Rights issue
A decision was made not to pursue a rights issue given the current macroeconomic outlook, and
the significant progress made on our response plan initiatives. The balance sheet deleveraging
pathway will continue to be prioritised to ensure that we operate within our financial covenants
and maintain adequate liquidity headroom, whilst delivering the Sasol 2.0 transformation
programme.
Balance sheet management
Cash generated by operating activities decreased by 40% to R11,7 billion compared to the prior
period and our net cash on hand decreased from R34,1 billion as at 30 June 2020 to
R27,6 billion. Although our cash flows were impacted by low crude oil prices, softer chemical
prices, plant downtime and the impact of COVID-19, our cash conservation initiative and asset
divestment programme enabled us to repay approximately R28 billion (US$2 billion) of debt. In
addition, we repaid ZAR banking facilities of approximately R4 billion. Actual capital expenditure
amounted to R7,5 billion compared to R21,4 billion during the first six months of 2020. The free
cash flow for the period was R0,4 billion in a low US$43,62/barrel average oil price environment.
To create flexibility in Sasol’s balance sheet during this peak gearing period our lenders agreed
to lift our covenant from 3,0 times to 4,0 times of Net debt: EBITDA (bank definition) when
measured at 31 December 2020. This provided additional flexibility, subject to conditions, which
were consistent with our capital allocation framework, i.e. prioritising debt reduction through
commitments to suspend dividend payments and acquisitions while our leverage is above 3,0
times Net debt: EBITDA. We are appreciative of the continued support from our lenders during
this challenging period.
Our Net debt: EBITDA ratio at 31 December 2020 was 2,6 times (bank definition), significantly
below the threshold level.
At 31 December 2020 our total debt was R126,3 billion compared to R189,7 billion as at
30 June 2020. During the period, we utilised proceeds from our asset divestments to repay the
US Dollar syndicated loan, as well as a portion of our Revolving credit facility, reducing our US
dollar denominated debt by almost R28 billion (US$2 billion) to R121 billion (US$8,2 billion).
Through our comprehensive response plan and planned asset divestments, we intend to further
reduce our net debt to achieve a Net debt: EBITDA ratio of less than 2,0 times and gearing of
30% by 2023.
Our gearing decreased from 114,5% at 30 June 2020 to 76% at 31 December 2020 mainly due
to repayment of US dollar debt (20%) and a stronger closing Rand/US dollar exchange rate
(7%).
As at 31 December 2020, our liquidity headroom was in excess of R53 billion (US$3,6 billion)
well above our targeted liquidity of at least 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 debt maturity profile. We have no significant debt maturities before November 2021
when the R2,2 billion (US$150 million) term loan becomes due. In terms of the covenant
waivers with the lenders that existed at 30 June 2020 we remain obliged to use certain planned
disposal proceeds to settle debt. As a result, R14,3 billion (US$975 million) has being classified
as short-term debt.
We continue to actively manage the balance sheet with the objective of maintaining a healthy
liquidity position and a balanced debt maturity profile.
Dividend
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. We
expect the balance sheet to regain flexibility following the implementation of our comprehensive
response plan strategy.