'Leases'.
- All other operational and financial measures (such as cash fixed cost) have not been audited and reported on by the Company's auditors.
- Adjusted EBITDA is calculated by adjusting EBIT for depreciation and amortisation, share-based payments, remeasurement items, movement in environmental provisions due to discount rate changes, unrealised net losses/(gains) on all derivatives and hedging activities and unrealised translation losses arising on the translation of monetary assets and liabilities into functional currency. We believe Adjusted EBITDA and Core HEPS as noted below, are useful measures of the Group's underlying cash flow performance. However, this is not a defined term under IFRS and may not be comparable with similarly titled measures reported by other companies. (Adjusted EBITDA constitutes pro forma financial information in terms of the JSE Limited Listings Requirements and should be read in conjunction with the basis of preparation and pro forma financial information notes as set out on page 22).
- Core HEPS is calculated by adjusting headline earnings per share with certain once-off items (provision for tax litigation matters and LCCP cash fixed cost with limited corresponding gross margin), year-end close adjustments and depreciation and amortisation of capital projects (exceeding R4 billion) which have reached beneficial operation and are still ramping up, and share-based payments on implementation of B-BBEE transactions. Year-end close adjustments include unrealised net losses/(gains) on all derivatives and hedging activities and unrealised translation losses arising on the translation of monetary assets and liabilities into functional currency in order to remove volatility from earnings from year to year. (Core HEPS constitutes pro forma financial information in terms of the JSE Limited Listings Requirements and should be read in conjunction with the basis of preparation and pro forma financial information notes as set out on page 22).
Maintaining our focus on sustainable value creation
- We are deeply saddened to report the loss of six lives in workplace incidents during the year. We do believe zero harm is indeed possible and safety remains our top priority. Our approach to ensuring a safe workplace is built on leadership and competency, strengthened by clear policies and procedures. In response to these tragic losses and our 12-month rolling RCR which has reached a plateau at 0,27 (against the target of 0,26), we continue with our efforts to improve our safety performance and have:
- Reinforced safe behaviours through a CEO led intervention, supported by Group-wide safety leadership engagement, with a specific focus on the delivery of our High Severity Injury (HSI) programme, our safety culture, motivating adherence to Life Saving Rules and increased focus on sharing and embedding learnings;
- At Sasol Mining, we appointed a service provider specialising in safety to assist us with the establishment of an HSI Elimination Taskforce; and
- Integrated safety, health and environmental requirements into planning and improving operational discipline and safety leadership development throughout the Company.
- Ensuring that our business is environmentally, socially and economically sustainable is imperative. Our strategy has at its heart a focus on climate change resilience into the future. In a post COVID-19 environment, our commitment is unwavering to reduce our greenhouse gas (GHG) emissions. This year we release our second Climate Change Report, together with the full suite of annual reports. In this report, we share our 2030 emission reduction roadmap to achieve an at least 10% GHG reduction for our South African operations by 2030, off a 2017 baseline. We have embedded climate change management into mainstream decision-making. We believe, together with our 2050 reduction ambition and an associated roadmap for release in calendar year 2021, we will be ideally positioned to be a more sustainable business. A rigorous technology selection and evaluation process was followed to ensure our 2030 roadmap is robust, credible and addressed social, environmental, financial and implementation issues.
6 Sasol Limited Financial Results 2020
- In executing on our 2030 roadmap, we issued a Request for Information to procure 600MW of renewable energy and a Request for Proposal to construct two 10MW solar photovoltaic facilities to significantly lower the carbon intensity of our electricity import. Furthermore, we continue our focus on securing lower-carbon feedstocks such as additional gas supply to support our long-term transition. Total GHG emissions for all our operations globally are 66,10 million tons compared to 66,56 million tons for the prior year.
- Our GHG emissions intensity (measured in CO2e per ton of production) is 3,92 at 30 June 2020, compared to 3,61 at 30 June 2019. The GHG intensity and emissions were higher due to the reduced production capacity brought about by the decrease in demand and COVID-19 lockdown regulations.
- In respect of air quality, Sasol previously communicated and we remain of the view that meeting the new plant standard for
sulphur dioxide (SO2) for our boiler plants pose a challenge for the Company beyond 2025 due to technical and feasibility challenges. We believe that the recently promulgated 1 000 mg/Nm3 SO2 limit for old combustion plants is representative of a reasonable standard, but will require significant effort to be achieved. - The commissioning of the LCCP units has led to a planned increase in river water usage for the year which has resulted in an increase in total water use from 134,3 million m³ to 142,6 million m³. A continued deterioration in river water quality has contributed to an increase in water use in Secunda for industrial purposes from 80,7 million m³ to 82,0 million m³.
- We became one of the founding members of the KZN Marine South Coast Waste Network established during May 2019. The baseline study which we have contributed to has set a solid foundation for the development of an integrated waste management programme with particular focus on plastics waste that would otherwise end up in the ocean.
- The spread of COVID-19 exacerbated the levels of inequality, poverty and unemployment all around us, making our social and economic contribution more critical than ever. We stepped up, supporting our people and communities by front line health workers, fast-tracking bulk hand sanitiser donations, supporting first responders, and streaming free science, technology, engineering and mathematics lessons to learners forced to stay at home during the pandemic. By donating 1 million litres of jet fuel, we helped with the repatriation of a number of South African citizens stranded abroad.
- We invested R1,2 billion globally in skills and socioeconomic development, which includes funding towards small to large enterprises, bursaries, graduate development as well as education, health and investment in infrastructure.
- We continued to deliver on our commitments towards sustainable transformation and broad-based black economic empowerment (B-BBEE) despite the current macroeconomic challenges. Sasol Limited and Sasol South Africa Limited achieved an improved Level 3 contributor status during the year. Sasol Mining achieved a Level 8 contributor status and Sasol Oil achieved a Level 3 contributor status. Our expenditure with black-owned suppliers amounted to R26,3 billion compared to R19,2 billion in the prior year and a further improved spend is anticipated for 2021.
- We have strengthened our LCCP control environment, including a detailed change management programme with specific focus on culture, processes and governance which is being monitored within the project, operations and functional teams. The material weakness reported for 2019 will not be considered remediated until we have completed designing and implementing the longer-term remediation efforts and the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Business performance outlook* - solid production performance and achievement of comprehensive response plan targets
The current economic climate continues to remain highly volatile and uncertain. While oil and chemical prices, the impacts of the COVID-19 pandemic, gross domestic product growth and foreign exchange movements are outside our control, and may impact our results, our focus remains firmly on managing factors within our control, including volume growth, cash fixed cost, deleveraging of the balance sheet through our comprehensive response plan and focused financial risk management.
Our guidance is based on the following assumptions:
- Rand/US dollar exchange rate to range between R16,00 and R17,00 and average Brent crude oil price to remain between US$35/bbl and US$45/bbl;
- The impact of the COVID-19 pandemic is expected to continue to drive short-term to near-term volatility; and
- Management achieving the targets set in terms of our comprehensive response plan generating at least US$6 billion by the end of 2021.
Sasol Limited Financial Results 2020 | 7 |
Sasol Limited Group
We expect an overall solid operational performance for the year ending 30 June 2021, with:
- SSO volumes of 7,7 to 7,8 million tons;
- Liquid fuels sales of approximately 54 to 55 million barrels;
- Natref production units of between 520 to 550 m3/h;
- Base Chemicals overall sales volumes to be 3% to 5% higher than 2020. Excluding US polymers products, sales volumes to be 1% to 2% higher than 2020;
- Performance Chemicals overall sales volumes to be 3% to 5% higher than the prior year. Excluding LCCP produced products, sales volumes to be flat or slightly below the prior year;
- The LDPE unit is expected to reach beneficial operation before the end of October 2020 and therefore all LCCP units online during 2021;
- Gas production volumes from the Petroleum Production Agreement license area in Mozambique to be 114 to 118 bscf;
- We expect to achieve a utilisation rate of 75% to 80% at ORYX GTL in Qatar due to an extended planned shutdown;
- Normalised cash fixed costs to remain within inflation;
- Capital expenditure of R21 billion for 2021. Capital estimates may change as a result of exchange rate volatility and other factors; and
- Net debt: EBITDA to be below covenant. Macroeconomic volatility may continue to have an impact on the covenant level if a sudden further unexpected deterioration is experienced.
- The financial information contained in this business performance outlook is the responsibility of the directors and in accordance with standard practice, it is noted that this information has not been audited and reported on by the Company's auditors.
Board activities
The following change to the Board of the Company occurred after the publication of the Company's Interim Financial Results on
21 February 2020:
- Ms KC Harper was appointed as Independent Director with effect from 1 April 2020. On behalf of the Board
Sipho Nkosi | Fleetwood Grobler | Paul Victor |
Chairman | President and Chief Executive Officer | Chief Financial Officer |
Sasol Limited | ||
17 August 2020 |
8 Sasol Limited Financial Results 2020
SASOL LIMITED
AUDITED SUMMARISED
FINANCIAL STATEMENTS
for the year ended 30 June 2020
POSITIONING FOR A
SUSTAINABLE FUTURE
Sasol Limited Group
The summarised financial statements are presented on a condensed consolidated basis.
INCOME STATEMENT
for the year ended 30 June
2020 | 2019 | 2018 | |
Rm | Rm | Rm | |
Turnover | 190 367 | 203 576 | 181 461 |
Materials, energy and consumables used | (90 109) | (90 589) | (76 606) |
Selling and distribution costs | (8 388) | (7 836) | (7 060) |
Maintenance expenditure | (10 493) | (10 227) | (9 163) |
Employee-related expenditure | (30 667) | (29 928) | (27 468) |
Exploration expenditure and feasibility costs | (608) | (663) | (352) |
Depreciation and amortisation | (22 575) | (17 968) | (16 425) |
Other expenses and income | (27 376) | (19 097) | (15 316) |
Translation (losses)/gains | (6 542) | 604 | (11) |
Other operating expenses and income | (20 834) | (19 701) | (15 305) |
Equity accounted (losses)/profits, net of tax | (347) | 1 074 | 1 443 |
Operating (loss)/profit before remeasurement items and Sasol Khanyisa | |||
share-based payment | (196) | 28 342 | 30 514 |
Remeasurement items affecting operating profit¹ | (110 834) | (18 645) | (9 901) |
Sasol Khanyisa share-based payment affecting operating profit | - | - | (2 866) |
(LBIT)/EBIT | (111 030) | 9 697 | 17 747 |
Finance income | 922 | 787 | 1 716 |
Finance costs | (7 303) | (1 253) | (3 759) |
(Loss)/earnings before tax | (117 411) | 9 231 | 15 704 |
Taxation | 26 139 | (3 157) | (5 558) |
(Loss)/earnings for the year² | (91 272) | 6 074 | 10 146 |
Attributable to | |||
Owners of Sasol Limited | (91 109) | 4 298 | 8 729 |
Non-controlling interests in subsidiaries | (163) | 1 776 | 1 417 |
(91 272) | 6 074 | 10 146 | |
Rand | Rand | Rand | |
Per share information | |||
Basic (loss)/earnings per share | (147,45) | 6,97 | 14,26 |
Diluted earnings per share | (147,45) | 6,93 | 14,18 |
- Remeasurement items includes the impairment of R72,6 billion (US$4,2 billion) of our Base Chemicals portfolio within Sasol Chemicals USA which have been classified as disposal groups held for sale at 30 June 2020 and impaired to its fair value less cost to sell, the impairment of the Synfuels liquid fuels refinery and Sasolburg liquid fuels refinery CGUs of R3,8 billion and R8,6 billion respectively, our Base Chemicals foundation business in the Southern African value chain of R18,1 billion and our South African wax business and Eurasian wax businesses of R4,6 billion and R2,8 billion respectively.
- The combined effects of unprecedented low oil prices, destruction of demand for products and impairments of R111,6 billion resulted in a loss of R91,3 billion for the year compared to earnings of R6,1 billion in the prior year. Within a volatile and uncertain macroeconomic environment, our foundation businesses still delivered resilient results with a strong volume, cash fixed cost and working capital performance. The 18% decrease in the rand per barrel price of Brent crude oil coupled with much softer global chemical and refining margins negatively impacted our realised gross margins especially during the second half of the year.
The notes on pages 15 to 27 are an integral part of these summarised consolidated financial statements.
10 Sasol Limited Financial Results 2020
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
2020 | 2019 | 2018 | |
Rm | Rm | Rm | |
(Loss)/earnings for the year | (91 272) | 6 074 | 10 146 |
Other comprehensive income, net of tax | |||
Items that can be subsequently reclassified to the income statement | 24 123 | 1 353 | 6 068 |
Effect of translation of foreign operations | 26 720 | 1 533 | 5 237 |
Effect of cash flow hedges | (2 192) | (287) | 1 233 |
Fair value of investments available-for-sale | - | - | 13 |
Foreign currency translation reserve on disposal of business reclassified to the | |||
income statement | (801) | - | - |
Tax on items that can be subsequently reclassified to the income statement | 396 | 107 | (415) |
Items that cannot be subsequently reclassified to the income statement | (205) | (265) | (54) |
Remeasurements on post-retirement benefit obligations | (147) | (531) | (80) |
Fair value of investments through other comprehensive income | (112) | 136 | - |
Tax on items that cannot be subsequently reclassified to the income statement | 54 | 130 | 26 |
Total comprehensive (loss)/income for the year | (67 354) | 7 162 | 16 160 |
Attributable to | |||
Owners of Sasol Limited | (67 220) | 5 377 | 14 727 |
Non-controlling interests in subsidiaries | (134) | 1 785 | 1 433 |
(67 354) | 7 162 | 16 160 | |
The notes on pages 15 to 27 are an integral part of these summarised consolidated financial statements.
Sasol Limited Financial Results 2020 | 11 |
Sasol Limited Group
STATEMENT OF FINANCIAL POSITION
at 30 June
2020 | 2019 | ||
Rm | Rm | ||
Assets | 204 470 | ||
Property, plant and equipment¹ | 233 549 | ||
Assets under construction² | 27 802 | 127 764 | |
Right of use assets³ | 13 816 | - | |
Goodwill and other intangible assets | 2 800 | 3 357 | |
Equity accounted investments | 11 812 | 9 866 | |
Post-retirement benefit assets | 467 | 1 274 | |
Deferred tax assets⁴ | 31 665 | 8 563 | |
Other long-term assets | 8 361 | 7 580 | |
Non-current assets | 301 193 | 391 953 | |
Inventories | 27 801 | 29 646 | |
Trade and other receivables | 30 516 | 29 308 | |
Short-term financial assets | 645 | 630 | |
Cash and cash equivalents | 34 739 | 15 877 | |
Current assets | 93 701 | 75 461 | |
Assets in disposal groups held for sale⁵ | 84 268 | 2 554 | |
Total assets | 479 162 | 469 968 | |
Equity and liabilities | 154 307 | ||
Shareholders' equity | 219 910 | ||
Non-controlling interests | 4 941 | 5 885 | |
Total equity | 159 248 | 225 795 | |
Long-term debt⁶ | 147 511 | 127 350 | |
Lease liabilities³ | 15 825 | 7 445 | |
Long-term provisions | 21 857 | 17 622 | |
Post-retirement benefit obligations | 14 691 | 12 708 | |
Long-term deferred income | 842 | 924 | |
Long-term financial liabilities | 5 620 | 1 440 | |
Deferred tax liabilities⁴ | 20 450 | 27 586 | |
Non-current liabilities | 226 796 | 195 075 | |
Short-term debt⁶ | 43 468 | 3 783 | |
Short-term financial liabilities | 4 271 | 765 | |
Other current liabilities | 39 203 | 44 004 | |
Bank overdraft | 645 | 58 | |
Current liabilities | 87 587 | 48 610 | |
Liabilities in disposal groups held for sale⁵ | 5 531 | 488 | |
Total equity and liabilities | 479 162 | 469 968 | |
- Includes assets under construction capitalised of R128 billion, property, plant and equipment classified as disposal groups held for sale of R64 billion, current year depreciation of R20 billion and net impairments of R94 billion.
- Actual capital expenditure, including accruals, amounted to R35 billion. This includes R14 billion (US$0,9 billion) relating to the LCCP. R128 billion was capitalised to property, plant and equipment.
- Refer page 20 for the impact of the adoption of IFRS 16 'Leases'.
- Relates mainly to significant impairments recognised during the year.
- Relates mainly to our 16 air separation units including the cooling tower linked to train 16, located in Secunda, assets relating to our Base Chemicals portfolio within Sasol Chemicals USA and our 50% shareholding in Republic of Mozambique Pipeline Investment Company.
- The increase in long-term debt relates mainly to loans raised of R36 billion and foreign exchange translation losses of R30 billion resulting from US dollar denominated debt translated to functional currency offset by loans repaid of R28 billion. Short-term debt also includes R17 billion relating to the US$1 billion syndicated loan facility raised in November 2019 and repayable in June 2021, US$1 billion of the US$3,9 billion revolving credit facility which was classified as short-term in anticipation of proceeds from our asset divestment being utilisted to repay debt in accordance with the covenant waiver agreement and a draw down of R4,3 billion on commercial banking facilities.
The notes on pages 15 to 27 are an integral part of these summarised consolidated financial statements.
12 Sasol Limited Financial Results 2020
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
2020 | 2019 | 2018 | |
Rm | Rm | Rm | |
Balance at beginning of year | 225 795 | 228 608 | 217 234 |
Adjustment on initial application of IFRS 16, net of tax¹ | (290) | - | - |
Restated balance at beginning of period | 225 505 | 228 608 | 217 234 |
Disposal of business | - | (52) | - |
Movement in share-based payment reserve | 1 938 | 1 552 | 3 942 |
Share-based payment expense | 878 | 707 | 823 |
Deferred tax | (8) | (107) | 166 |
Sasol Khanyisa transaction | 1 068 | 952 | 2 953 |
Total comprehensive (loss)/income for the year | (67 354) | 7 162 | 16 160 |
Transactions with non-controlling shareholders | - | - | (51) |
Dividends paid to shareholders | (31) | (8 580) | (7 952) |
Final distribution to Sasol Inzalo Public | - | (1 372) | - |
Dividends paid to non-controlling shareholders in subsidiaries | (810) | (1 523) | (725) |
Balance at end of year | 159 248 | 225 795 | 228 608 |
Comprising | |||
Share capital | 9 888 | 9 888 | 15 775 |
Retained earnings | 90 890 | 181 706 | 184 352 |
Share-based payment reserve | 1 734 | 410 | (4 021) |
Foreign currency translation reserve | 55 849 | 29 978 | 28 500 |
Remeasurements on post-retirement benefit obligations | (2 332) | (2 204) | (1 844) |
Investment fair value reserve | 49 | 132 | 43 |
Cash flow hedge accounting reserve | (1 771) | - | 180 |
Shareholders' equity | 154 307 | 219 910 | 222 985 |
Non-controlling interests in subsidiaries | 4 941 | 5 885 | 5 623 |
Total equity | 159 248 | 225 795 | 228 608 |
1 The adjustment on initial application of IFRS 16 'Leases' relates the derecognition of the IAS 17 finance lease of Oxygen Train 17 and the recognition of the embedded derivative in the Oxygen Train 17 service contract with Air Liquide. Refer page 20 for the impact of the adoption of IFRS 16 'Leases'.
The notes on pages 15 to 27 are an integral part of these summarised consolidated financial statements.
Sasol Limited Financial Results 2020 13
Sasol Limited Group
STATEMENT OF CASH FLOWS
for the year ended 30 June
2020 | 2019 | 2018 | ||
Rm | Rm | Rm | ||
Cash receipts from customers | 196 798 | 203 613 | 178 672 | |
Cash paid to suppliers and employees | (154 414) | (152 215) | (135 795) | |
Cash generated by operating activities¹ | 42 384 | 51 398 | 42 877 | |
Dividends received from equity accounted investments | 208 | 1 506 | 1 702 | |
Finance income received | 792 | 682 | 1 565 | |
Finance costs paid² | (7 154) | (6 222) | (4 797) | |
Tax paid | (5 659) | (3 946) | (7 041) | |
Cash available from operating activities | 30 571 | 43 418 | 34 306 | |
Dividends paid | (31) | (9 952) | (7 952) | |
Dividends paid to non-controlling shareholders in subsidiaries | (810) | (1 523) | (725) | |
Cash retained from operating activities | 29 730 | 31 943 | 25 629 | |
Total additions to non-current assets | (41 935) | (56 734) | (55 891) | |
Additions to non-current assets | (35 164) | (55 800) | (53 384) | |
Decrease in capital project related payables³ | (6 771) | (934) | (2 507) | |
Cash movements in equity accounted investments | ||||
(284) | 66 | (164) | ||
Proceeds on disposals and scrappings⁴ | 4 285 | 567 | 2 280 | |
Acquisition of interest in equity accounted investments | (512) | - | - | |
Purchase of investments | (121) | (222) | (124) | |
Other net cash flow from investing activities | 17 | (89) | (80) | |
Cash used in investing activities | (38 550) | (56 412) | (53 979) | |
Proceeds from long-term debt⁵ | 36 487 | 93 884 | 24 961 | |
Repayment of long-term debt⁵ | (28 335) | (70 000) | (9 199) | |
Payment of lease liabilities | (2 061) | - | - | |
Proceeds from short-term debt⁶ | 19 998 | 977 | 1 957 | |
Repayment of short-term debt | (977) | (1 730) | (2 607) | |
Cash generated by financing activities | 25 112 | 23 131 | 15 112 | |
Translation effects on cash and cash equivalents | 3 607 | 162 | 954 | |
Decrease in cash and cash equivalents | 19 899 | (1 176) | (12 284) | |
Cash and cash equivalents at the beginning of year | 15 819 | 17 039 | 29 323 | |
Reclassification to held for sale and other long-term investments | (1 624) | (44) | - | |
Cash and cash equivalents at the end of the year⁷ | 34 094 | 15 819 | 17 039 | |
- Cash generated by operating activities decreased by 18% to R42,4 billion compared to the prior year. This was largely due to the softer macroeconomic environment during the first six months of the year which was further impacted by the economic consequences from the COVID-19 pandemic and lower oil prices during the second half of the year coupled with the LCCP still being in a ramp-up phase. The decrease was partially negated by another strong working capital and cost performance from the foundation business. Working capital decreased by R5,8 billion during the year mainly as a result of focused management actions.
- Included in finance cost paid are amounts capitalised to assets under construction of R3 520 million.
- The movement is mainly as a result of the LCCP nearing completion.
- Includes proceeds received from the disposal of our investment in Sasol Huntsman GmbH & co KG (R1,5 billion), partial disposal of Explosives business (R991 million) and our investment in EGTL (R875 million).
- Relates mainly to loans raised to fund US growth projects and the US$1,5 billion repayments on the revolving credit facility of Sasol Financing International.
- Short-termdebt includes R17 billion relating to the US$1 billion syndicated loan facility raised in November 2019 and repayable in June 2021.
- Includes bank overdraft.
The notes on pages 15 to 27 are an integral part of these summarised consolidated financial statements.
14 Sasol Limited Financial Results 2020
SEGMENT REPORT
for the year ended 30 June
Turnover | (LBIT)/EBIT | |||||
R million | R million | |||||
Segment analysis | ||||||
2018 | 2019 | 2020 | 2020 | 2019 | 2018 | |
23 995 | 26 060 | 25 095 | Operating Business Units | 3 953 | 3 812 | 1 561 |
19 797 | 20 876 | 19 891 | Mining | 2 756 | 4 701 | 5 244 |
4 198 | 5 184 | 5 204 | Exploration and Production | 1 197 | (889) | (3 683) |
International | ||||||
178 611 | 200 912 | 189 781 | Strategic Business Units | (101 937) | 8 095 | 22 852 |
69 773 | 83 803 | 67 901 | Energy | (6 678) | 16 566 | 14 081 |
43 951 | 48 813 | 52 683 | Base Chemicals | (70 804) | (1 431) | 918 |
64 887 | 68 296 | 69 197 | Performance Chemicals | (24 455) | (7 040) | 7 853 |
52 | 78 | 30 | Group Functions | (13 046) | (2 210) | (6 666) |
202 658 | 227 050 | 214 906 | Group performance | (111 030) | 9 697 | 17 747 |
(21 197) | (23 474) | (24 539) | Intersegmental turnover | |||
External turnover | ||||||
181 461 | 203 576 | 190 367 | ||||
Revenue by major product line | ||||||
2020 | 2019 | 2018 | ||||
Rm | Rm | Rm | ||||
Base Chemicals | 51 868 | 48 113 | 43 262 | |||
Polymers | 30 275 | 25 864 | 22 332 | |||
Solvents | 13 226 | 13 178 | 12 948 | |||
Fertilisers and explosives | 3 820 | 4 718 | 4 145 | |||
Other base chemicals | 4 547 | 4 353 | 3 837 | |||
Performance Chemicals | ||||||
68 316 | 67 228 | 63 916 | ||||
Organics | 52 189 | 51 405 | 49 005 | |||
Waxes | 8 927 | 8 474 | 8 456 | |||
Advanced materials | 7 200 | 7 349 | 6 455 | |||
Upstream, Energy and Other | ||||||
Coal | 1 343 | 3 222 | 3 446 | |||
Liquid fuels and crude oil | 59 775 | 75 819 | 62 555 | |||
Gas (methane rich and natural gas) and condensate | 5 953 | 5 986 | 5 411 | |||
Other (Technology, refinery services) | 2 313 | 2 308 | 1 933 | |||
Revenue from contracts and customers | 189 568 | 202 676 | 180 523 | |||
Revenue from other contracts (franchise rentals, use of fuel tanks and fuel storage) | 799 | 900 | 938 | |||
Total external turnover | 190 367 | 203 576 | 181 461 | |||
Sasol Limited Financial Results 2020 15
Sasol Limited Group
Segmental earnings performance, ,
Mining - striving towards zero harm, productivity a key focus
Safety remains a key focus for Mining. During the year we undertook a holistic review of our safety approach, established a Fatality and High Severity Incident Elimination Task Force, and revised our life saving rules by adopting a Zero Harm, Zero Tolerance approach.
Productivity improved during the second half of the year, with the full year productivity rate of 1 148 t/cm/s, in line with previous market guidance. Overall, this was 4% lower than the previous year due to infrastructure downtime, safety incidents and the ongoing geological complexity challenges at our Syferfontein and Sigma Collieries.
Operational improvements during the last six months, together with the temporary reductions in demand from both internal and external customers, have enabled us to increase our inventory levels to above working capital target levels. These inventory levels provide us with an additional risk mitigation measure against any business continuity risks or potential future impacts of the COVID-19 pandemic on our operations. Internal customer demand has returned to pre-COVID-19 levels in June 2020, and we have seen encouraging increases in demand from our external customers.
In addition, we have stopped additional external purchases during the last quarter of the year, supporting our group-wide cash conservation measures.
EBIT decreased by 41% to R2,8 billion compared to the prior year, mainly as a result of a deterioration in export coal prices, lower export sales volumes and higher external coal purchases early during the year. External sales were 41% lower compared to the prior year due to the diversion of export quality coal to Secunda Synfuels Operations (SSO) during the first half of the year and a temporary reduction in customer demand in the second half of the year due to the COVID-19 pandemic. Our normalised mining unit cost increased by 11% to R347/ton due to lower overall production levels, above inflation labour related cost increases and higher depreciation for the year. Excluding any adverse COVID-19 impacts, we expect our mining unit cost for 2021 to normalise between R340 to R360/ton.
Exploration and Production International (E&PI) - consistent operational performance, adversely impacted by lower sales prices and COVID-19 impact on volumes
EBIT increased by more than 100% to R1,2 billion compared to the prior year.
Our Mozambican operations recorded an EBIT of R1,5 billion, a 35% decrease compared to the prior year largely due to lower sales prices and volumes partly offset by a decrease in cash fixed costs. Gas production volumes of 112,4 bscf were slightly lower than the prior year due to lower demand associated with COVID-19.
We have, however, seen an increase in demand post the easing of the COVID-19 lockdown regulations in South Africa.
Our Gabon producing asset achieved an EBIT of R155 million, a 68% decrease compared to the prior year. The recently completed drilling campaign resulted in higher volumes, however, the increase in depreciation and lower oil prices negatively impacted profitability.
Our Canadian shale gas asset in Montney generated an operating loss of R192 million compared to the prior year loss of R2,7 billion which included an impairment of R1,9 billion. Canadian gas volumes were lower due to the natural decline in the production wells. Our condensate volumes were higher for the year due to additional liquid rich wells which came online during September 2019. We remain committed to divest from this asset as part of our strategic portfolio optimisation.
Energy - liquid fuels volume performance impacted by COVID-19, with lower refining margins
Liquid fuels and natural gas sales volumes decreased by 12% and 8% respectively due to lower market demand resulting from the decline in the South African economy and the impact of the COVID-19 lockdown. Liquid fuels sales volumes of 52,7 million barrels exceeded the previous market guidance of approximately 50 to 51 million barrels due to a quicker recovery in fuel demand as a result of the earlier than anticipated easing of the COVID-19 lockdown regulations in South Africa.
Total production volumes at SSO decreased by 3% compared to the prior year due to reduced liquid fuels demand during the last quarter of the year. During this time, SSO successfully completed certain maintenance activities, which allowed for the postponement of the September 2020 shutdown. Natref production was 22% lower compared to the prior year, mainly due to the suspension of production with effect from 9 April 2020 resulting from the decrease in fuel demand in South Africa. Maintenance work planned for the first half of 2021 was successfully completed during the cessation of production. Phased commissioning commenced on 18 June 2020 and will ramp up to full capacity as jet fuel demand grows in line with the anticipated uplifting of local and international flight restrictions.
We recorded a LBIT of R6,7 billion for the year which is R23,2 billion lower compared to the prior year EBIT of R16,6 billion. Our gross margin percentage decreased from 43% to 38% compared to the prior year mainly due to lower average Brent crude oil prices, lower sales volumes resulting from the impact of the extended COVID-19 lockdown in South Africa, a weak Southern African economic performance and lower refining margins which was partially offset by the impact of a weaker Rand/US dollar exchange rate. Cash fixed costs were 2% below inflation due to focused management cash conservation actions.
16 Sasol Limited Financial Results 2020
We recognised an impairment of R12,4 billion related to our liquid fuels refining assets cash generating units (CGUs) mainly due to a significant decrease in our crude oil prices outlook for the short- to medium-term, lower refining margins, an increase in the weighted average cost of capital (WACC) rate and future gas feedstock cost due to increased prices.
During the year we opened five new retail convenience centres. We have also divested from six non-trading sites as part of our strategic site divestment programme.
ORYX GTL contributed R338 million to EBIT, a R793 million decrease from R1 131 million compared to the prior year and achieved a utilisation rate of 57% due to the extended shutdown, in line with the previous market guidance. Train 1 resumed operation at the beginning of June 2020 and is currently in stable operation. Inspection work performed at the start of the train 2 shutdown in January 2020 resulted in an extension of the required shutdown duration. We expect train 2 to be back in operation during the second quarter of 2021.
Escravos GTL (EGTL) production volumes were 16% lower than the prior year due to both trains being on an extended shutdown from August 2019 to December 2019. We sold our participating interest in EGTL to Chevron during June 2020.
Performance Chemicals - solid performance in challenging macro environment
Performance Chemicals delivered a solid performance during the second half of the year with slightly higher volumes compared to the prior year. Our Advanced Materials business benefited from higher sales of green coke (carbon) and has maintained robust margins, which were, however, impacted by lower demand due to the COVID-19 lockdowns in some markets.
Our Wax portfolio benefited from higher hard wax sales supported by a competitor's unplanned outage. Sales volumes of the Organics business and other parts of Advanced Materials business were impacted by the COVID-19 lockdown especially in end-market segments such as automotive, energy and construction, partly offset by the stronger demand for detergent and cleaners. Against this backdrop, coupled with an already general soft macroeconomic environment in Europe and Asia during the first half of the year, total sales volumes increased by 8% compared to the prior year. At the LCCP, the ethylene oxide/ethylene glycol (EO/EG) unit continues to produce as planned whilst the ETO unit is ramping up smoothly, facing robust demand.
Excluding LCCP volumes, our Organics business's sales volumes decreased by 3% compared to the prior year, mainly due to the soft macroeconomic environment and COVID-19 pandemic impacting demand in key market segments with its sales prices negatively impacted by the higher proportion of monoethylene glycol (MEG) and lower oleochemicals pricing. Hard wax sales increased year on year, however our total wax sales volumes decreased slightly, mostly due to lower paraffin wax sales.
LBIT in the prior year of R7,0 billion increased by R17,5 billion to R24,5 billion mainly due to higher impairments recognised during the year (R27,7 billion) compared to R13,1 billion in the prior year, the COVID-19 impact on an already soft global economic environment and R2,6 billion of losses attributable to the LCCP while in the ramp-up phase. Our South African wax business recognised an impairment of R4,6 billion mainly due to the higher gas feedstock cost outlook. Our Eurasian wax businesses recognised an impairment of
R2,8 billion mainly due to a lower wax selling price outlook, driven by the negative macroeconomic conditions and increased market competition. An impairment of R19,6 billion (US$1,1 billion) has been recognised on our proportion of the shared assets related to the Base Chemicals portfolio within Sasol Chemicals USA which have been classified as disposal groups held for sale.
With the LCCP Guerbet and Ziegler units having achieved beneficial operation during June 2020, all the LCCP Specialty Chemicals units are now online which is expected to sustainably increase our EBIT in future. These two units expand Sasol's position in having the broadest integrated alcohols and surfactants portfolio in the world. The Ziegler unit is an extension of the existing Ziegler plant in Lake Charles and strengthens our significant economies of scale. The positioning of our Guerbet alcohol production sites in Europe and North America is unrivalled and provides our customers with expanded access to a more efficient and sustainable global supply chain.
Base Chemicals - higher volumes offset by lower for longer chemical prices resulting in significant impairments
Sales volumes increased 19% mainly as a result of the linear low-density polyethylene (LLDPE) plant achieving beneficial operation in February 2019 and the ethane cracker achieving beneficial operation in August 2019. This resulted in our Polymers US sales volumes being more than double the volume of the prior year. For our foundation business (excluding Polymers US products), sales volumes decreased by 3% compared to the prior year due to significant impacts of the COVID-19 pandemic resulting in lower market demand and the associated lower SSO production rates.
LBIT for the year of R70,8 billion increased by R69,4 billion compared to the prior year largely due to an 18% decrease in the
US$/ton basket sales price (R10,7 billion), losses attributable to the LCCP (R2,3 billion) while in the ramp-up phase and R71,3 billion of impairments across a number of cash generating units attributable to further softening of international sales prices, higher costs associated with feedstocks and utilities and/or planned divestitures. This was negated by higher sales volumes and a weaker Rand exchange rate compared to the prior year. The introduction of cash conservation measures during the second half of the year contributed to reduce cash fixed costs to below the prior year.
Softer commodity chemical prices were experienced across most of our sales regions and products, largely attributable to weaker global demand, increased global capacity (particularly for polymers), the low oil price environment and the global COVID-19 pandemic impacts during the last quarter of the year. We recognised a total of R18,1 billion of impairments related to our foundation business in the Southern African value chain and in the US, an impairment of R53,2 billion (US$3,1 billion) had been recognised regarding our proportion of our Base Chemicals portfolio within Sasol Chemicals USA which have been classified as disposal groups held for sale, reducing the carrying value of the disposable assets down to its fair value less cost to sell. On 30 June 2020, we concluded the sale of a 51% share in our explosives business recognising a loss on the sale of the assets of R42 million.
Sasol Limited Financial Results 2020 17
Sasol Limited Group
Polymers US basket prices have continued to be impacted by product mix with Base Chemicals selling a large amount of merchant ethylene following the delay in the LDPE start-up. US ethylene, co-product and global polymer prices have also been lower with the total 2020 ethylene and co-product sales as a ratio of total US Polymer sales being 10% higher compared to the prior year.
Net working capital as percentage of turnover decreased to 16,8% as at 30 June 2020 compared to 22,7% in the prior year due to focused management actions, despite challenges faced by the COVID-19 pandemic.
- Forward-lookingstatements are the responsibility of the Directors and in accordance with standard practice, it is noted that this statement has not been audited and reported on by the Company's auditors.
- All comparisons to the prior year refer to the year ended 30 June 2019. All numbers are quoted on a pre-tax basis, except for earnings attributable to shareholders.
- All other operational and financial measures (such as cash fixed cost) have not been audited and reported on by the Company's auditors.
SALIENT FEATURES
for the year ended 30 June
2020 | 2019 | 2018 | ||
Other financial information | ||||
Total debt (excluding lease liabilities) | Rm | 189 730 | 130 866 | 109 454 |
interest-bearing | Rm | 189 730 | 129 921 | 108 017 |
non-interest-bearing | Rm | - | 945 | 1 437 |
Finance expense capitalised¹ | Rm | 3 520 | 6 942 | 3 568 |
Capital commitments (subsidiaries and joint operations)¹ | Rm | 31 950 | 60 095 | 69 927 |
authorised and contracted | Rm | 260 620 | 212 848 | 179 172 |
authorised, not yet contracted | Rm | 21 136 | 43 097 | 47 338 |
less expenditure to date | Rm | (249 806) | (195 850) | (156 583) |
Capital commitments (equity accounted investments) | Rm | 1 277 | 1 283 | 893 |
authorised and contracted | Rm | 1 936 | 715 | 536 |
authorised, not yet contracted | Rm | 1 089 | 1 100 | 623 |
less expenditure to date | Rm | (1 748) | (532) | (266) |
Effective tax rate | % | 22,3 | 34,2 | 35,4 |
Number of employees2 | number | 31 001 | 31 429 | 31 270 |
- Finance expense capitalised and capital commitments decreased as a result of all LCCP units (excluding the LDPE unit) achieving beneficial operation.
- The total number of employees includes permanent and non-permanent employees and the Group's share of employees within joint operations, but excludes contractors and equity accounted investments' employees.
18 Sasol Limited Financial Results 2020
2020 | 2019 | 2018 | ||
Rm | Rm | Rm | ||
Reconciliation of headline (loss)/earnings | ||||
(Losses)/earnings attributable to owners of Sasol Limited | (91 109) | 4 298 | 8 729 | |
Effect of remeasurement items for subsidiaries and joint operations¹ | 110 834 | 18 645 | 9 901 | |
Impairment of property, plant and equipment | 94 032 | 14 161 | 7 623 | |
Impairment of assets under construction | 13 399 | 4 272 | 1 492 | |
Impairment of right of use assets | 3 322 | - | - | |
Impairment of goodwill and other intangible assets | 839 | 18 | - | |
Reversal of impairment | - | (949) | (354) | |
Fair value write-down - assets held for sale | - | - | - | |
Loss/(profit) on disposal of non-current assets | 173 | (32) | 7 | |
Profit on disposal of investment in businesses | (1 684) | (267) | (833) | |
Scrapping of non-current assets | 796 | 1 408 | 1 654 | |
Write-off of unsuccessful exploration wells | (43) | 34 | 312 | |
Tax effects and non-controlling interests | (27 010) | (4 017) | (1 843) | |
Effect of remeasurement items for equity accounted investments | - | 15 | 11 | |
Headline (loss)/earnings | (7 285) | 18 941 | 16 798 | |
Headline (loss)/earnings adjustments per above | ||||
Mining | 113 | 45 | 34 | |
Exploration and Production International | (30) | 1 976 | 4 241 | |
Energy | 11 987 | 247 | 971 | |
Base Chemicals | 70 670 | 3 190 | 4 486 | |
Performance Chemicals | 27 863 | 13 182 | 129 | |
Group Functions | 231 | 5 | 40 | |
Remeasurement items | 110 834 | 18 645 | 9 901 | |
Headline (loss)/earnings per share | Rand | (11,79) | 30,72 | 27,44 |
Diluted headline earnings per share | Rand | (11,79) | 30,54 | 27,27 |
1 Remeasurement items includes the impairment of R72,6 billion (US$4,2 billion) of our Base Chemicals portfolio within Sasol Chemicals USA which have been classified as disposal groups held for sale at 30 June 2020 and impaired to its fair value less cost to sell, the impairment of the Synref and Sasref CGUs of R3,8 billion and R8,6 billion respectively, our Base Chemicals foundation business in the Southern African value chain of R18,1 billion and our South African wax business and Eurasian wax businesses of R4,6 billion and R2,8 billion respectively.
Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the JSE Limited's (JSE) Listings Requirements and the provisions of the Companies Act applicable to preliminary reports. The JSE requires summary financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 'Interim Financial Reporting'.
The summarised consolidated financial statements do not include all the disclosure required for complete annual financial statements prepared in accordance with IFRS as issued by the IASB. The summarised consolidated financial statements are prepared on a going concern basis. The Board is satisfied that the liquidity and solvency of the Company is sufficient to support the current operations for the next 12 months.
These summarised consolidated financial statements have been prepared in accordance with the historic cost convention except that certain items, including derivative instruments, liabilities for cash-settledshare-based payments schemes, financial assets at fair value through profit or loss and financial assets designated at fair value through other comprehensive income, are stated at fair value.
The summarised consolidated financial statements are presented in South African rand, which is Sasol Limited's functional and presentation currency. The accounting policies applied in the preparation of these summarised consolidated financial statements are in terms of IFRS and are consistent with those applied in the consolidated annual financial statements for the year ended 30 June 2019, except for the adoption of IFRS 16 'Leases' and the Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS 7 'Financial Instruments: Disclosure', and IFRIC 23 'Uncertainty Over Income Tax Treatments' with effect from 1 July 2019. IFRS 16 was adopted using the modified transition approach, where the comparative financial information is not restated as permitted by the standard. The amendments to IFRS 9, IAS 39, IFRS 7 and IFRIC 23 were applied prospectively. These accounting policies are consistently applied throughout the Group.
The summarised consolidated financial statements appearing in this announcement were accurately extracted from the full set of annual financial statements and are the responsibility of the Directors. The Directors take full responsibility for the preparation of the summarised consolidated financial statements. Paul Victor CA(SA), Chief Financial Officer, is responsible for this set of summarised consolidated financial statements and has supervised the preparation thereof in conjunction with the Senior Vice President: Financial Control Services, Moveshen Moodley CA(SA).
Sasol Limited Financial Results 2020 19
Sasol Limited Group
New International Financial Reporting Standards adopted
IFRS 16 'Leases'
IFRS 16 replaces IAS 17 'Leases' as well as three Interpretations (IFRIC 4 'Determining whether an Arrangement contains a Lease', SIC-15 'Operating Leases - Incentives' and SIC-27 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease').
IFRS 16 introduces a single lease accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right of use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.
Sasol adopted IFRS 16 with effect from 1 July 2019 using the modified retrospective approach, which allows the cumulative effect of initially applying the standard to be recognised in equity as an adjustment to the opening retained earnings at adoption date, with no restatement of comparative financial information required. The adoption of the standard has a material effect on the Group's financial statements, significantly increasing the Group's recognised assets and liabilities.
IFRS 16 provides a revised definition for leases whereby contracts that convey the right to control the use of an identified asset for a period of time in exchange for consideration are accounted for as leases.
Sasol reviewed contracts previously classified as leases under IAS 17 to determine whether the contract contains a lease on adoption date, and evaluated whether any significant contracts not previously accounted for as leases contained a lease under IFRS 16.
At 1 July 2019, additional lease liabilities were recognised for leases previously classified as operating leases under IAS 17. These lease liabilities were measured at the present value of lease payments over the remaining reasonably certain lease period, discounted using entity-specific incremental borrowing rates as of 1 July 2019. The discount rates incorporate factors such as the lessee's country of operation, the lease term, the nature of the asset and the commencement date of the lease. On transition, the incremental borrowing rates applied in deriving the total lease liability range from 8,2% to 11,5% (South African rand denominated leases), 0,9% to 8,1% (Eurasia) and 3,7% to 5,6% (United States).
On 1 July 2019, a corresponding right of use asset was recognised for an amount equal to the aforementioned lease liability, adjusted for any prepaid or accrued lease payment on the contract as at 30 June 2019, as well as for any restoration obligation. In terms of the transition options allowed by IFRS 16, leases with a remaining contract period of less than 12 months from adoption date were not recognised on the statement of financial position but continue to be expensed through the income statement on a straight-line basis. As allowed practical expedients in IFRS 16, initial direct costs were excluded from the measurement of the right of use asset at adoption date, a single discount rate was used in certain instances for a portfolio of leases with reasonably similar characteristics, hindsight was used in the determination of the lease term in the case of renewal or termination options and relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review to determine that no onerous contracts existed at 1 July 2019.
With the application of the definition of leases contained in IFRS 16, certain contracts previously accounted for as operating or finance leases under IAS 17 are no longer accounted for as leases, but rather as service contracts. This was mainly where it was determined that Sasol do not control how and for what purpose the asset is used. For leases previously classified as finance leases, the respective right of use assets and lease liabilities were measured at adoption date at the same amounts as under IAS 17 immediately preceding the adoption of IFRS 16.
20 Sasol Limited Financial Results 2020
The impact of the adoption of IFRS 16 on the Group's statement of financial position at 1 July 2019 is as follows:
30 June | IFRS 16 | 1 July | ||
2019 | Impact | 2019 | ||
Audited | Reviewed | Reviewed | ||
Rm | Rm | Rm | ||
Statement of financial position | ||||
Assets | ||||
Property, plant and equipment | 233 549 | (7 417) | 226 132 | |
Assets under construction | 127 764 | (71) | 127 693 | |
Right of use assets | - | 16 045 | 16 045 | |
Goodwill and other intangible assets | 3 357 | - | 3 357 | |
Equity accounted investments | 9 866 | - | 9 866 | |
Post-retirement benefit assets | 1 274 | - | 1 274 | |
Deferred tax assets | 8 563 | - | 8 563 | |
Other long-term assets | 7 580 | (191) | 7 389 | |
Non-current assets | 391 953 | 8 366 | 400 319 | |
Assets in disposal groups held for sale | 2 554 | - | 2 554 | |
Inventories | 29 646 | - | 29 646 | |
Trade and other receivables | 29 308 | (13) | 29 295 | |
Short-term financial assets | 630 | - | 630 | |
Cash and cash equivalents | 15 877 | - | 15 877 | |
Current assets | 78 015 | (13) | 78 002 | |
Total assets | 469 968 | 8 353 | 478 321 | |
Equity and liabilities | ||||
Shareholders' equity | 219 910 | (290) | 219 620 | |
Non-controlling interests | 5 885 | - | 5 885 | |
Total equity | 225 795 | (290) | 225 505 | |
Long-term debt | 127 350 | (1 005) | 126 345 | |
Lease liabilities | 7 445 | 7 933 | 15 378 | |
Long-term provisions | 17 622 | - | 17 622 | |
Post-retirement benefit obligations | 12 708 | - | 12 708 | |
Long-term deferred income | 924 | (152) | 772 | |
Long-term financial liabilities | 1 440 | 624 | 2 064 | |
Deferred tax liabilities | 27 586 | (111) | 27 475 | |
Non-current liabilities | 195 075 | 7 289 | 202 364 | |
Liabilities in disposal groups held for sale | 488 | - | 488 | |
Short-term debt | 3 783 | 1 383 | 5 166 | |
Short-term financial liabilities | 765 | - | 765 | |
Other current liabilities | 44 004 | (29) | 43 975 | |
Bank overdraft | 58 | - | 58 | |
Current liabilities | 49 098 | 1 354 | 50 452 | |
Total equity and liabilities | 469 968 | 8 353 | 478 321 | |
The application of the new standard has a significant impact on the presentation and timing of expenditure.
Under IFRS 16, expenses related to leases previously classified as operating leases are now recognised in the income statement over the lease term as amortisation of the right of use asset and interest expense relating to the lease liability, whereas these expenditures were previously predominantly disclosed as expenditure on 'Selling and distribution costs', 'Maintenance expenditure' and 'Other operating expenses' on a straight-line basis.
Following the adoption of IFRS 16, payments relating to leases previously classified as operating leases are presented under cash flow from financing activities, representing the payment of principal, and as operating cash flows, representing the payment of interest. Under IAS 17, these payments were primarily reflected as cash flows from operating activities.
Sasol Limited Financial Results 2020 21
Sasol Limited Group
The following table provides a reconciliation of the operating lease commitments and finance lease liabilities recognised as at 30 June 2019 to the total lease liability recognised on the Group balance sheet in accordance with IFRS 16 as at 1 July 2019.
Rm | |
Operating lease commitments disclosed as at 30 June 2019 | 24 081 |
Short-term leases not recognised as a liability | (144) |
Low-value leases not recognised as a liability | (18) |
Discounting at lessee's incremental borrowing rate | (11 835) |
Discounted operating lease commitments as at 30 June 2019 | 12 084 |
Finance lease liabilities recognised as at 30 June 2019 | 7 770 |
Contracts reassessed as not being lease contracts | (3 850) |
Adjustments as a result of different treatment of extension and termination options | 1 408 |
Other | (305) |
Lease liabilities recognised as at 1 July 2019 | 17 107 |
Non-current | 15 378 |
Current | 1 729 |
Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial Instruments: Recognition and
Measurement' and IFRS 7 'Financial Instruments: Disclosure'
These amendments provide certain reliefs in connection with interest rate benchmark (IBOR) reform. The reliefs relate to hedge accounting and have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness should continue to be recorded in the income statement. The IBOR reform amendment was early adopted. The adoption of these amendments had no impact on the Group's financial statements.
IFRIC 23 'Uncertainty Over Income Tax Treatments'
IFRIC 23 clarifies how the recognition and measurement requirements of IAS 12 'Income taxes' are applied where there is uncertainty over income tax treatments. The adoption of IFRIC 23 had no impact on the Group at 30 June 2020.
Pro forma financial information (JSE Limited Listings Requirement)
Core HEPS, LBITDA, EBITDA and adjusted EBITDA included in this announcement constitute pro forma financial information in terms of the JSE Limited Listings Requirements. Pro forma financial information in terms of the compares to non-GAAP measures in terms of the United States Securities and Exchange Commission.
The pro forma financial information is the responsibility of the Board of Directors and is presented for illustrative purposes only. Because of its nature, the pro forma financial information may not fairly present Sasol's financial position, changes in equity, results of operations or cash flows. The underlying information, used in the preparation of the pro forma financial information, has been prepared using accounting policies which comply with IFRS and are consistent with those applied in the published Group consolidated annual financial statements for the year ended 30 June 2020, except for the new standards adopted.
This pro forma information has been reported on by the Group's auditors, being PricewaterhouseCoopers Inc. Their unqualified reporting accountant's report prepared in terms of ISAE 3420 is available for inspection (by appointment observing COVID-19 restrictions) at the Company's registered address.
Going concern
Introduction
In determining the appropriate basis of preparation of the summarised consolidated financial statements, the Directors are required to consider whether the Sasol Group (Group) and Sasol Limited (Company) can continue in operational existence for the foreseeable future.
Financial performance during the year
The financial performance of the Group was significantly impacted by an unprecedented set of combined challenges driven by the significant decline in global oil and chemical prices and the global COVID-19 pandemic. Due to the global economic lockdowns associated with COVID-19, the Group experienced a substantial decline in demand for products, particularly in South Africa, and therefore temporarily reduced production rates at SSO in Secunda and suspended production at Natref in Sasolburg.
These events came at a time when the balance sheet was under severe pressure due to the additional expenditure required to complete the LCCP. At 30 June 2020, the balance sheet reached peak gearing at 114,5% and Net debt EBITDA, of 4,3 times (based on the Revolving Credit facility and US dollar Term Loan covenant definition).
The ability of the Group to meet its debt covenant requirements at 31 December 2020 and 30 June 2021 and repay debt as it becomes due is dependent on the timing and quantum of cash flows from operations, the ability to realise cash through a combination of asset disposals, or part thereof, and the successful raising of equity.
22 Sasol Limited Financial Results 2020
The Group and Company reported a loss for the year of R91,3 billion and R32,2 billion respectively, which compares to earnings of R6,1 billion and R9,0 billion respectively, for the prior year. The loss in 2020 is mainly attributable to:
- Lower oil prices with Brent crude oil averaging US$51,22/bbl, and reaching a high of US$69,96/bbl and a low of US$13,24/bbl and a moderately weak average exchange rate of R15,69/US dollar. The rand per barrel price of Brent crude oil decreased by 18% to R803,64/bbl compared to R974,55/bbl in the prior year;
- The 18% decrease in the rand per barrel price of Brent crude oil coupled with softer global chemical prices and lower refining margins negatively impacted the total realised gross margins particularly during the second half of the year;
- Impairments of R111,6 billion due to the lower oil and chemicals price outlook. R72,6 billion (US$4,2 billion) of this amount related to an impairment of the Base Chemicals portfolio within Sasol Chemicals USA which has been classified as a disposal group held for sale as a result of the advanced stage of the partnering process. The remaining amount of R38,8 billion relates to impairments of other assets mainly in South Africa. An impairment of investment in subsidiary of R36,5 billion as a result of the lower valuation of the entity, impacted the results of the Company;
- Lower production volumes across the value chain mainly due to COVID-19. SSO reported a 3% decline in volumes and Natref production decreased by 22% compared to the prior year. At both of these operations, production was cut back due to the lower demand in South Africa;
- Outside of South Africa, the ORYX GTL joint venture reported a 57% utilisation which is significantly lower than the historical performance of between 80% to 110%. The lower utilisation rate were due to a planned extended shutdown. In the US, the operations performed in line with expectations. However, the Group's earnings were impacted by the mismatch between full year depreciation charges and costs with revenue being disproportionate due to the ramping up of most of the LCCP units which reached beneficial operations during 2020; and
- This performance was partially offset by a resilient performance by the chemicals businesses which reported an increase in volumes, largely due to higher demand for surfactants and LCCP volumes.
In March 2020, Sasol announced a comprehensive response plan to stabilise the Group in the short-term. This entailed:
- Conserving cash through self-help management actions in operational and capital expenditure of US$1 billion in 2020, with a further US$1 billion in 2021;
- Accelerating asset disposals and delivering proceeds in excess of the targeted US$2 billion; and
- Pursuing a rights issue of up to US$2 billion.
By 30 June 2020, the Group had exceeded the self-help management actions target of US$1 billion by reducing external expenditure and saving costs across various human capital levers, optimising working capital and capital expenditure by curtailing discretionary capital and keeping sustenance capital at the minimum level required to ensure safe and reliable operations.
At 30 June 2020, the group had cash and cash equivalents (excluding restricted cash) of R32,3 billion and available facilities of R10,5 billion.
The Board has considered management's plans and appointed an international external advisor to provide an independent opinion on the risks related to going concern, the timing and successful execution of asset disposal transactions to ensure that the debt covenants are met as well as the credibility of the plans presented by management.
The Board has appointed capital market advisors and is considering various capital raising alternatives. In assessing the various options available to reduce debt, the Board is mindful of the impact that different potential disposals may have on the business's cash flow generation thereafter and believes that a rights issue of up to US$2 billion will still be required.
The Board has no intention to cease trading, curtail operations or liquidate the businesses, other than planned asset disposals which are aligned with the Group's revised strategy to create a more focused portfolio.
Timing and success of asset disposals
As part of the asset review programme, the Group has identified numerous assets which could be disposed of, entirely or partially, and has embarked on various simultaneous initiatives to potentially dispose of these assets in a structured manner and at prices in line with the balance sheet, shareholder value and strategic objectives. Non-binding expressions of interest have been received in relation to some operations and assets which are expected to generate significant cash to enable the Group to meet its debt reduction milestones.
The Group has made good progress on the expanded and accelerated asset disposal programme by securing US$600 million of proceeds. In 2020, the Group sold 51% of its interest in the explosives business by establishing a joint venture with Eneax and sold its indirect equity interest in the Escravos GTL project in Nigeria. Subsequent to 30 June 2020, Sasol signed an exclusive negotiation agreement with Air Liquide for the sale of 16 air separation units, including the cooling tower linked to train 16, located in Secunda. The proceeds of this disposal will amount to approximately R8,5 billion.
Sasol Limited Financial Results 2020 23
Sasol Limited Group
The Group has classified R78,7 billion as net assets and liabilities in disposal groups held for sale at 30 June 2020 and expects that these disposal transactions will be completed within the next 12 months. Included in net assets and liabilities in disposal groups held for sale is R68,6 billion relating to the Base Chemicals portfolio within Sasol Chemicals USA. Partnering in the Base Chemicals portfolio represents a significant step forward in delivering the asset disposal lever of the Group's comprehensive response plan announced on 17 March 2020. Proceeds from the disposal, combined with the progress with self-help measures, should make a meaningful and positive impact on Sasol's financial prospects, principally as a result of the intended use of disposal proceeds to settle debt with payment obligations within the next 12 to 24 months.
The next debt maturity is the syndicated loan of R17,3 billion (US$1 billion) which matures in June 2021. This loan will be repaid from asset disposal proceeds.
As the Group operates in different businesses and geographies, the future cash generation and resultant debt levels could vary vastly in cases where different asset disposal options are decided on. Proceeds from assets sold in South Africa would require approval from the South African Reserve Bank to pay off US Dollar denominated debt and therefore the matching of currency from proceeds to reduce debt has to be carefully considered. It is also not clear on the timing of asset disposals, given the current economic conditions.
Rights issue
The Company will also pursue a rights issue of up to US$2 billion in the second half of financial year 2021 as the final step of the comprehensive response plan. The rights issue should allow Sasol to operate sustainably within its covenant thresholds and deliver on its strategy going forward. The exact amount of the rights issue and its timing is subject to prevailing operating and market conditions as well as other initiatives, such as further disposals, that Sasol may implement consistent with its Future Sasol strategic reset.
Strategic reset
A key part of the comprehensive response plan was to look beyond near-term measures and position the business for sustained profitability in a low oil price environment. This entailed reviewing and updating the strategy to bring greater focus to the portfolio and transition Sasol to a lower-carbon future. The Future Sasol will comprise two market focused businesses, Chemicals and Energy. A key decision as a result of this is the discontinuation of all oil growth activities in West Africa and resizing the upstream portfolio to focus on gas. The revision of the strategy aims to have a greater focus on enhanced cash generation, value realisation for all stakeholders and business sustainability.
The Group is in the process of developing credible targets with plans to reset the capital structure, improve business performance and margins and reduce the overheads by streamlining the Corporate Centre. As part of the strategic reset plan presented to the Board, future profitability and cash generation forecasts support a sustainable business going forward. The forecasts and process followed to develop the targets have been reviewed by independent international external advisors appointed by the Board. Management expects to share these targets with stakeholders during November 2020, once the formal review processes have been completed.
Solvency and liquidity
As a result of the liquidity constraints, weak trading environments and the risk of a second COVID-19 outbreak, the Board undertook a comprehensive assessment of the Group and Company, including their solvency and liquidity statuses.
Solvency
At 30 June 2020, after impairments, the valuations of the Group's assets indicate that their fair values exceed their carrying values as well as the external debt. The asset base of the Group comprises mainly tangible assets with significant value, reflected in the records of the underlying businesses.
As such, the Board is of the view that given the significant headroom in the fair value of the assets over the fair value of the liabilities (including contingent liabilities), the Company and Group are solvent as at 30 June 2020 and at the date of this report.
Liquidity management
Although still cash positive, the Group has limited cash flow available to cover operating expenses, interest and capital expenditure at 30 June 2020. As outlined to stakeholders previously, this was mainly due to the oil price collapse and COVID-19 economic impacts which came at a time when the balance sheet was at peak gearing due to expenditure incurred to complete the LCCP.
Additionally, the Group's credit rating was downgraded as a result of the impact of the COVID-19 pandemic on global growth and the volatility in the oil price. The cost of some of the Group's floating rate debt is partly linked to the credit rating. The revised credit rating profile will therefore result in an increase in finance costs from existing facilities of approximately US$50 million per annum.
The ability of the Group to meet its debt covenant requirements at 31 December 2020 and 30 June 2021 and repay debt as it becomes due is dependent on the timing and quantum of cash flows from operations, the ability to realise cash through a combination of asset disposals, or part thereof, and the successful raising of equity.
To address the risk of short-term cash pressure, management has prepared budgets for 2021 and 2022, as well as a robust liquidity model which includes cash flow forecasts covering a period of nine months from the date of the summarised consolidated financial statements.
The Group liquidity model is a monthly consolidation of the Group's individual business cash flow forecasts. The cash flows forecasts are based on estimated free cash flow from operations, on a monthly basis, for the upstream Mining and Oil and Gas Exploration entities, the manufacturing operations globally and the selling business units, being Base Chemicals, Performance Chemicals and Energy. The cash flow forecasts have been adjusted for planned disposals over the next 12 months.
24 Sasol Limited Financial Results 2020
The cash flow forecasts are prepared monthly and reviewed by management. They are evaluated against forecasted expectations and variances are monitored and scrutinised. Various scenarios and stress testing analysis are performed to test the robustness of the cash flow forecasts. To address future possible cash outflows, detailed performance and operational liquidity improvement initiatives have been developed, with their implementation regularly monitored. The forecasts and any variances are presented to the Board at least on a quarterly basis or more frequently as required.
Performance and liquidity improvement initiatives undertaken during 2020 and will continue into 2021
The following steps were taken to stabilise the business and improve the liquidity position:
- Revising the strategy - Clear portfolio choices, including a decision to stop all oil growth activities in West Africa has resulted in immediate cash and capital savings which will be sustainable, beyond 2020;
- Weekly "cash war room" - On a weekly basis, management reviewed the monthly cash forecast relative to actions being taken to reduce or defer cash outflows, and understand the forecast cash position of the Company for the next six months;
- Hedging activities - The Group continued to execute on its hedging programme and focused on covering its exposure to oil, the Rand/US dollar exchange rate and ethane prices as the three key drivers which impact on profitability;
- Cost reduction - The necessity and quantum of expenditure in this fiscal year was challenged on a top down and bottoms up basis and a substantial cost reduction work stream was implemented to reduce external spend with a focus on all discretionary expenditure;
- Human capital levers - A moratorium was implemented on external recruitment to fill non-critical vacancies and on the use of hired labour and consultants for non-critical activities. In parallel, short-term incentive payments were ceased for 2020 whilst salary sacrifices were implemented on a sliding scale with suspension of employer contributions to the various retirement funds for an initial period of eight months up to December 2020;
- Capital optimisation - Capital expenditure was reduced substantially by curtailing discretionary capital whilst keeping sustenance capital at the minimum level required to ensure safe and reliable operations. Capital in excess of R5 billion was deferred in 2020 through prioritisation using a risk-based approach and use of digitalisation;
- Working capital - The Group has been able to contribute positively to cash on hand through the recovery of long-outstanding debtors, managing of payables and maintaining an optimal inventory levels. Working capital is, and continues to be, tracked and measured on a monthly basis; and
- Tax - Certain tax payments were deferred as part of a COVID-19 cash relief measures as agreed with the relevant tax authorities.
In addition, the Company and Group signed a covenant waiver with its lenders in June 2020. In the waiver agreement, the lenders agreed to waive the covenant at June 2020 and lift the December 2020 covenant from a Net debt: EBITDA of 3,0 times to 4,0 times. The Net debt: EBITDA covenant at 30 June 2021 is 3,0 times.
This additional flexibility is consistent with Sasol's broader capital allocation framework and subject to conditions which are customary for such covenant amendments. These include provisions to prioritise debt reduction at this time, commitments that there will be no dividend payments nor acquisitions while Sasol's leverage is above 3,0 times Net debt: EBITDA and that the 2021 capital expenditure will not exceed the forecast level of R21 billion by more than 10%. Sasol will also reduce the size of its facilities as debt levels are reduced, whilst continuing to maintain a strong liquidity position.
At 30 June 2020, the Group had access to facilities of R199,9 billion, of which R189,4 billion was utilised.
Estimates and judgements considered within the liquidity assessment
Management has considered a number of estimates, judgements and assumptions in performing the liquidity assessments, the most significant of which are listed and expanded upon below:
- The Group has applied conservative macroeconomic assumptions in the cash flow forecast and has modelled a Brent crude oil price of US$42/bbl (in real terms) and a Rand/US dollar exchange rate of R15,47 in 2021. These assumptions are applied across the Group to ensure a consistent forecasting base;
- The Group assumed a working capital percentage of 16%, which is conservative in relation to the 12% achieved in 2020. The Group will monitor if the initiatives implemented in 2020 to reduce working capital are sustainable before adjusting this assumption;
- Sasol has applied a 50% partnering of the Base Chemicals portfolio adjustment within Sasol Chemicals USA in 2021 and as such has proportionately downward adjusted the earnings contribution from this asset. The potential proceeds have been assumed to be applied to the repayment of debt in the cash flow forecast. The transaction is at an advanced stage and management believes that the closing of the transaction by December 2020 is probable. In the event that the disposal transaction is not successful, the Board will consider the sale of other enabling and core assets to meet its covenants requirements in December 2020 and June 2021. The standby underwriting agreement entered into in March 2020 is subject to a number of conditions including significant progress in Sasol's expanded and accelerated asset disposal programme measured from March 2020. The timing and successful execution of partnering the Base Chemicals portfolio within Sasol Chemicals USA therefore places doubt on the Group's going concern assumption. The Board has engaged with two corporate finance advisors to assist with reviewing and executing of this disposal transaction and receives feedback on a weekly basis from management. A committee of the Board, led by the Chairman of the Board, has been established to oversee the asset disposal process. The independent valuations of the assets considered for disposal and results of the due diligence are presented to this committee for review. The focus of the committee is to ensure that assets are sold at fair value;
Sasol Limited Financial Results 2020 25
Sasol Limited Group
- Continue with the oil hedging programme. For the first quarter of 2021, approximately 80% of SSO's liquid fuels exposure was hedged, translating to 6 million barrels. Oil hedges for the remainder of 2021 are in progress with 5,5 million hedged barrels using put options;
- LCCP units ramp up in line with expectation and ethane prices are between 30 to 35 cents per gallon;
- Continued positive results in the short-term from the comprehensive response plan in 2021;
- The reduction in debt through the sale of assets and/or equity raising to meet the debt reduction milestones;
- The availability of working capital facilities to cover any shortfall during planned annual shutdowns of operations;
- Business operations resume to pre-COVID-19 levels in 2021; and
- Full current liability repayments are forecast and considered within the liquidity model as an outflow, based on the expected timing of outflow, and a normalised working capital, relevant to the reduced business size, introduced due to asset disposals.
The Board remains focused on and committed to the strategic reset (Future Sasol) that is aimed at sustainably unlocking cash through gross margin improvements, cash cost reduction, significant reduction in overheads at the Corporate Office and optimisation of capital expenditure by 2025. The planned asset disposals combined with a rights issue and the Future Sasol are expected to result in a more sustainable and resilient capital structure and improved shareholder returns.
Conclusion
The events, conditions, judgements and assumptions described above inherently include material uncertainty on the timing of future cash flows and therefore any significant deviations may cast significant doubt on the Group's and Company's ability to continue as a going concern and its ability to realise assets and discharge liabilities in the normal course of business.
Whilst there are material uncertainties, the Directors have, based on the information available to them, considered the financial plans and forecasts, the actions taken by the Company, the historic track record of the Group to deliver on previous response plans and cost optimisation targets and the skills and acumen of management to execute on asset disposals.
Based on the above, the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the summarised consolidated financial statements.
Tax litigation and other legal matters
As reported previously, the South African Revenue Services (SARS) conducted an audit over a number of years on Sasol Financing International Plc (SFI) which performs an off-shore treasury function for Sasol. The audit culminated in the issuance by SARS of revised tax assessments, based on the interpretation of the place of effective management of SFI. The potential tax exposure is R2,46 billion (including interest and penalties as at 30 June 2020), which is disclosed as a contingent liability.
SARS dismissed Sasol's objection to the revised assessments and Sasol appealed this decision to the Tax Court and launched a review application in respect of certain elements of the revised assessments in respect of which the Tax Court does
not have jurisdiction. Sasol also brought a review application against the SARS decision to register SFI as a South African taxpayer. SFI and SARS have agreed that the Tax Court related processes will be held in abeyance pending the outcome of the judicial review applications. The interlocutory application by Sasol regarding the disclosure of further elements of the record of decision by SARS was heard in the High Court on 19 February 2020 and judgement is pending. Further pleadings will be exchanged between the Parties once the decision in the interlocutory application is handed down.
On 5 February 2020, a class action lawsuit has been filed against Sasol and several of its current and former executive directors in Federal District Court in New York. The lawsuit alleges that Sasol violated U.S. federal securities laws by allegedly making false or misleading public statements regarding the LCCP between 2015 and 2020, specifically relating to cost and schedule. The plaintiff has not specified any alleged claims for compensatory damages and left it to be determined at trial. Sasol and the individual defendants have filed a motion to dismiss on 2 July 2020. The jury trial will only start if the motion to dismiss the complaint is not successful. The hearing on the motion to dismiss has been set down for 20 August 2020. As no specific amount of alleged damage has been claimed by the plaintiff yet, no contingent liability has been disclosed as at 30 June 2020.
From time to time, Sasol companies are involved in other litigation and similar proceedings in the normal course of business. A detailed assessment is performed on each matter and a provision is recognised where appropriate. Although the outcome of these proceedings and claims cannot be predicted with certainty, the Company does not believe that the outcome of any of these cases would have a material effect on the Group's financial results.
Related party transactions
The Group, in the ordinary course of business, entered into various sale and purchase transactions on an arm's length basis at market rates with related parties.
26 Sasol Limited Financial Results 2020
Significant events and transactions since 30 June 2019
In accordance with IAS 34 'Interim Financial Reporting', we have included below explanations of events and transactions which are significant to obtain an understanding of the changes in our financial position and performance since 30 June 2019:
- During the second half of the year, the impacts of the COVID-19 pandemic, including the various lockdowns in South Africa and the areas we do business in impacted us significantly on various fronts, most notably having adverse effects on the demand for our products, our product margins and health and wellbeing of our people and communities.
- Significant disposals were concluded during the year:
- On 30 June 2020, we concluded the sale of a 51% share in our explosives business recognising a loss on the sale of the assets of R42 million;
- A R936 million profit was recognised in relation to the disposal of our 50% equity interest in the Sasol Huntsman maleic anhydride joint venture as we executed on our asset optimisation programme; and
- We sold our participating interest in EGTL to Chevron during June 2020.
- Significant assets and liabilities in disposal groups held for sale at 30 June 2020:
- Our 16 air separation units, including the cooling tower linked to train 16, located in Secunda;
- Assets of our Base Chemicals portfolio within Sasol Chemicals USA; and
- Our 50% shareholding in Republic of Mozambique Pipeline Investment Company.
Subsequent events
There were no subsequent events that occurred subsequent to 30 June 2020.
Independent audit by the auditors
These summarised consolidated financial statements for the year ended 30 June 2020 have been audited by PricewaterhouseCoopers Inc., who expressed an unmodified conclusion thereon. The individual auditor assigned to perform the audit is Johan Potgieter.
The auditor's report does not extend to the information contained in pages 1 to 8 of this results announcement, including financial pro forma information. The auditor's report is available for inspection (by appointment observing COVID-19 restrictions) at the Company's registered address.
Sasol Limited Financial Results 2020 27
Sasol Limited Group
Financial instruments
Fair value
Fair value is determined using valuation techniques as outlined unless the instrument is listed in an active market. Where possible, inputs are based on quoted prices and other market determined variables.
Fair value hierarchy
The table below represents significant financial instruments measured at fair value at reporting date, or for which fair value is disclosed at 30 June 2020. The US dollar bonds, Oxygen Train 17 service contract, the interest rate swap, the zero-cost foreign exchange collars and the ethane swaps were considered to be significant financial instruments for the Group based on the amounts recognised in the statement of financial position. The calculation of fair value requires various inputs into the valuation methodologies used. The source of the inputs used affects the reliability and accuracy of the valuations. Financial instruments have been classified into the hierarchical levels in line with IFRS 13.
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices that are observable for the asset or liability (directly or indirectly). Level 3 Inputs for the asset or liability that are unobservable.
IFRS 13 | Carrying | Fair | |||
Instrument | fair value | value | value | Valuation method | Significant inputs |
hierarchy | Rm | Rm | |||
Listed long-term debt | Level 1 | 56 760 | 50 701 | Fair value | Quoted market price for the |
same or similar instruments | |||||
Derivative financial | Level 2 | 7 078 | 7 078 | Forward rate interpolator | Foreign exchange rates, |
assets and liabilities | model, discounted | market commodity prices, | |||
expected cash flows, | US$ swap curve, as | ||||
numerical approximation, as | appropriate | ||||
appropriate | |||||
Derivative financial | Level 3 | 2 168 | 2 168 | Forward rate interpolator | US PPI and US labour index |
assets and liabilities¹ | model, discounted | forecast, US dollar and Rand | |||
expected cash flows, | treasury curves, Rand zero | ||||
numerical approximation, as | swap discount rate | ||||
appropriate | |||||
1 Relates to the embedded derivative contained in the Oxygen Train 17 service contract with Air Liquide, IFRS 16 adoption impact of R624 million and R1 544 million fair value at 30 June 2020.
For all other financial instruments, fair value approximates carrying value.
28 Sasol Limited Financial Results 2020
Independent auditor's report on the summary consolidated financial statements
To the Shareholders of Sasol Limited
Opinion
The summary consolidated financial statements of Sasol Limited, set out on pages 10 to 28 of the Sasol Limited Financial Results, which comprise the summary consolidated statement of financial position as at 30 June 2020, the summary consolidated income statement, the summary consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and related notes, are derived from the audited consolidated financial statements of Sasol Limited for the year ended 30 June 2020.
In our opinion, the accompanying summary consolidated financial statements are consistent, in all material respects, with the audited consolidated financial statements, in accordance with the requirements of the JSE Limited Listing Requirements for preliminary reports, as set out in the "Basis of preparation" section on page 19 to the summary consolidated financial statements, and the requirements of the Companies Act of South Africa as applicable to summary financial statements.
Summary consolidated financial statements
The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards and the requirements of the Companies Act of South Africa as applicable to annual financial statements. Reading the summary consolidated financial statements and the auditor's report thereon, therefore, is not a substitute for reading the audited consolidated financial statements and the auditor's report thereon.
The audited consolidated financial statements and our report thereon
We expressed an unmodified audit opinion on the audited consolidated financial statements in our report dated 17 August 2020. That report also includes:
- A section on Material uncertainty related to going concern that draws attention to Note 2 in the audited consolidated financial statements. The material uncertainty arises from the Group's ability to meet its debt covenant requirements at 31 December 2020 and 30 June 2021 and repay debt as it becomes due, which is dependent on the timing and quantum of cash flows from operations, the ability to realise cash through a combination of asset disposals, or part thereof, and the successful raising of equity.
- The communication of key audit matters. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period.
Directors' responsibility for the summary consolidated financial statements
The Directors are responsible for the preparation of the summary consolidated financial statements in accordance with the requirements of the JSE Limited Listing Requirements for preliminary reports, set out in the "Basis of preparation" section on page 19 to the summary consolidated financial statements, and the requirements of the Companies Act of South Africa as applicable to summary financial statements.
Auditor's responsibility
Our responsibility is to express an opinion on whether the summary consolidated financial statements are consistent, in all material respects, with the audited consolidated financial statements based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810 (Revised), Engagements to Report on Summary Financial Statements.
PricewaterhouseCoopers Inc.
Director: Johan Potgieter
Registered Auditor
Waterfall City
17 August 2020
Sasol Limited Financial Results 2020 29
Sasol Limited Group
Contact information
Registered office: Sasol Place, 50 Katherine Street, Sandton, Johannesburg 2090
Private Bag X10014, Sandton, 2196, South Africa
Share registrars: Link Market Services South Africa (Pty) Ltd
13th Floor, 19 Ameshoff Street, Braamfontein 2001, Republic of South Africa PO Box 4844, Johannesburg 2000, Republic of South Africa
Tel: 0800 800 010, Email: sasol@linkmarketservices.co.za
JSE Sponsor: Merrill Lynch South Africa (Pty) Ltd
Directors (Independent Non-executive): Mr SA Nkosi (Chairman), Mr C Beggs, Mr MJ Cuambe (Mozambican), Ms MBN Dube, Dr M Flöel (German), Ms KC Harper (American), Ms GMB Kennealy, Ms NNA Matyumza, Mr ZM Mkhize, Ms MEK Nkeli,
Mr PJ Robertson (British and American), Mr S Westwell (British)^
Directors (Executive): Mr FR Grobler (President and Chief Executive Officer), Mr VD Kahla (Executive Director and Executive Vice
President: Advisory, Assurance and Supply Chain), Mr P Victor (Chief Financial Officer)
^Lead Independent Director
Company Secretary: Ms MML Mokoka
Company registration number: 1979/003231/06, incorporated in the Republic of South Africa
Income tax reference number: 9520/018/60/8
Ordinary shares | JSE | NYSE |
Share code: | SOL | SSL |
ISIN: | ZAE000006896 | US8038663006 |
Sasol BEE Ordinary shares | ||
Share code: | SOLBE1 | |
ISIN: | ZAE000151817 | |
American depository receipts (ADR) program: | ||
Cusip number 803866300 | ADR to ordinary share 1:1 |
Depositary: J.P. Morgan Depositary Receipts, 383 Madison Ave, Floor 11, New York, NY 10179, United States of America
Sandton, 17 August 2020
30 Sasol Limited Financial Results 2020
Disclaimer - Forward-looking statements
Sasol may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, expectations, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, the impact of the novel coronavirus (COVID-19) pandemic on Sasol's business, results of operations, financial condition and liquidity and statements regarding the effectiveness of any actions taken by Sasol to address or limit any impact of COVID-19 on its business; statements regarding exchange rate fluctuations, changing crude oil prices , volume growth, increases in market share, total shareholder return, executing our growth projects (including LCCP), oil and gas reserves, cost reductions, our climate change strategy and business performance outlook. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "endeavour", "target", "forecast" and "project" and similar expressions are intended to identify such forward- looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors and others are discussed more fully in our most recent annual report on Form 20-F filed on 28 October 2019 and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
Please note: One billion is defined as one thousand million, bbl - barrel, bscf - billion standard cubic feet, mmscf - million standard cubic feet, oil references brent crude, mmboe - million barrels oil equivalent. All references to years refer to the financial year ended 30 June. Any reference to a calendar year is prefaced by the word "calendar".
Comprehensive additional information is available on our website: www.sasol.com
Sasol Limited Audited Financial Results 2020 | 31 |
www.sasol.com
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Sasol Ltd. published this content on 17 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2020 09:07:05 UTC
