JOHANNESBURG, February 27, 2017 /PRNewswire/ --
- Strong business performance across most of the value chain
- Production volumes:
- Up 1% for Secunda Synfuels Operations
- Up 5% for Eurasian Operations
- Normalised sales volumes:
- Base Chemicals up 11% and Performance Chemicals up 2%
- Energy liquid fuels down 2%
- Business Performance Enhancement Programme delivered:
- Sustainable actual cost savings of R4,9bn
- Target exit run rate of R5,4bn by 2018
- Response Plan cash savings exceeding expectations:
- R17,8bn cash savings delivered for the period
- Target increased to deliver full year cash savings of
R26bn
- Lake Charles Chemicals Project is on track and 64%
complete
- Headline earnings per share down 38% to R15,12, earnings per
share up 19% to R14,21
- Safety Recordable Case Rate (RCR), excluding illnesses,
improved to 0,27. We regret that three fatalities occurred
- Cash fixed costs, including the mining strike cost, 1% down in
real terms
- Invested R471 million in skills development and socioeconomic
development
- Direct and indirect taxes paid to South African Government
R15,4 billion
Sasol today released its interim results for the six months
ended 31 December 2016. Earnings
attributable to shareholders for the six months ended 31 December 2016 increased by 19% to R8,7 billion
from R7,3 billion in the prior period. Headline earnings per share
(HEPS) decreased by 38% to R15,12 and earnings per share (EPS)
increased by 19% to R14,21 compared to the prior period. Operating
profit decreased by 8% to R13,7 billion compared to the prior
period. An interim gross cash dividend of South African
480,00 cents per ordinary share (31
December 2015 - 570,00 cents per
ordinary share) has been declared for the six months ended
31 December 2016.
Although business performance was mostly in line with our
expectations, Sasol's profitability, period on period, and as
reflected in HEPS, was negatively impacted by the following items:
- The strengthening of the Rand against the US dollar to R13,74
at 31 December 2016 (30 June 2016: R14,71) resulted in translation
losses of approximately R1,3 billion on the valuation of the
balance sheet, compared to translation gains of R2,6 billion in the
prior period (including foreign exchange contracts). The valuation
impact of the stronger closing exchange rate for the period under
review negatively impacted earnings by approximately R1,46 per
share.
- The impact of the once-off prolonged strike action at our
Secunda mining operations resulted in an additional net cost of R1
billion or R1,06 per share.
- The reversal of a provision of R2,3 billion (US$166 million) or R3,77 per share in the prior
period based on a favourable ruling received from the Tax Appeal
Tribunal in Nigeria relating to
the Escravos Gas-to-Liquids (EGTL) project.
HEPS, normalised for these once-off adjustments and translation
effects, amounted to R18,62 per share, which is 4% higher compared
to normalised HEPS for the prior period of R17,96.
"Notwithstanding the volatile macro-economic environment in
which we operate, Sasol delivered a resilient performance. This is
attributable to our continued sharpened focus on business and
capital excellence, advancement of our value-based capital
projects, consistent delivery against our cost reduction and cash
savings targets and a heightened focus on macro-economic risk
mitigations to protect our balance sheet. These decisive actions
were underpinned by a robust business performance from our global
assets. Furthermore, we continue pursuing our zero harm focus,
building a resilient organisation for the future and nurturing our
foundation business, while driving value based growth as we
consider our future investment opportunities," said Joint President
and Chief Executive Officer, Bongani
Nqwababa.
"Advancing our value based growth strategy continues through our
near-term focus on Southern Africa
and North America. Our Lake
Charles Chemicals Project in the United
States is now 64% complete, and remains on track for
start-up of the first units in the second half of 2018. The
fundamental drivers for this investment remain sound, and will
enable Sasol's continued growth in a low feedstock cost region. In
Mozambique, we remain committed to
our growth plans and will continue to partner with the country's
government and other stakeholders on projects that will help
stimulate socio-economic growth. We are confident that the
economics to develop the Production Sharing Agreement license area
remain positive, with four wells completed, as part of our drilling
campaign, already showing promising results," said Joint President
and Chief Executive Officer, Stephen
Cornell.
Business performance in Energy and Chemicals
businesses
Overall, Sasol delivered a strong business performance across
most of the value chain. Secunda Synfuels' production volumes
increased by 1% and our Eurasian operations increased production
volumes by 5% on the back of stronger demand. Natref's production
volumes were down 7% mainly due to plant shutdowns during the
period under review. Normalised sales volumes increased by 11% for
our Base Chemicals business and 2% for our Performance Chemicals
business compared to the prior period mainly on the back of
stronger demand and improved plant stability. Liquid fuels sales
volumes decreased by 2% due to the Natref planned shutdowns and
more volumes from Secunda Synfuels Operations (SSO) being allocated
to the higher margin yielding chemical businesses. ORYX GTL
achieved an average utilisation rate of 95% with the run-rate of
production in line with our previous market guidance.
Sasol's Secunda mining operations experienced a challenging six
months with the onset of a protected strike action, which commenced
in August 2016, by the Association of
Mineworkers and Construction Union (AMCU). Notwithstanding a 16%
decrease in mining production volumes resulting from the strike
action, Mining continued to deliver our full coal supply commitment
to the integrated Sasol value chain through external coal purchases
and increased gas consumption at Secunda Synfuels Operations. The
profitability of the mining business was significantly impacted by
the R1 billion net additional cost as a result of the strike.
Cost discipline enhancing resilience
Sasol continued to drive our cost containment programme and
managed cash fixed costs well below inflation in nominal terms,
when compared to the prior period. Excluding the impact of
inflation, our cash fixed costs, including the mining strike costs,
reduced by 1% in real terms compared to the prior period. The
strong cost performance was achieved by sustainable delivery of our
Business Performance Enhancement Programme (BPEP) and Response Plan
(RP).
As part of the BPEP, we delivered sustainable cost savings of
R4,9 billion, exceeding our December
2016 exit run rate target by R0,2 billion. We are confident
that we will meet or exceed our targeted sustainable savings at an
exit run rate of R5,4 billion by the end of 2018.
Our comprehensive low oil price RP, focusing on cash
conservation to counter a lower-for-much-longer oil price reality,
has continued to yield positive cash savings in line with our 2017
targets, despite margin contraction and difficulties experienced in
placing certain product. The RP realised R17,8 billion of cash
savings for the period. We have increased our full year cash
savings target from R22 billion to R26 billion, mainly due to the
reprioritisation of our capital portfolio. The RP places the
company in a strong position to operate profitably within a
US$40-50/bbl oil price environment.
We expect our sustainable cash cost savings from our RP to be R2,5
billion by 2019, in addition to the R5,4bn sustainable savings from
our BPEP.
Actual capital expenditure, including accruals, amounted to
R30,2 billion. This includes R17,4 billion (US$1,2 billion) relating to the Lake Charles
Chemicals Project (LCCP). We have revised our capital expenditure
estimate from R75 billion to R66 billion for the full year, largely
due to the impact of the stronger rand/US dollar exchange rate
coupled with our cash conservation initiatives and active
management of our capital portfolio.
Cash generation and position
Our net cash position decreased from R52 billion in June 2016 to R28 billion at 31 December 2016, mainly due to the funding of
the LCCP and the effect of a stronger closing rand/US dollar
exchange rate. Loans raised during the period amounted to R2
billion, mainly for the funding of our growth projects.
During the current financial year, Sasol entered into a number
of hedges to mitigate specific financial risks and provide
protection against unforeseen movements in oil prices, interest
rates, currency movements, and commodity and final product prices.
Approximately 50% of the crude oil exposure was hedged with crude
oil put options for 2017 at a net price of ~US$49,50/bbl. A total net loss of R515 million
(US$37 million) was recognised during
the period. To manage the exposure to the US dollar, approximately
12% of the rand/US dollar exposure was hedged with zero-cost collar
instruments at a floor of ~R14,10 for specific periods in 2018. A
net gain of R283 million (US$20
million) was recognised during the period. Should attractive
hedges become available in the market at an acceptable cost, we
will enter into additional hedges as mitigation against these
financial risks.
Cash generated by operating activities decreased by 37% to R16,8
billion compared with R26,7 billion in the prior period.
Notwithstanding reduced cash flows, our balance sheet has the
capacity to lever up, as we continue to execute our growth plans
and return value to our shareholders. Accordingly, in support of
our funding strategy, gearing increased to 25%, which is consistent
with our previous market guidance of 20% to 44%.
To manage the impact of price volatility and the low oil price
environment, the Sasol Limited Board (Board) concluded that our
internal gearing ceiling will remain at 44% until the end of 2018.
The net debt: EBITDA ratio is forecasted to be below 2,0 times. We
actively manage our capital structure and funding plan to ensure
that we maintain an optimum solvency and liquidity profile.
Advancing projects to enable future growth
We are encouraged by the headway we are making in delivering on
our project pipeline:
Growing our footprint in North
America
- Overall construction on the LCCP continues on all fronts, with
most engineering and procurement activities nearing completion
during the period. Total capital spent amounts to US$6,0 billion, and the overall project
completion is 64%. The total forecasted capital cost for the
project remains within the approved US$11
billion budget and approved schedule. The project's
contingency which, measured against industry norms for this stage
of project completion, is still considered sufficient to
effectively complete the project to beneficial operation (BO)
within the US$11 billion budget.
Although unplanned event-driven risks may still impact the
execution and cost of the project, we are confident that the
remaining construction, procurement, execution and business
readiness risks can be managed within the budget as a result of
these changes. We still consider the LCCP to be a value-based
investment that will return sustainable value to our shareholders
for many years into the future. The project returns are still
forecast to be above our weighted average cost of capital
(WACC).
- Construction of our 50% joint venture high-density polyethylene
plant with Ineos Olefins and Polymers USA is more than 90% complete and is on track
for mechanical completion by the middle of the 2017 calendar year.
The plant will be the largest bi-modal high density polyethylene
(HDPE) manufacturing facility in the US (470 kt per annum) and will
produce some of the most cost competitive performance resins based
on InnoveneTM S technology. We continue to work with the operator
(our joint venture partner) to manage construction delays that have
mainly resulted from adverse weather conditions and poor craft
labour productivity. Together with our partner, we have
successfully approached the market and attained a favourable
reduction in the financing rate for the remaining term of the
facility. The project economics remain strong and returns are
currently above WACC despite the project's cost increase. The
market conditions for start-up continue to be favourable with low
feedstock cost and strong polyethylene market demand projected in
2017.
Focusing on our asset base in Southern Africa
- Our strategic R14,0 billion mine replacement programme, which
will ensure uninterrupted coal supply to SSO in order to support
Sasol's strategy to operate its southern African facilities until
2050, is nearing completion. The total programme is expected to be
completed below budget and within schedule. The Shondoni colliery
achieved BO, within budget, during April
2016 and will be fully completed during the second half of
the 2017 calendar year. Phase 2 of the Impumelelo colliery project
for R0,9 billion commenced during the first half of the 2016
calendar year and is on track to be completed within budget, late
in the 2019 calendar year.
- The expansion of our FTWEP facility in Sasolburg is progressing
well. BO for phase two is on track for the end of the third quarter
of 2017. The project economics for this project remain sound. The
total project cost for both phases is estimated at R13,5
billion.
- The Loop Line 2 project on the Mozambique to Secunda Pipeline (MSP) reached
BO ahead of schedule on 2 November
2016 at a total project cost below budget, while delivering
a safety recordable case rate of zero. Loop Line 2 will increase
the MSP's available annual gas transportation capacity from 169,4
bscf to 191 bscf and renders a return in line with our investment
hurdle rate.
- The first phase of the development of the Production Sharing
Agreement (PSA) licence area remains on budget and schedule. To
date, four wells have been drilled and completed, two gas wells in
the Temane G8 reservoir and two oil wells in the Inhassoro G6
reservoir. Drilling results have been in line with
expectations. The third oil well (or fifth well) was spudded in
early February 2017. In addition, as
part of the PSA programme, the first onshore Mozambique 3D seismic programme has been
successfully undertaken.
Profit outlook* - strong production performance
and cost reductions to continue
The current economic climate remains volatile and uncertain.
While oil price and foreign exchange movements are outside our
control and may impact on our results, our focus remains firmly on
managing factors within our control, including volume growth, cost
optimisation, effective capital allocation, focused financial risk
management and cash conservation.
We expect an overall strong operational performance for 2017,
with:
- Liquid fuels sales volumes for the Energy business in southern
Africa to be approximately 61
million barrels;
- Base Chemicals sales volumes to be between 4% to 6% higher than
the prior year, with US dollar product prices recovering;
- Performance Chemicals sales volumes to be between 1% to 2%
higher, with average margins for the business remaining
resilient;
- An average utilisation rate at ORYX GTL in Qatar of above 90% for the remainder of the
financial year;
- Normalised cash fixed costs to remain in line with SA PPI;
- The RP cash flow contribution to range between R22 billion and
R26 billion;
- BPEP cash cost savings to achieve an annual run rate of R5,4
billion by 2018;
- Capital expenditure, including capital accruals, of R66 billion
for 2017 and R60 billion in 2018 as we progress with the execution
of our growth plan and strategy. Capital estimates may change as a
result of exchange rate volatility;
- Our balance sheet gearing up to a level of between 30% and 35%,
with net debt:EBITDA being managed to below 2,0 times;
- Average Brent crude oil prices expected to remain between
US$50/bbl and US$55/bbl; and
- Ongoing rand/US dollar volatility due to various factors,
including the pending outcome of the next review of the South
African sovereign credit rating and capital inflows.
*The financial information contained in this profit outlook and
other financial forecasts mentioned elsewhere in the financial
overview are the responsibility of the directors and in accordance
with standard practice, it is noted that this information has not
been reviewed and reported on by the company's auditors.
On Monday, 20 March 2017,
dividends due to certificated shareholders on the South African
registry will either be electronically transferred to shareholders'
bank accounts or, in the absence of suitable mandates, dividend
cheques will be posted to such shareholders. Shareholders who hold
dematerialised shares will have their accounts held by their CSDP
or broker credited on Monday, 20 March
2017. Share certificates may not be dematerialised or
rematerialised between 15 March 2017
and 17 March 2017, both days
inclusive.
Comprehensive additional information is available on our
website: http://www.sasol.com
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, developments
and business strategies. Examples of such forward-looking
statements include, but are not limited to, statements regarding
exchange rate fluctuations, volume growth, increases in market
share, total shareholder return and cost reductions. Words such as
"believe", "anticipate", "expect", "intend", "seek", "will",
"plan", "could", "may", "endeavour" 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 are discussed more fully in our most
recent annual report under the Securities Exchange Act of 1934 on
Form 20-F filed on 27 September 2016
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.
About Sasol:
Sasol is an international integrated chemicals and energy
company that leverages technologies and the expertise of our 30 300
people working in 33 countries. We develop and commercialise
technologies, and build and operate world-scale facilities to
produce a range of high-value product streams, including liquid
fuels, chemicals and low-carbon electricity.
Issued by:
Alex Anderson, Head of Group Media
Relations
Direct telephone: +27-(0)-10-344-6509; Mobile:
+27-(0)-71-600-9605;
alex.anderson@sasol.com
Matebello Motloung, Senior Specialist: Media Relations
Direct telephone: +27-(0)-11-344-9256, Mobile:
+27-(0)-83-773-9457
matebello.motloung@sasol.com
Cavan Hill, Senior Vice President:
Investor Relations
Direct telephone: +27-(0)-10-344-9280
investor.relations@sasol.com
SOURCE Sasol Limited