JOHANNESBURG, March 17, 2020 /PRNewswire/ --
BACKGROUND
Shareholders are referred to the SENS announcement issued on
12 March 2020, where Sasol announced
it was reviewing a variety of actions to address the challenges
created by the impact of COVID-19 and the recent decline in the
oil and chemical prices.
In the short term, Sasol needs to enhance cash flow and
reposition the balance sheet on the assumption that there is a
sustained low oil price until the end of financial year 2021. It is
important to reiterate that Sasol currently has available liquidity
of approximately US$2.5 billion with
no significant debt maturities before May
2021 and it therefore believes it is positioned to withstand
recent market volatility in the short term. Sasol believes it can
maintain liquidity headroom in excess of US$1 billion over the next 12 - 18 months with a
US$25 per barrel oil price before the
benefits of hedging.
Sasol can today announce a comprehensive response strategy
designed to mitigate the impact of these macroeconomic factors.
This includes a commitment to re-set the organisation to be
globally competitive in a sustained low oil price environment. The
global portfolio of our foundation business remains cash positive
under prevailing spot market conditions and an oil hedging
programme has been put in place to insulate the balance sheet from
further financial pressure.
A package of measures is being undertaken that is intended to
fundamentally reposition the Company over the following 24
months:
- A cash conservation programme focused on enhancing cash flow
and cost competitiveness in a low oil price environment, with
US$2 billion cash delivery ahead of
current plan targeted by 30 June
2021;
- An accelerated and expanded asset disposal programme executed
in line with balance sheet, shareholder value and strategic
objectives with a view to deliver proceeds significantly ahead of
the US$2 billion currently
targeted;
- Potential for partnering options at Sasol's US Base Chemicals
assets; and
- A potential rights issue, which has been underwritten on a
standby basis, as a supplemental initiative to reset the capital
structure, subject to the progress made on cash conservation
initiatives and asset disposals.
Collectively these actions target generating at least
US$6 billion by the end of financial
year 2021. This is expected to reshape Sasol's balance sheet and
provide the platform to deliver a globally competitive business
with high cash yielding assets. Further to this, Sasol is in
discussions with its lenders about additional flexibility in
respect of its financial maintenance covenants to provide improved
balance sheet flexibility in financial year 2021.
OVERVIEW OF COMPREHENSIVE RESPONSE STRATEGY
Self-help management actions: US$2
billion targeted by 30 June
2021
Financial year 2020
- Immediate measures targeted to deliver a cash
improvement of approximately US$1
billion by 30 June 2020
relative to current plan assumptions, including approximately
- US$800 million to be realised
from working capital optimisation and re-prioritising capital
expenditure; and
- US$200 million to be realised
from cost-saving measures.
- These improvements build on existing initiatives and
take into account the anticipated working capital release as
inventory and receivables are adjusted for lower oil and product
prices.
- Safe and reliable operating units remain a top priority
for Sasol.
Sasol believes achieving these
targets would enable it to maintain a net debt to EBITDA ratio in
compliance with financial maintenance covenants.
Financial year 2021
- Further measures targeted to deliver approximately
US$1 billion additional improvement
in net debt position relative to previous plan assumptions,
including approximately:
- US$700 million to be saved from
re-prioritising capital and working capital expenditure; and
- US$300 million from continuing
cost savings and business optimisation.
Asset disposals: Accelerated programme with scope increased
significantly above current US$2
billion target
- Expanding the scope of,
and accelerating, the asset disposal programme which is now
intended to realise proceeds significantly above the previous
target of US$2 billion.
- This builds on the
comprehensive asset review process and includes the potential for
partnering Sasol's US Base Chemicals assets on which there are
active discussions.
Potential rights issue: Resetting the capital structure
through an equity issue after FY20 results, currently targeted at
US$2 billion
- Potential rights issue to
raise up to US$2 billion (equivalent
in ZAR terms), with execution expected after financial year 2020
results.
- Sasol has entered into a
standby underwriting agreement with BofA Securities, Citigroup and
J.P. Morgan Securities in respect of a rights issue for an amount
of up to US$2 billion-equivalent,
which contains certain customary terms and conditions for
transactions of this nature and conditions relating to Sasol making
progress on certain of the measures described above, in
anticipation of entering into an underwriting agreement in respect
of a rights issue for an amount of up to US$2 billion-equivalent. BofA Securities and
Citigroup will act as Joint Global Coordinators and Joint
Bookrunners, and J.P. Morgan Securities plc will act as Joint
Bookrunner in connection with the potential rights issue.
- In connection with
implementation of the proposed rights issue, the shareholders of
the Company will be required to approve certain resolutions. In
this respect, in due course the Company intends to post a circular
to shareholders in order to convene a general meeting of
shareholders around July 2020,
and to approve the necessary resolutions required to implement the
proposed rights offer.
- The size of the rights
issue may be reduced subject to the progress made on the other
elements of the response strategy.
Liquidity: Liquidity headroom of US$1-2 billion or greater to be put in place over
the following 12 to 18 months
- Sasol expects to comply
with the financial maintenance covenant thresholds in its debt
agreements at 30 June 2020 assuming,
amongst others, a prevailing Rand oil price of approximately R580
per barrel. Sasol can sustain a liquidity headroom in excess of
US$1 billion over the next 12 - 18
months in a US$25 per barrel oil
price before the benefits of hedging.
- Sasol is actively
engaging the lenders under its debt facilities to discuss
adequate flexibility on its financial maintenance covenant
thresholds in its debt agreements.
- An active oil hedging
strategy is in progress.
- Sasol is targeting a net
debt to EBITDA ratio of 1.5 and gearing below 30% at end financial
year 2022.
Business repositioning: Repositioning Sasol for sustainable
profitability in a low oil price environment
- Sasol is undertaking a
purposeful and systematic review of its global cost competitiveness
and business structure.
- Sasol is in the process of
designing the scope of approximately R2.5 billion in expected
sustainable net benefits by financial year 2022, expected to
increase to R3.0 billion by financial year 2023 through efficiency
and effectiveness measures across the business.
- The objective is to
deliver a focused and profitable business in a sustained low oil
price environment, creating the scope for sustainable shareholder
value creation through shareholder returns and strategic
investment.
- Sasol maintains its
commitment to meet the 10% reduction in greenhouse gas emissions as
per the target set for 2030 for the South African operations, off a
2017 baseline.
CONCLUSION
Sasol has a high quality, well diversified global portfolio with
a range of strategically advantaged assets and value chain
integration. Sasol believes that the portfolio can be positioned to
be sustainably profitable in a future low oil price
environment. A reshaped and strategically focused portfolio
based on cost, technology and market advantage is planned. If
assets do not increase the competitive advantage of this future
Sasol, they may be exited, or selective partnering may be pursued.
Sasol aims for an asset portfolio that is globally diverse across
sectors and able to operate at the low end of the cost curve in
each sector and region.
The immediate focus is on the actions to stabilise the Company
and protect the balance sheet so that the underlying value of the
portfolio is not compromised, and instead the potential realised in
the interests of all Sasol's stakeholders.
In light of this, the agenda of the Capital Markets Day planned
for November 2020 will be focused on
demonstrating progress against our short-term management actions,
including asset disposals, and our sustainability roadmap to meet
our 2030 targets.
Sasol believes the immediate and decisive implementation of the
measures announced today can reset Sasol's capital structure and
align it with the cash generation of the asset portfolio in a low
oil price environment. We believe that the future Sasol will have a
strong value proposition, with the capacity to deliver returns to
shareholders from the portfolio and also generate sufficient cash
for strategic growth and a sustainable future.
Fleetwood Grobler, Chief
Executive Officer, made the following statement:
"In this dynamic and challenging environment, it's critical that
we tighten control on what we can, acting both swiftly and
decisively. My management team and I are fully committed to
delivering on the measures that we have announced today. Sasol has
a strong underlying business and all efforts are being made to
enhance EBITDA in a sustained low oil price
environment. Delivering sustainable, long-term shareholder
value is our imperative and we have a clear plan to achieve
that."
Cautionary Statement
Shareholders are advised to exercise caution when trading in the
Company's securities until such time as the full details of the
disposals and the rights offer are published.
Sasol is hosting a call to discuss the above measures at 15:00
SA on Tuesday, 17 March with detail on the comprehensive package of
actions. Dial in details are as follows, and a replay facility will
be available for a period of 2 days from the date of this
announcement:
Conference call
details:
|
|
|
|
Tuesday, 17
March 2020
|
Time
|
Dial-in
numbers
|
Replay
numbers
|
South
Africa
|
15:00
|
+27 11 535
3600
|
+27 10 500
4108
|
United
Kingdom
|
13:00
|
+44 (0) 333 300
1418
|
+44 (0) 203 608
8021
|
United
States (ET)
|
09:00
|
+1 508 924
4326
|
+1 412 317
0088
|
Other
countries
|
|
+27 11 535
3600
|
+27 10 500
4108
|
Passcode:
|
|
|
31413
|
For online
participation, please register on the following
link:
https://www.corpcam.com/Sasol17032020
|
IMPORTANT NOTICE
This announcement is for information purposes only and shall not
constitute or form a part of any offer or solicitation to purchase
or subscribe for securities in any jurisdiction. The contents
of this announcement have been prepared by and are the sole
responsibility of the Company.
Merrill Lynch International, Citigroup and J.P. Morgan
Securities are acting exclusively for the Company and no-one else
in connection with the rights issue. They will not regard any
other person as their respective clients in relation to the rights
issue and will not be responsible to anyone other than the Company
for providing the protections afforded to their respective clients,
nor for providing advice in relation to the rights issue, the
contents of this announcement or any transaction, arrangement or
other matter referred to herein.
None of Merrill Lynch International, Citigroup or J.P. Morgan
Securities or any of their respective directors, officers,
employees, advisers or agents accepts any responsibility or
liability whatsoever for or makes any representation or warranty,
express or implied, as to the truth, accuracy or completeness of
the information in this announcement (or whether any information
has been omitted from the announcement) or any other information
relating to the Company, its subsidiaries or associated companies,
whether written, oral or in a visual or electronic form, and
howsoever transmitted or made available or for any loss howsoever
arising from any use of this announcement or its contents or
otherwise arising in connection therewith.
The Company may file a registration statement or a
post-effective amendment to its registration statement (including a
prospectus) with the U.S. Securities and Exchange Commission (the
"SEC") for any offering of securities referred to in this
communication. Before you invest, you should read the prospectus in
that registration statement and other documents filed by the
Company with the SEC for more complete information about the
Company and this offering. You may get these documents for free by
visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively,
the Company will arrange to send you the prospectus after filing if
you request it by calling the Investor Relations Department at +27
10 344 9280.
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, statements regarding exchange rate
fluctuations, expectations regarding future cash flow, Sasol's
ability to meet its debt covenants, Sasol's ability to achieve the
cost savings or complete its asset disposal programme, the actions
referred to herein intended to strengthen Sasol's balance sheet and
to maintain profitability at lower oil prices 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. You are accordingly advised to exercise caution when
trading in the Company's securities until such time the full
details of the disposal and the rights offer are published. 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.
If you have any questions, please email:
investor.relations@sasol.com or contact:
Investor Relations:
Feroza Syed, Chief Investor
Relations Officer
Telephone: +27(0)10-344-7778
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SOURCE Sasol Limited