JOHANNESBURG, Oct. 28, 2019 /PRNewswire/ --
Financial performance in context
- Headline earnings per share (HEPS) up 12% to
R30,72
- Core headline earnings1 per share (CHEPS) up
5% to R38,13
- Earnings Before Interest and Tax (EBIT) down 45% due to
higher remeasurement items
- Cash generated by operating activities up 20%
- Normalised cash fixed cost – below our 6% inflation
target
Resilient operational performance
- Production:
-
- Secunda Synfuels Operations achieving annualised run rate of
7,8 mt post the full shutdown
- Natref achieved a production run rate of 637m³/h, highest in
last 8 years
- High Density Polyethylene plant has produced at upper end of
design capacity
- ORYX GTL utilisation of 81% due to unplanned maintenance
shutdowns
- Mining productivity up 3%
- Sales:
-
- Liquid fuel sales volumes up 2%, resulting from a strong Natref
performance
- Base Chemicals sales volumes up 4%, offset by softer commodity
chemical prices
- Performance Chemicals sales volumes down 3% impacted by
1st half 2019 external supply constraints and
2nd half 2019 softer macroenvironment in Europe and Asia
Board review concluded - No earnings, financial position
or cash flow restatements
Focused balance sheet management
- Gearing elevated at 56,3%
- Net debt: Earnings Before Interest Tax Depreciation and
Amortisation (EBITDA) 2,6 times
- Bank Net debt: EBITDA 2,2 – 2,4 times – below USD bank covenant
of 3 times
- Final FY19 dividend passed to protect and strengthen our
balance sheet
- Working capital of 15% of revenue – benefitting from focused
management initiatives
Advancing Lake Charles Chemicals Project (LCCP)
- 98% overall project completion, with Recordable Case Rate (RCR)
of 0,11
- Cracker reached beneficial operation in August 2019
- Linear Low Density Polyethylene and Ethylene Oxide/Ethylene
Glycol units ramping up to targeted levels
- Cost tracking estimate of US$12,6
– US$12,9 billion
Progressing sustainability
- Safety RCR, improved to 0,26; regrettably three fatalities
- Achieved Level 4 Broad-Based Black Economic Empowerment
status
- R19 billion in procurement spend with SA Black-owned
businesses
- Developing our Greenhouse Gas emission reduction roadmap
- Sasol Oil tax dispute settled
Earnings performance
Our foundation business delivered resilient results with a
mostly strong volume and normalised cash fixed cost performance
against the backdrop of a challenging macroeconomic environment.
Our business was impacted by market and geopolitical risk,
including subdued growth in global gross domestic product
(GDP).
Our gross margin percentage decreased 2% compared to the prior
year driven by a softer macro environment negatively impacting
supply-demand dynamics especially in our chemicals business. We
view this as temporary as the market is expected to recover over
the short-to-medium term. Our Energy business benefitted from
higher crude oil prices and higher diesel differentials. These
benefits were partly offset by weaker petrol differentials driven
by negative supply-demand fundamentals.
Cash fixed cost, excluding capital growth and the impact of
exchange rates, increased by 5,7%, relative to our internal 6%
inflation target. Our cost management processes remain robust while
we continue to evaluate further opportunities to embed our
continuous improvement efforts. The sustained competitiveness of
our business remains top of mind.
Adjusted EBITDA2 decreased 9% compared to the prior
year due to lower chemical product prices and higher LCCP operating
cost. 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. We expect a closer match between
margin and costs for the LCCP to be achieved from 2020.
EBIT decreased 45% to R9,7 billion, largely due to significant
remeasurement items of R18,6 billion (US$1,3
billion) recorded in the current year resulting from softer
chemical prices as well as the higher than anticipated capital
spend on the LCCP.
CHEPS increased 5% to R38,13 compared to the prior year. HEPS
increased 12% to R30,72 per share compared to the prior year. The
increase in core headline earnings continues to reflect our cash
flow generating ability from our foundation businesses despite
weaker chemicals pricing.
Key
metrics
|
2019
|
2018
|
Change
%
|
EBIT (R
million)
|
9 697
|
17 747
|
(45)
|
Headline earnings (R
million)
|
18 941
|
16 798
|
13
|
|
Earnings per share
(Rand)
|
6,97
|
14,26
|
51
|
Headline earnings per
share (Rand)
|
30,72
|
27,44
|
12
|
Core headline
earnings per share (Rand)
|
38,13
|
36,38
|
5
|
|
Dividend per share
(Rand)
|
5,90
|
12,90
|
(54)
|
- Interim
(Rand)
|
5,90
|
5,00
|
18
|
- Final
(Rand)
|
-
|
7,90
|
(100)
|
1 Core headline earnings per share (CHEPS)
adjusts the standard JSE definition of headline earnings for the
impact of translation gains arising on the translation of monetary
assets and liabilities to functional currency, market-to-market
valuation of hedges, Sasol Khanyisa equity-settled share-based
payments recorded in the income statement, LCCP losses during
ramp-up and provision for significant tax litigation matters. This
constitutes pro forma financial information and should be read in
conjunction with the full announcement.
2 Adjusted EBITDA is calculated by adjusting
EBIT for depreciation, amortisation, share-based payments,
remeasurement items, movement in rehabilitation provisions due to
discount rate changes, unrealised translation gains and losses, and
unrealised gains and losses on hedging activities. This constitutes
pro forma financial information and should be read in conjunction
with the full announcement.
Net asset
value
|
2019
|
2018
|
Change
%
|
Total assets (R
million)
|
469 968
|
439 235
|
7
|
Total liabilities (R
million)
|
(244 173)
|
(210 627)
|
16
|
Total equity (R
million)
|
225 795
|
228 608
|
(1)
|
Turnover (R
million)
|
|
EBIT (R
million)
|
2018
|
2019
|
|
2019
|
2018(1)
|
19 797
|
20 876
|
Mining
|
4 701
|
5 244
|
4 198
|
5 184
|
Exploration and
Production International
|
(889)
|
(3 683)
|
69 773
|
83 803
|
Energy
|
16 566
|
14 081
|
43 951
|
48 813
|
Base
Chemicals
|
(1 431)
|
918
|
64 887
|
68 296
|
Performance
Chemicals
|
(7 040)
|
7 853
|
52
|
78
|
Group
Functions
|
(2 210)
|
(6 666)
|
202 658
|
227 050
|
Group
performance
|
9 697
|
17 747
|
(21 197)
|
(23 474)
|
Intersegmental
turnover
|
|
181 461
|
203 576
|
External
turnover
|
Balance sheet management
Cash generated by operating activities increased to R51 billion
compared to R43 billion in the prior year. This was largely
attributable to favourable Brent crude oil prices and the exchange
rate, together with our strong working capital performance. These
benefits were offset by softer chemical prices and losses
attributable to the LCCP incurring costs with limited corresponding
returns while in ramp-up phase.
Our net cash on hand position decreased from R17,0 billion to
R15,8 billion as at 30 June 2019.
Actual capital expenditure, including accruals, amounted to R56
billion. This includes R30 billion (US$2,1
billion) relating to the LCCP. The higher LCCP capital cash
flows and significant impairments recorded increased our gearing to
56,3%, which is above our previous market guidance of 44 – 49%.
We continue to actively manage the balance sheet with the
objective of maintaining a robust liquidity position and a balanced
debt maturity profile. Active balance sheet management will remain
a key ongoing focus during this peak gearing phase.
During 2019, we refinanced the US$4
billion LCCP asset-based facility in two phases, initially
by the issue of US$2,25 billion of US
dollar-denominated bonds and thereafter by a US$1,8 billion 5-year bank loan financing (with a
net debt: EBITDA covenant of 3,0 times).
The US dollar bond issue was Sasol's first such issuance since
the inaugural US$1 billion 10-year
bond issued in 2012. The issuance comprised a US$1,5 billion 5,5-year bond and a US$0,75 billion 10-year bond. This refinancing
enabled Sasol to optimise our mix of funding instruments between
bank loans and bond market, while at the same time extending the
maturity of the debt profile from 2021 to as far out as 2028. An
additional benefit of refinancing away from asset-based security
was that S&P re-rated the 2012 bond back to the same investment
grade level as Sasol Limited. The US$1,8
billion bank loan was closed in June
2019.
As part of the refinancing, we agreed with our lenders to amend
the net debt: EBITDA covenant from 2,5 times to 3,0 times under the
US$3,9 billion Revolving Credit
Facility entered into in 2017. Our net debt: EBITDA at 30 June 2019 was 2,6 times, with the banks
definition of net debt: EBITDA expected to range between 2,2 and
2,4 times, which remains well below the covenant.
In addition, in the domestic South African market, we have both
bank loan facilities, and the R8 billion Domestic Medium Term Note
Programme (DMTN) which was established in 2017. In August 2019 Sasol issued our inaugural paper to
the value of R2,2 billion in the local debt market under the DMTN
programme.
Another key element of financial market risk management is our
hedging programme. 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).
We will continue to hedge our net cash exposures for our balance
sheet for 2020 and 2021 and will reduce our cover ratios once we
are satisfied with the balance sheet's gearing levels.
In line with our capital allocation framework, we continue to
hold a long-term commitment to maintain our investment grade credit
ratings.
Dividend
After careful consideration of our current leverage and the
volatility in the macroeconomic environment, the Board has made the
decision to pass the final dividend to protect and strengthen our
balance sheet. We continue to ensure that we deliver the key
elements of our strategy, particularly the final completion of the
LCCP. The Board may further consider the passing of the 2020
interim dividend based on the health of the balance sheet credit
metrics at that stage.
Board activities
In May 2019, the Board
commissioned an independent review into the circumstances that may
have delayed the prompt identification and reporting of the LCCP
cost and schedule overruns. The review has now been concluded.
Management has determined that, as of 30
June 2019, the Company's internal control over financial
reporting was ineffective due to the existence of a material
weakness with respect to the capital cost estimation process
implemented in connection with the LCCP, which resulted from the
aggregation of a series of individual control and project-related
control environment deficiencies, the remediation of which had not
been fully implemented and validated as of year-end.
There were no restatements to earnings, financial position or
cash flow. Please refer to the Company's announcement on
28 October 2019 for more information
on the conclusions and remediation.
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, 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 and others are discussed more fully in
our most recent annual report on Form 20-F filed on or about
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
About Sasol:
Sasol is a global integrated chemicals and energy company.
Through our talented people, we use selected technologies to safely
and sustainably source, produce and market chemical and energy
products competitively to create superior value for our customers,
shareholders and other stakeholders.
Sasol Investor Relations, 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