JOHANESBURG, June 18, 2020
/PRNewswire/ -- Sasol continues to make significant progress on the
response plan measures announced on 17 March
2020 and 23 April 2020, to
address the impacts of oil price volatility and the COVID-19
pandemic (COVID-19).
The situation remains highly dynamic, but as lockdown
regulations are eased in South
Africa and elsewhere, Sasol is now ramping up operations
whilst taking action to ensure the safety of employees and service
providers.
This announcement includes the following:
- Operational performance update
- Covenant update
- Status on financial position
- Future positioning of Sasol
- Change in Director's executive responsibilities and new Group
Executive Committee structure
OPERATIONAL PERFORMANCE UPDATE
As previously communicated, an unprecedented decrease in fuel
demand in South Africa as a result
of COVID-19 resulted in us reducing our production rates at Secunda
Synfuels Operations (SSO) and suspending production at the Natref
Refinery in Sasolburg, in a joint decision with Sasol's partner,
Total South Africa.
Sasol used this period of lower production to bring forward its
planned September 2020 maintenance
shutdown at SSO. This shutdown was successfully completed in
May 2020 and ensures production will
be uninterrupted for the remainder of the calendar year. Similarly,
maintenance work planned for later during calendar year 2020 at
Natref was successfully completed during the lockdown period.
Since the lockdown restrictions in South Africa were eased on 1 June 2020, SSO has ramped up production, and
Natref is expected to start production by the end of June 2020 and will ramp up to full capacity as
jet fuel demand resumes. The ammonia, nitric acid and chlor-vinyl
plants in Sasolburg also started up in May
2020.
Outside South Africa, Sasol's
operations are performing to plan. Oryx GTL's train 1 came back
into operation at the beginning of June
2020, and train 2 is expected to be back in production in
the second quarter of financial year 2021 following the extended
planned shutdown of the plant.
Sasol previously guided the beneficial operation of the Ziegler
and Guerbet units at the Lake Charles Chemicals Project (LCCP) by
end June 2020 and is pleased to
announce that the Ziegler unit achieved beneficial operation on
16 June 2020 and the Guerbet unit's
beneficial operation is imminent. Remediation work on the low
density polyethylene (LDPE) unit is progressing according to plan,
and we expect to bring this unit into production before the end of
the third quarter of calendar year 2020.
COVENANT UPDATE
Sasol is pleased to announce the successful conclusion of
discussions with lenders regarding increased balance sheet
flexibility in the context of COVID-19 impacts and market
volatility. Our lenders have agreed to waive the covenant at
June 2020 and lift the December 2020 covenant from 3 times to 4 times
Net Debt : Earnings Before Interest, Taxation, Depreciation and
Amortisation (EBITDA).
This additional flexibility is subject to conditions which are
customary for such covenant amendments and consistent with Sasol's
broader capital allocation framework. These include provisions to
prioritise debt reduction at this time, such as commitments that
there will be no dividend payments nor acquisitions while Sasol's
leverage is above 3 times Net Debt : EBITDA. Sasol will also reduce
the size of its facilities as debt levels are reduced, whilst
continuing to maintain a strong liquidity position.
In conjunction with these amendments and in light of Sasol's two
notch credit rating downgrade earlier this year, the interest costs
across Sasol's debt facilities will increase by approximately
US$40 million per annum, before any
reduction in borrowings through any self-help measures or
disposals. The applicable interest rate will reduce in the
event that Sasol's credit rating improves.
UPDATE ON FINANCIAL POSITION
Management continues to progress with the execution of its crude
oil hedging programme for financial year 2021. For quarter 1
financial year 2021, approximately 80% of Synfuels' liquid fuels
exposure was hedged, translating to 6 million barrels. This
consists of 2,5 million barrels of zero cost collars at a put
strike price of US$31 per barrel and
a call strike price of US$39 per
barrel, and 3,5 million barrels of put options at an average net
strike price of US$37 per barrel. Oil
hedges for the remainder of financial year 2021 are in progress
with 2 million barrels using put options hedged at an average net
strike price of US$30 per barrel and
0,5 million barrels hedged using zero cost collars at a put strike
of US$36 per barrel and a call strike
of US$45 per barrel. These oil hedges
will significantly protect liquidity during the forthcoming
months
Sasol made significant progress with the implementation of its
self-help measures as communicated on 17 March and 23 April 2020. For financial year 2020 Sasol is
well on track to achieve the targets set, whilst for financial year
2021 plans to achieve the targets set have been developed to a high
level of probability.
Sasol reaffirms that liquidity headroom will remain well above
US$1 billion, with improved liquidity
balances in Sasol's US dollar and Rand liquidity facilities.
Several focussed management actions over the past couple of months
have improved our liquidity position.
Sasol remains committed to the delivery of its response plan to
bring leverage back in line with target levels and mitigate the
impacts of recent market volatility and COVID-19.
The process to accelerate and expand our asset disposal
programme has yielded good progress for several of Sasol's assets
despite the macro environment volatility in recent months. Any
divestment or similar activity will be executed in line with
balance sheet, shareholder value and strategic objectives,
including the potential for partnering options at Sasol's US Base
Chemicals business.
Further updates on the progress of the disposal transactions
will be made as and when appropriate.
POSITIONING SASOL FOR THE FUTURE
As previously communicated, a key part of Sasol's response plan
is to look beyond the near-term measures and position the business
for sustained profitability in a low oil price environment. The new
strategy will focus on Sasol's core portfolios of chemicals and
energy. A focused and robust review of the business, and the
associated workforce structures, is underway and a detailed update
will be provided to stakeholders alongside the full year
results.
A key decision as a result of this includes the discontinuation
of all oil growth activities in West
Africa. The reset of the strategy necessitates a revised
operating model, which is still under development and will be
announced in the second quarter of financial year 2021.
The review has identified that the future Sasol business –
"Sasol 2.0" – will be focused on two core businesses, Chemicals and
Energy (the Businesses). The revision of our strategy aims to have
a greater focus on enhanced cash generation, value realisation for
shareholders and business sustainability. The Chemicals Business
will focus on its activities in specialty chemicals where it has
differentiated capabilities and strong market positions which can
be expanded over time. The Energy Business will comprise the
Southern African value chain and associated assets and will pursue
greenhouse gas emission reduction (GHG) through focus on gas as a
key feedstock and renewables as a secondary energy source. This
will be a key enabler to achieve the 2030 and longer term
aspirations to shift to a lower carbon economy.
Our two market-facing Businesses will each be responsible for
its own profit and loss, management of resources and capabilities.
A lean corporate centre will enable the Businesses by fostering
synergies and integrating activities, setting strategic boundaries
and allocating capital.
The redesign of the organisation to enable our
sustainability at lower oil prices will have an impact on our
workforce structure. We have accordingly issued a notice to our
representative trade unions in South
Africa in terms of section 189 of the Labour Relations Act
number 66 of 1995, inviting them to enter into consultation with
Sasol. A similar process will be followed with the relevant
recognised bodies in our other jurisdictions.
Change in Director's executive responsibilities and new Group
Executive Committee structures
As a first step towards this long-term trajectory, the new
senior leadership end-state structure will consist of the President
and Chief Executive Officer (CEO) and six Executive Vice President
(EVP) portfolios. An additional EVP Sasol 2.0 Transformation role
will be in place for up to 24 months to help execute our
restructuring initiative and mitigate risks to ongoing operations.
Changes in the roles of EVPs will be effective from 1 November 2020. This new structure will also
increase our gender and diversity representation at GEC level.
The EVP portfolios will be structured as follows:
- The Energy Business Unit will comprise two EVP portfolios;
-
- Priscillah Mabelane, whose appointment we announced on
2 June 2020, will lead Sasol's liquid
fuels marketing and sales activities, upstream gas, sourcing and
marketing, and supporting functions associated with the Energy
value chain.
- Bernard Klingenberg will lead
operations and technical functions within the Energy value chain,
as well as mining, to ensure continuity in our ability to deliver
across our integrated value chain.
- The Chemicals Business Unit will be led by Brad Griffith. He will be fully accountable for
the full end-to-end chemicals business, from feedstock sourcing
through operations, marketing and sales and associated supporting
activities and functions.
The Corporate Centre will be made up of three EVP
portfolios:
- Chief Financial Officer, Paul
Victor.
- Human Resources and Stakeholder Relations, led by Charlotte Mokoena.
- Strategy, Sustainability and Integrated Services, led by
Executive Director Vuyo Kahla.
Corporate portfolio strategy, sustainability, enterprise-wide risk
management as well as enterprise-wide SHE policy and reporting will
be added to his current responsibilities. Supply chain will move
from his current portfolio of responsibilities and form part of the
business units.
In addition to the permanent roles described above, Marius Brand will be appointed as EVP Sasol 2.0
Transformation to lead the Group-wide Transformation Programme to
Sasol 2.0 and delivering the long-term sustainability targets by
the third quarter of financial year 2021.
Further details of our repositioning process will be provided at
the August 2020 results release.
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.
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
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SOURCE Sasol Limited