JOHANNESBURG, July 25, 2019 /PRNewswire/ --
Trading Update
Sasol's foundation business is expected to deliver resilient
results with a strong volume, cost and working capital performance,
despite a weak macroeconomic environment resulting in lower
chemical prices and petrol differentials.
There are a number of non-cash adjustments to the results which
will result in a decrease in earnings per share. The largest of
these were the sizable impairments of relevant cash generating
units (CGUs) due to the softer outlook for global chemical and gas
prices and the higher capital spend on the Lake Charles Chemicals
Project (LCCP). In addition, as the LCCP progresses through the
sequential beneficial operation schedule, the costs associated with
relevant units are expensed while the gross margin contribution
follows the ramp-up profile and inventory build.
Adjusted earnings before interest, tax, depreciation and
amortisation (Adjusted EBITDA*) is expected to decline by between
4% and 14% compared to R51,5 billion in the prior year, despite the
19% increase in the rand per barrel price of Brent crude oil. This
is mainly as a result of the negative EBITDA contribution from the
LCCP and the impact of softer chemical margins.
Headline earnings per share (HEPS) for the financial year ended 30 June 2019 is expected
to increase by between 7% and 17% (approximating R1,92 to R4,66 per
share) compared to the prior year HEPS of R27,44. Core headline
earnings per share (CHEPS**) is expected to increase by between 1%
and 11% (approximating R0,36 to R4,00 per share) compared to the
CHEPS for 2018 of R36,38. CHEPS is adjusted for once-off
items, which includes operating losses from the LCCP
during ramp-up.
Earnings per share (EPS) for the 2019 financial year is expected
to decrease by between 46% and 56% (approximating
R6,56 to R7,99 per share) from the prior year EPS of R14,26 as a
result of higher impairments recorded in the
financial year.
Sasol´s earnings for the financial year ended 30 June 2019 have been significantly impacted by
the following remeasurement items before tax:
- North American value chain R12,9 billion (US$914 million). The Ethylene Oxide/Ethylene
Glycol (EO/EG) CGU and the Tetramerization (TET) CGU were impaired
by R5,5 billion (US$388 million) and R7,4 billion
(US$526 million) respectively. The
impairments were mostly as a result of an increase in capital cost
for the LCCP and softer forecasted US ethylene and global
Mono-ethylene Glycol (MEG) prices based on the latest expert
consultants' macro-economic assumptions as at 30
June 2019.
- The Ammonia CGU in the Southern African value chain was
impaired by R3,3 billion mainly as a result of much softer
forecasted international ammonia sales prices.
-
The Canadian shale gas business was further impaired by R1,9 billion (CAD181 million) during the
financial year.
Given the above
financial performance, our gearing
is expected to
increase above our previous market guidance of
49%, however we expect the net debt to EBITDA to remain well below
our debt covenant level of 3,0
times. We continue to progress our asset
portfolio optimisation strategy, with further details
to be provided during the results announcement.
A detailed production summary and key business performance
metrics for the financial year for all of our businesses, including
our hedging activities, is available on our website, www.sasol.com.
The salient features are:
- Mining productivity improved by 5%, with a 22% decrease in
external purchases.
- Secunda Synfuels Operations (SSO) achieved an excellent
performance post the total West factory shutdown, enabling full
year production levels in line with our prior year.
- Liquid fuels sales volumes increased by 2% to 60 million
barrels, exceeding previous market guidance.
- Base Chemicals sales volumes (excluding Polymers US products)
showed a strong recovery during the second half of the financial
year, exceeding our previous market guidance.
-
High Density Polyethylene (HDPE) production volume in the US was 218kt.
The Linear Low Density Polyethylene (LLDPE) and EO/EG plants are
ramping up, and achieved saleable production of 103kt and 41kt,
respectively.
- Performance Chemicals sales volumes declined by 3%
due to external supply constraints and a softer macro-environment.
The Speciality Chemical portfolio remains resilient.
We are also pleased to report that agreement has been reached
with the South African Revenue Services to withdraw all the issued
and pending assessments for the crude oil procurement matter
relating to Sasol Oil for financial years 1999 to 2016.
Lake Charles Chemicals Project (LCCP) update
The LCCP remains in line with the revised cost estimate provided
in May 2019 and is mostly tracking
schedule. As at the end of June 2019,
overall project completion is at 98%. Engineering and procurement
activities are substantially complete and construction progress is
at 94%. The Ethane Cracker start-up sequence has commenced and we
expect beneficial operation (BO) by the end of July or shortly
thereafter. We are experiencing some schedule pressure on the Low
Density Polyethylene (LDPE) plant and expect BO to be delayed by
four to six weeks as it has taken longer than planned to complete
the construction, as well as the cleaning and preparation of
critical equipment. While the Ethoxylates (ETO) and Guerbet plants
are currently tracking schedule as previously announced, the
Ziegler unit BO is expected to be delayed by four to eight weeks
mainly due to slower piping hydro-testing completion. Mitigation
plans are in place to minimise the delay to the maximum extent
possible.
When updated guidance was provided on the LCCP in May 2019, it was announced that the Board was to
undertake an independent review on the project. The review is
ongoing and is conducted by independent external experts. It is an
in depth exercise entailing the review of a voluminous amount of
documents and numerous interviews. As a result, it is anticipated
that a report on this review will be submitted to the Board by the
end of August 2019. The Board will be
convened shortly thereafter to consider the report, following which
an update will be provided.
All references to years refer to the financial year ended 30
June.
The financial information on which this trading statement is
based has not been reviewed and reported on by the Company's
external auditors. Sasol's financial results for the financial year
ended 30 June 2019 will be announced
on Monday, 19 August 2019.
* Adjusted EBITDA is calculated by adjusting operating profit
for depreciation, amortisation, share-based payments, remeasurement
items, change in discount rates of our rehabilitation provisions,
unrealised translation gains and losses, and unrealised gains and
losses on our hedging activities.
** Core HEPS is calculated by adjusting headline earnings with
once-off items, period 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.
Period close adjustments in relation to the valuation of our
derivatives at period end are to remove volatility from earnings as
these instruments are valued using forward curves and other market
factors at the reporting date and could vary from period to period.
We believe core headline earnings are a useful measure of the
group's sustainable operating performance. However, this is not a
defined term under IFRS and may not be comparable with similarly
titled measures reported by other companies. The aforementioned
adjustments are the responsibility of the directors of Sasol. The
adjustments have been prepared for illustrative purposes only and
due to their nature, may not fairly present Sasol's financial
position, changes in equity, results of operations or cash
flows.
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, 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,
executing our growth projects (including LCCP), oil and gas
reserves, cost reductions, our Continuous Improvement (CI)
initiative 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 are discussed more fully in our most
recent annual report on Form 20-F filed on 28 August 2018 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.
For further information, please contact:
Feroza Syed
Chief Investor Relations Officer
Direct telephone: +27 (0) 10-344-7778
investor.relations@sasol.com
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SOURCE Sasol Limited