JOHANNESBURG, Aug. 17, 2020 /PRNewswire/ -- 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.
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(1) 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(2) (CHEPS) decreased by 61%
to R14,79 compared to the prior year.
Key
metrics
|
2020
|
2019
|
Change
%
|
(LBIT)/EBIT (R
million)
|
(111 030)
|
9 697
|
(more than
100)
|
Adjusted EBITDA1 (R
million)
|
34 976
|
47 637
|
(27)
|
Headline
(loss)/earnings (R
million)
|
(7 285)
|
18 941
|
(more than
100)
|
Basic (loss)/earnings
per share (Rand)
|
(147,45)
|
6,97
|
(more than
100)
|
Headline
(loss)/earnings per share (Rand)
|
(11,79)
|
30,72
|
(more than
100)
|
Core headline
earnings per share(2) (Rand)
|
14,79
|
37,65
|
(61)
|
Dividend per share
(Rand)
|
|
|
|
- Interim
(Rand)
|
0,0
|
5,90
|
(100)
|
- Final
(Rand)
|
0,0
|
0,0
|
0
|
(1) 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 as set out in the full set of audited
summarised financial statements.)
(2) 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 unrealized 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 as set out in the
full set of audited summarised financial statements.)
Net asset
value
|
2020
|
2019
|
Change
%
|
Total assets (R
million)
|
479 162
|
469 968
|
2
|
Total liabilities (R
million)
|
319 914
|
244 173
|
31
|
Total equity (R
million)
|
159 248
|
225 795
|
(29)
|
|
|
|
|
Turnover (R million)
|
|
(LBIT)/EBIT (R
million)
|
2019
|
2020
|
|
2020
|
2019
|
20 876
|
19 891
|
Mining
|
2 756
|
4 701
|
5 184
|
5 204
|
Exploration and
Production
|
1 197
|
(889)
|
|
|
International
|
|
|
83 803
|
67 901
|
Energy
|
(6 678)
|
16 566
|
48 813
|
52 683
|
Base
Chemicals
|
(70 804)
|
(1 431)
|
68 296
|
69 197
|
Performance
Chemicals
|
(24 455)
|
(7 040)
|
78
|
30
|
Group
Functions
|
(13 046)
|
(2 210)
|
227 050
|
214 906
|
Group
performance
|
(111 030)
|
9 697
|
(23 474)
|
(24 539)
|
Intersegmental
turnover
|
|
|
203 576
|
190 367
|
External
turnover
|
|
|
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).
Further cautionary announcement
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.
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.
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.
Short-form statement
This announcement is the responsibility of the Directors. The
information in this short-form announcement, including the
financial information on which the outlook is based, has not been
audited and reported on by Sasol Limited's external auditors.
Financial figures in this announcement have been correctly
extracted from the audited financial results. The external auditors
expressed an unmodified audit opinion on the consolidated financial
statements in their report dated 17 August
2020. That report also includes a section on material
uncertainty related to going concern and the communication of key
audit matters. It is only a summary of the information contained in
the full announcement and does not contain full or complete
details. Any investment decision should also take into
consideration the information contained in the full announcement,
published on SENS on 17 August 2020,
via the JSE link.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/SOL/FY20Result.pdf
The full announcement and the FY20 audited financial results
will be available on the Company's website at www.sasol.com.
Copies of the full announcement may also be requested from the
office of the Chief Investor Relations Officer,
investor.relations@sasol.com or +27 10 344 9280, alternatively
collected from the Group's registered office (by appointment,
observing COVID-19 restrictions), Sasol Place, 50 Katherine Street,
Sandton, Johannesburg 2090 at no
charge, weekdays during office hours.
Sasol will release its Annual Financial Results on Monday,
17 August 2020, for the year ended
30 June 2020. Given the prevalence of
the COVID-19 pandemic, and the associated restrictions placed on
public gatherings, Sasol has decided to pre-record its results
presentation. Sasol's President and Chief Executive Officer,
Fleetwood Grobler, and Chief
Financial Officer, Paul Victor, will
present the results.
The pre-recorded presentation will be available on 17 August 2020, at 08h00 (Central African time),
on the following link: https://www.corpcam.com/Sasol17082020
A conference call will also be hosted via webcast at 15h00 (SA)
with Fleetwood Grobler and
Paul Victor to discuss the results
and provide an update of the business. Please confirm your
participation by registering online:
https://www.corpcam.com/Sasol17August2020
For further information, please contact:
Sasol Investor Relations,
Feroza Syed, Chief Investor
Relations Officer
Direct telephone: +27 (0) 82-557-7740
investor.relations@sasol.com
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".
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SOURCE Sasol Limited