JOHANNESBURG, April 23, 2020 /PRNewswire/ --
OPERATIONS SAFETY UPDATE
The safety and wellbeing of our employees and service providers
remains our top priority. Sasol management is disheartened by the
tragic fatality suffered by a service provider at our Secunda
operations on 7 April 2020. An
internal incident investigation, in collaboration with the service
provider, is well underway to determine the root cause of this
incident. The journey towards zero harm and eliminating fatalities
remains an imperative for Sasol.
FURTHER UPDATE OF COVID-19 ON GLOBAL OPERATIONS
In relation to the COVID-19 impacts on employees and service
providers, Sasol has implemented a range of measures and strict
protocols to ensure that employees can continue to perform
essential work safely. Detailed COVID-19 response plans are in
place for all sites globally, with dedicated task teams closely
monitoring and managing the situation in line with relevant local
guidance. Fourteen Sasol employees have tested positive for
COVID-19 globally, of which nine employees have recovered and the
remaining five employees remain in self-isolation and are receiving
appropriate support. No employee has tested positive for COVID-19
at our South African operations.
The lockdown in South Africa
continues to have a significant impact on fuel demand. Consistent
with Sasol's COVID-19 update on 8 April, this has resulted in the
phased suspension of production at the Natref refinery and a 25%
reduction in production rates at Secunda Synfuels Operations (SSO).
Chemicals used in the mining and construction sectors have also
seen a reduction in demand, which has necessitated the suspension
of production of Sasol's ammonia, nitric acid and chlor-vinyl
plants in Sasolburg. Market demand for Sasol's other
industrial chemicals has not been significantly impacted and
therefore SSO's residual operating capacity is prioritising
chemicals production for supply to domestic and export markets.
Fuel demand is being closely monitored in light of the two week
extension of the lockdown in South
Africa.
The COVID-19 situation remains highly dynamic with infection
rates varying across Sasol's operating jurisdictions. Sasol's
operations offer some flexibility to balance fuels and chemicals
output to respond to product demand.
RESPONSE STRATEGY PROGRESS
Sasol has made significant progress in implementing the
self-help measures communicated on 17 March
2020 as part of the response strategy to the COVID-19
pandemic and oil price volatility. Most of the financial year 2020
initiatives have already been agreed and are now being implemented.
However, savings relating to working capital carry some risk due to
higher than expected inventory levels following reduced demand and
the weaker exchange rate impact on accounts receivable. For
financial year 2021, we have made significant progress and have
committed actions in place for more than 80% of the savings
target.
The first set of self-help measures announced on 17 March 2020 is being realised mainly by:
- Optimising and reducing cash costs. A wide range of
measures have been taken to cut operating costs. Some examples
include non-payment of the financial year 2020 short-term incentive
scheme to employees, freezing of vacancies and the drastic
curtailment of external spend through engagements with suppliers to
consider renegotiations on price and reduction in scope of
services.
- Significant results realised by re-prioritising capital
expenditure following a risk based evaluation.
- Several actions are planned to manage working capital to
optimal levels for the Company to the end of financial year 2021 as
the disruption associated with COVID-19 is expected to ease.
The ongoing negative demand impact from COVID-19 requires
management to consider further self-help measures. These measures
are necessary to help protect the Company's balance sheet and
liquidity until at least the end of financial year 2021. The
Company will implement the following key human capital
measures:
- A 20% to 40% reduction in directors' fees.
- A two-part salary sacrifice for the President and Chief
Executive Officer (CEO) which entails a donation of 33% of the
CEO's salary for three months from May
2020 to the Solidarity Fund set up by the South African
government to support the fight against COVID-19, and for the
remaining five months to December
2020, a salary sacrifice of 20% will apply.
- Salary sacrifices for the Group Executive Committee and
senior leadership members of 20%, and for middle to junior
management levels ranging from 15-10%. Salary sacrifices are
planned for 8 months, however the duration of the temporary
measures will be reassessed against the progress we make towards
our savings targets. Furthermore, no salary increases will be
effected in 2020.
In addition we are proactively investigating the opportunity to
conduct critical and statutory work during the current period of
the lower product demand at SSO, which could allow the maintenance
intervention planned for September
2020 to be optimised significantly or even postponed.
In parallel, Sasol has made progress on its expedited review of
the business to consider how it can be most effectively positioned
to be sustainable in a low oil price environment. Consistent with
this approach, the expanded asset disposal process has yielded good
interest in relation to a number of assets, despite the macro
environment uncertainty. Updates on progress will be provided at
the appropriate time.
UPDATE ON FINANCIAL POSITION
Sasol aims to sustain liquidity headroom above US$1 billion for the foreseeable future
considering that it has no significant debt maturities before
May 2021. The contribution of the suite of self-help measures
is key in maintaining this liquidity position with asset disposals
remaining essential to reduce Sasol's debt levels. The COVID-19
impact will have a significant negative effect on operating cash
flows. The response strategy measures detailed above are necessary
to mitigate the impact of reduced demand and much weaker
macro-economic indicators on the Company's profitability. The
necessity of any additional measures required will be assessed on
the basis of the further market developments.
Sasol appreciates the ongoing support from its lending group.
The process to secure appropriate adjustments to relevant covenants
is underway and a further update will be provided in due
course.
We are currently in the process of assessing the impact of
lower-for-longer macro-economic assumptions on the value of our
assets ahead of the 2020 financial year end process. Details will
be provided in our future trading updates.
BUSINESS OUTLOOK
Sasol Mining's full year productivity is expected to range
between 1 130-1 180 tons per continuous miner per shift, without
taking into account any potential effects of the COVID-19 spread
amongst our workforce and the subsequent impact on operations. We
have reduced our additional external coal stock purchases by
approximately 400 – 600 kilotons for the SSO value chain for the
remainder of the financial year, following the recent reduction in
both internal and external customer demand. The resultant increase
in coal stockpiles will help mitigate potential business continuity
risk including the potential impact of the spread of COVID-19
amongst the workforce.
Given the decline in liquid fuels demand following the COVID-19
prevalence, sales volumes are expected to be approximately 50-51
million barrels for financial year 2020. This is based on the
current extended COVID-19 lockdown in South Africa, and a phased demand ramp-up
after the lifting of the lockdown restrictions. Accordingly, SSO
production for the full year is forecasted to decrease to
approximately 7,3-7,4 million tons. Chemicals production will be
prioritised within the revised SSO operating parameters.
Despite the Lake Charles Chemical Project (LCCP) ramp up
continuing in line with expectations for operational performance,
further price weakness means that the earnings before interest,
taxes, depreciation, and amortisation (EBITDA) contribution from
LCCP for financial year 2020 has been revised to a loss of between
US$50-US$100
million. This compares to the previous guidance of a
positive EBITDA of US$50-US$100 million before the price weakness as a
result of the decline in oil prices and the COVID-19 global demand
reduction.
Beneficial operations of the Guerbet and Ziegler units remain on
track for the end of June 2020 and
the LDPE unit, which was planned for the second half of the
calendar year 2020, is now targeted to be on-line by the third
quarter of calendar year 2020. The acceleration of this timeline
will ensure that Sasol captures the additional contribution margin
above ethylene, given the current low ethylene prices achieved in
the market.
The financial information on which this update is based has not
been reviewed and reported on by the Company's external
auditors.
PRODUCTION AND SALES METRICS FOR THE NINE MONTHS ENDED
31 MARCH 2020
Sasol has published its production and sales metrics for the
nine months ended 31 March 2020 on
the Company´s website at www.sasol.com, under the Investor
Centre section or via this URL:
https://www.sasol.com/investor-centre/financial-reporting/business-performance-metrics
Sasol is hosting a webcast to discuss the business update and
production and sales metrics at 15:00 SA on Thursday, 23 April 2020. For participation, please register
on the following link: https://www.corpcam.com/Sasol23042020
A replay facility will be available for a period of five days
from the date of this announcement.
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. 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.
For further information, please contact:
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