Sasol Chief Financial Officer Update
JOHANNESBURG, June 7, 2013
JOHANNESBURG, June 7, 2013 /PRNewswire/ --
Sasol Limited (NYSE: SSL): Highlights for the period
oOverall solid operational performance despite volatile macro environment
oSasol Synfuels continues to deliver strong operational performance
oLong-lead equipment orders placed for US ethane cracker
oSasol celebrates the 10 year anniversary of its listing on NYSE
On 9 April 2013, Sasol celebrated the 10 ^ year anniversary of its listing on
the New York Stock Exchange (NYSE). The listing, following Sasol's listing on
the Johannesburg Stock Exchange in 1979, made it possible for Sasol to access
the US capital market, while growing its profile in this investment community
as a compelling investment proposition. Sasol's shares trade in the form of
American Depositary Receipts (ADRs) and listed at US$10,73 per share. Our ADR
share price has increased almost five fold since our listing. The success of
our listing bodes well for our future US investment opportunities. Coupled
with our NYSE celebrations, we held very successful investor strategy days in
New York and Cape Town. We were able to showcase our US investment proposition
in respect of the integrated, world-scale ethane cracker and downstream
derivatives units and the gas-to-liquids (GTL) and chemical value-adds
facility at Lake Charles in Louisiana. We are currently executing the
front-end engineering and design (FEED) phase of the integrated, world-scale
ethane cracker and downstream derivatives and will commence FEED for the GTL
and chemicals value-adds facility during the second half of the 2013 calendar
year. We have already placed orders for long-lead equipment for the ethane
In the first nine months of the 2013 financial year*, we have delivered solid
financial results. Sasol Synfuels continues to deliver strong operational
performance and a weaker South African rand has enhanced group profitability.
The average Brent crude oil price for the nine months softened. Chemical
prices remained depressed, negatively impacting our chemicals businesses,
where demand continues to remain soft.
We continue to make good progress, albeit slower than we initially
anticipated, on our disposal of Arya Sasol Polymers Company (ASPC). We
concluded a memorandum of understanding with an interested party regarding the
disposal of ASPC and at the date of this update, we are finalising closing
Furthermore, we continue to focus on those factors within our control
including cost containment, operational efficiencies and margin improvement.
However, our current cost inflation is expected to be above normal producers'
price index (PPI) inflation trends for the 2013 calendar year.
We remain confident that, based on the production guidance and our
macroeconomic assumptions, we will deliver solid operational performance and
earnings for the 2013 financial year compared to the reported attributable
earnings of R23,6 billion in the 2012 financial year, excluding major once-off
items such as the impact resulting from the ASPC disposal.
7 June 2013
*This update is based on information for the nine months ended 31 March 2013,
however, where practical, information to 30April 2013 has been included to
indicate business performance.
1. Macroeconomics remain volatile
April 2013 March 2013 March 2012 Change %
YTD YTD YTD March YTD
Average rand/US$ 8,68 8,64 7,67 13%
Brent crude oil (US$/b) 109,85 110,71 113,75 (3%)
Henry Hub gas price 3,34 3,25 3,32 (2%)
SA fuel price (US$/b) 130 129 131 (2%)
Ethylene (US$/ton) 1 615 1 611 1 548 4%
Propylene (US$/ton) 1 417 1 414 1 468 (4%)
Polymers basket 1 246 1 247 1 251 -
Solvents basket 1 222 1 240 1 250 (1%)
Prices reflect international commodities or baskets of commodities and are not
necessarily Sasol specific.
Sources: RSA Department of Energy, ICIS-LOR, Reuters, Platts, International
World economic growth remained cautious in the third quarter of Sasol's
current financial year as gross domestic product (GDP) growth slowed in the
United States (US) and the euro zone recession deepened. In contrast, Chinese
economic growth accelerated in the quarter, easing fears of a hard landing. In
South Africa, GDP growth improved in the quarter even as a further contraction
in mining output continued to weigh on overall economic activity.
In recent months, the downside risks to the global economic outlook have
eased, but have not disappeared. The fiscal cliff in the US was avoided early
in the 2013 calendar year. However, the impact of tax increases and the budget
sequester will likely only become more apparent during the course of the 2013
calendar year. Following the European Central Bank's pledge to do "whatever it
takes" to ensure the survival of the euro, risks associated with a
disintegration of the euro zone have been reduced significantly. While the
Chinese economy appears to have avoided a hard landing, recent weak economic
activity indicators do raise questions over the durability of the recovery.
Nonetheless, it is believed that growth in China will stabilise around 7,5 –
In South Africa, uncertainty surrounding the outcome of the upcoming wage
negotiation process, potential electricity supply shortages, anticipated
slower growth in household consumption expenditure and timid global demand
conditions are all likely to weigh on domestic growth prospects during the
course of this calendar year. It is not expected that GDP growth will show a
significant improvement on the 2,5% growth recorded in the 2012 calendar year.
The ebb-and-flow of news related to the health of the global economy is likely
to lead to ongoing oil price and exchange rate volatility. Aside from global
news flow, South Africa specific factors such as potential labour market
instability, electricity supply constraints and current account deficit
concerns are expected to exacerbate rand/US dollar exchange rate volatility.
Chemical product margins continued to be under pressure as feedstock price
increases outweighed the increases in selling prices. This has been
particularly evident in our Sasol Polymers and Sasol Solvents businesses,
which have experienced lower demand and softer product prices on the back of
weakening European macroeconomic conditions. Our Sasol Olefins and Surfactants
(O&S) business managed to maintain its total gross margin, despite a slight
reduction in volumes.
Across our operations, we remain focused on working capital management, cost
containment, production planning and optimisation as well as margin
2. Solid operational performance
April 2013 March 2013 March 2012 Change% March
YTD YTD YTD YTD
Sasol Mining (mt) 33,0 29,5 29,8 (1%)
Sasol Gas (mGJ) 132,9 119 112 6%
Sasol Synfuels (kt) 6 160 5 533 5 262 5%
Sasol Oil (m^3) 6 390 534 5 706 861 6 056 387 (6%)
Total product yield (%) 97,58 97,60 97,88 -
ORYX GTL* (mbbl) 3,6 3,3 3,6 (8%)
Canada shale gas assets* 19,9 18,1 11,4 59%
Arya Sasol Polymer Company* 305 281 302 (7%)
Sasol O&S (kt) 1 650 1 466 1 488 (1%)
* Sasol's share of production
Sasol Synfuels' year-to-date production for the nine months to 31 March 2013
was 5,5 milliontons (mt). This represents a 5% increase compared to the prior
year comparable period. The improved production is underpinned by the
commissioning of new plant and equipment, notably four additional gasifiers,
the impact of the 17th reformer (steam methane reformer) and improved plant
stability.Included in the positive variance is the impact of the 2012
industrial action. Delays experienced during the gas heated heat exchange
reformers' (GHHER's) east turnaround are adversely impacting Sasol Synfuels'
production targets compared to the first half of the financial year. Sasol
Synfuels' cash unit costs remain under pressure as a result of higher coal
feedstock prices, as well as increased energy, labour and maintenance costs.
Sasol Synfuels' cash cost inflation per unit was, however, largely in line
with PPI, excluding the coal feedstock and the abnormal electricity price
Our ORYX gas-to-liquids (GTL) joint venture, in Qatar, achieved 3,3million
barrels (mbbl) (Sasol's 49% share) cumulative production over the nine month
period. The decrease in production volumes compared to the prior year is as a
result of the planned statutory shutdown which commenced in February 2013 and
was completed in April 2013. The shutdown has enabled ORYX GTL to progress
various key de-bottlenecking projects which have already resulted in
operational benefits since start-up. Average throughput for the month of May
2013 was above 106% of design capacity.
The performance of our Sasol Olefins & Surfactants' (Sasol O&S) business for
the nine month period continues to highlight the contrasting supply and market
conditions that prevail between our US and European operations. Our US
operations continued to benefit from low US ethane prices, while our European
based businesses came under increased pressure as a result of reduced volumes
and lower margins. Total production and sales volumes for the nine months to
31March 2013 are marginally lower when compared to the prior year comparable
period. We expect Sasol O&S's operating margins to remain within the guided 7%
to 11% range through the cycle. The 100000 tons per annum ethylene
tetramerisation unit, currently being constructed at Sasol O&S's Lake Charles,
Louisiana site in the US, remains on schedule and is expected to start up
during the third quarter of the 2013 calendar year.
Arya Sasol Polymer Company (ASPC) production volumes were 7% down compared to
the prior year comparable period. Sasol's 50% share of the year-to-date total
production output from the plants was 281 kilotons (kt), achieving an average
utilisation rate for the nine month period of approximately 83% of design
capacity. However, due to logistics disruptions at ASPC, sales volumes were
Our South African-based polymers business continues to experience severe
margin pressure in line with the global polymers industry, incurring an
operating loss of R1453 million, excluding income from associates of R318
million, for the nine months ended 31 March 2013. Operating losses for the
full financial year are expected to be between R2,0 billion and R2,2 billion.
Average sales prices improved compared to the first six months of this
financial year, due to the weaker rand/US dollar exchange rates. However
higher feedstock costs eroded these benefits. Sales volumes were 7% higher
than the prior year comparable period. This performance was underpinned by a
7% increase in saleable production, due to improved plant efficiencies coupled
with more stable operations. Cash fixed costs in this business continue to
remain under pressure and during the period, in addition to normal inflation
increases, additional maintenance outage costs were incurred compared to the
prior year comparable period due to scheduled maintenance outages. The Sasol
Polymers business has commenced a turnaround intervention to restore the
overall profitability of the business and the design phase is underway. Our
projects identified to improve production performance are making significant
progress. The Ethylene Purification Unit (EPU5) project, which will increase
ethylene available for our polyethylene plants by approximately 48 kt per
annum, is expected to be operational in the second half of the 2013 calendar
year, while the C3 stabilisation project will achieve beneficial operation
during the middle of the 2014 calendar year.
Sasol Solvents' business performance for the nine months to 31 March 2013 has
improved from the first six months of the financial year but, remains under
pressure. Sales volumes were 4% above those of the prior year comparable
period, despite production volumes being 2% below those of the same period.
Our European operations continue to experience the effects of the euro zone
crisis and incurred losses for the nine month period. Margins remain under
severe pressure, mainly due to higher feedstock prices. The weaker rand did,
however, soften the effects of lower US dollar selling prices and US margins.
In our other chemical businesses, the gross margin of our Sasol Wax business
for the nine months ended 31 March 2013 was 5% higher than the prior year
comparable period, despite 1% lower sales volumes. Hard wax sales for the
first nine months of the financial year are, however, at similar levels
compared to the prior year comparable period. During the period, the
electricity co-generation plant in Hamburg, Germany was installed, with
beneficial operation being achieved in April 2013. It is anticipated that this
plant will yield a 16% energy cost saving and reduce our carbon footprint by
approximately 17 000 tons per annum. Sasol Nitro experienced challenging
operating conditions during the period. The explosives business was negatively
impacted by the mining sector labour unrest experienced in the first half of
the financial year, while the fertiliser business faced supply constraints due
to a slower ramp-up of the new limestone ammonium nitrate (LAN) fertiliser
granulation plant in Secunda, which reached beneficial operation on 2 May
Sasol Petroleum International (SPI) successfully completed the extended well
test on the I9-Z light oil well in the Inhassoro field in Mozambique which was
part of the appraisal programme for the Production Sharing Agreement (PSA)
licence area. The PSA licence area includes several gas discoveries that are
adjacent to the producing Pande and Temane natural gas fields. A comprehensive
appraisal report for the PSA was submitted to the Mozambican government at the
end of November 2012. Subsequent to this submission, Sasol notified the
government that various existing undeveloped discoveries are deemed to be
commercially viable. A field development plan will be submitted within the
allowed two year period. The project has just entered the pre-feasibility
study phase and an application for a development and production area was
submitted to the Mozambican authorities by 25 May 2013.
A 3-D seismic survey was acquired in the Sofala block, offshore Mozambique,
and 2-D seismic data is also currently being acquired in the onshore Area A,
The second exploration period for the Mozambican M-10 licence expired and the
licence was relinquished, subsequent to the drilling of the Mupeji-1 dry well.
The profitability of our Canadian shale gas assets (Farrell Creek and Cypress
A) continue to remain under pressure resulting from the slow recovery of gas
prices in the US, coupled with higher depreciation. We anticipate a
continuation of the current loss position for the full 2013 financial year. At
31 March 2013, our share of the capital expenditure on the Canadian shale gas
assets amounted to CAD278 million for the nine month period. At that date,
there were a total of 90 wells on stream in Farrell Creek and six wells on
stream in Cypress A, with 20 wells which have been drilled but not yet
Following on the completion of an aeromagnetic survey, a nine core hole
drilling campaign in the Botswana coal bed methane licences commenced in
December2012, and has just been completed. At present, we are analysing the
data to assess the next potential steps in the licence.
Sasol is currently in the process of divesting from its exploration licences
in Papua New Guinea.
3. Financial performance
Weaker rand increases inflationary cost pressures
A 13% weaker average rand/US dollar exchange rate R8,64/US$ at 31March2013)
negatively impacted cash fixed costs for the nine months ended 31 March 2013.
Cash fixed costs, excluding once-off, growth costs and the impact of exchange
rates, have increased above inflation, resulting primarily from increased
labour, electricity and maintenance costs. We continue to contain the impact
of electricity cost increases, through the utilisation of our own electricity
generation capacity. In respect of labour costs, we are entering into wage
negotiations over the coming months with our represented unions.
In order to identify opportunities where we can reduce and contain our cost
base on a sustainable basis, a project was launched to significantly reduce
the future cost structures of the Sasol group. We are finalising our analysis
of the cost drivers in the group. This analysis will be used in conjunction
with procurement and maintenance cost reduction strategies, underpinned by a
drive for shared services. Further information on our progress on this project
will be provided at the year-end results announcement.
Strong cash generation continues to fund growth
Free cash flow for the nine months to 31 March 2013, increased by 18% compared
to the prior year comparable period, allowing the group to maintain its strong
balance sheet. Our healthy cash generating ability has allowed us to
successfully sustain our current operations and fund our approved growth
aspirations, while still delivering attractive returns to our shareholders.
4. Projects update
US integrated ethane cracker complex and GTL complex
We are executing the front-end engineering and design (FEED) phase of the
integrated, world-scale ethane cracker and downstream derivatives units, and
will commence with FEED for the GTL and chemicals value-adds facility at Lake
Charles in Louisiana during the second half of the 2013 calendar year.
The ethane cracker (estimated to cost between US$5 billion and US$7 billion)
will produce 1,5 million tons of ethylene that will be used to produce a range
of ethylene derivatives. The main technologies for the ethane cracker and
derivative units have been selected and we have placed orders for critical
long-lead equipment. We expect beneficial operation for the ethane cracker to
be achieved during the 2017 calendar year, with the final investment decision
(FID) to be taken during the 2014 calendar year.
The ethylene produced will be consumed in the production of the following
oethoxylates, used in the production of surfactants;
oa range of alcohols, used in surfactants as well as a wide range of
ooctene, used as a co-monomer in polyethylene; and
opolyethylene, for film and other markets.
The US GTL facility (estimated to cost between US$11 billion and US$14
billion) will produce at least a nominal 96000 barrels per day (bbl/d) of
product, with the potential to produce up to 10% more. The US GTL project will
be delivered in two phases after the ethane cracker, with each phase
comprising at least 48000 bbl/d. The final investment decision for the US GTL
project is expected to be taken within 18 to 24 months after that of the US
Around 70% of the production of the GTL facility will be low-sulphur diesel,
with naphtha and liquid petroleum gas (LPG) as co-products, and 30% of the
production will be chemical products, including paraffin feedstock for linear
alkyl benzene (LAB), wax products and synthetic base oils.
We have submitted the filings for the key environmental permits, and have
regular interaction with the authorities and other stakeholders to monitor the
process. The outcome of the permit applications are expected later towards the
end of the FEED process. Our experienced, well-resourced integrated owner team
and independent, reputable industry partners will continue to assess ways in
which to manage and mitigate potential risks associated with executing these
For further information regarding these projects, refer to the information
related to our investor strategy days on our website www.sasol.com.
Our Uzbekistan GTL FEED activities are progressing well and are expected to be
completed during the second half of the 2013 calendar year. An investment
decision for this project is, amongst others, dependent on appropriate project
As a result of the magnitude of Sasol's growth portfolio, as well as
significant sustenance capital required for our South African operations,
Sasol regularly reviews the projects in its project pipeline. As a result of
these reviews, the Sasol Limited Board, approved that Sasol decreases its
shareholding in the Uzbekistan GTL project from 44,5% to 25,5% at the end of
the FEED phase.
Different shareholding options are currently being evaluated.
The Uzbekistan GTL project remains an important project in Sasol's GTL growth
portfolio and the business case for the project remains robust.
Mining replacement projects
The development of the Impumelelo and Shondoni Collieries, which are part of
Sasol Mining's R14 billion mine replacement programme, is progressing. The
issue of certain water licences by the relevant authorities has caused some
delay; however, both the Impumelelo and Shondoni Collieries are still expected
to be completed within budget and on time, reaching beneficial operation
during the fourth quarter of the 2014 and second half of the 2015 calendar
FT wax expansion project
Construction on the FT wax expansion project facility in Sasolburg, South
Africa, continues to progress. The commissioning of the new Slurry Bed
Reactor, which is key equipment for the capacity expansion, is expected to
take place at the end of March 2014, three months later than previously
announced. Phase 2 of the project will be impacted by the delay of phase 1 and
commissioning of phase 2's key equipment (second Slurry Bed Reactor) is
expected to take place in August2016. In our half year-end results
announcements, we indicated that we were assessing the costs of this project.
The total project cost of both phases 1 and 2 has increased from the original
approved budget by 40-45% to an estimated total cost of R11,9 billion. The
total project cost comprises both phase 1 and phase 2 costs, estimated at R9,0
billion and R2,9 billion, respectively. The increased cost is primarily
related to the brownfield nature of the project, construction delays and poor
labour productivity, which have been exacerbated by recent strike action and
civil unrest. The economics of the project have been negatively impacted by
the aforementioned schedule delays, as well as the volatile macroeconomic
environment. As a consequence, we are reassessing the economics of the
project. Every effort is being taken by the project team to monitor and
mitigate these risks. However, it should be noted that this project is a
highly-complex brownfield mega-project, being executed in a labour constrained
environment, where severe labour unrest and low productivity are being
experienced. Accordingly, some uncertainty on the schedule and costs remain
and there is a risk of potential impairment. Further announcements will be
made once additional information is available in this regard.
Sasol Synfuels growth programme
The Sasol Synfuels growth programme is nearing completion, with the first pair
of the GHHERs to be operational during June 2013. This will contribute to
increased site flexibility and volume growth, where after the timing of the
installation of the second set of GHHERs will be finalised. Beneficial
operation of the entire programme is expected to be reached in the second half
of the 2014 calendar year.
During the period, through Sasol New Energy (SNE), we advanced the development
of our US$246 million additional 140 megawatt gas-fired electricity
generation plant in Mozambique, in partnership with the country's state-owned
power utility Electricidade de Mocambique (EDM) at Ressano Garcia. EDM will be
the sole-offtaker of the electricity under a power purchase agreement.
Construction (ground works) has commenced on site and beneficial operation is
expected during the first half of the 2014 calendar year.
SNE's external water conservation partnerships have started to yield results,
with the first water savings of a cumulative R4,5 million being realised
through the repair of leaking plumbing in 50 000 houses in Sebokeng and
Evaton, in the Sasolburg region. The project will now start to become
self-funded, demonstrating the sustainability of the "ring-fenced savings"
funding model for the project. The concept of water off-setting has been
positively received by the Parliamentary Portfolio Committee on Water and
Environmental Affairs, and further development of water off-setting policy by
the Department of Water Affairs is being supported by SNE.
Clean Fuels 2 update
The high level Clean Fuels 2 (CF2) specifications, aligned with Euro V
emission standards, were published in the South African Government Gazette on
1June2012 and are in line with expectations. Our latest estimates on the
capital expenditure to comply with the core specifications, octane and volume
recovery, is approximately R11,7 billion, attributable to both our share in
the Natref joint venture and Sasol Synfuels. These estimates are subject to
change, based on the finalisation of feasibility studies being carried out in
Sasol was encouraged by the South African Finance Minister's budget
announcement on 27 February 2013, which indicated that support mechanisms will
be introduced to assist the local refineries with the introduction of
environmentally friendly fuels. Details of these mechanisms are expected by
the end of June 2013. We continue to engage with the South African government
(National Treasury and the Department of Energy) on cost-recovery mechanisms
and specifications to be prepared and published by the South African Bureau of
5. Update on strategic issues
Our foreign currency credit rating published by Standard & Poor's (S&P) on
16October 2012, is BBB/Negative/A-2, and S&P's local currency rating for the
sovereign (South Africa) is A-/Negative/A-2. Our foreign currency credit
rating published by Moody's Investors Service on 29 March 2013, is
Baa1/stable/P-2, and our national scale issuer rating is Aa3.za/P-1.za.
The credit ratings reflect our local and international activities, diversified
along the integrated value chain, as well as our current strong financial risk
profile and prudent financial policies.
Our gearing is currently close to zero. However, as we continue to advance our
North American growth strategy, which constitutes a significant portion of
group capital investment over the next 10 years, gearing is likely to reach
our targeted range by the 2016 financial year. We are confident that we will
be able to manage the long-term gearing of the group within our targeted
range, without selling assets and after taking into account the phasing of our
US GTL project, our progressive dividend policy as well as allowing some
flexibility for a buffer against volatility in commodity prices.
Progressive dividend policy
We remain committed to our progressive dividend policy. Despite a 13% decline
in the interim earnings per share, we maintained the interim dividend in line
with the prior year comparable period. This supports a minimum total dividend
in line with our 2012 full year dividend, barring any material and unforeseen
events or significant fluctuations in the global macroeconomic environment.
Polymers competition hearing
As reported previously, the South African Competition Commission (the
Commission) alleges that Sasol Chemical Industries Limited charged excessive
prices for propylene and polypropylene in the South African market from 2004
to 2007. We continue to dispute the Commission's allegations. In 2010, the
matter was referred by the Commission to the South African Competition
Tribunal (the Tribunal). The trial was originally set down to be heard before
the Tribunal from 16 July 2012, however, as a result of an application brought
by the Commission to postpone the hearing, the trial was heard before the
Tribunal during 13May2013 through to 7 June 2013. We await the outcome of
Liquid fuels competition enquiry
The Commission referred its diesel fuel market investigation to the Tribunal
at the end of October 2012. We began engaging with the Commission in 2008, as
part of our group-wide competition law compliance review, which preceded the
Commission's investigation into the liquid fuels sector. At the time, we found
no evidence to support the Commission's concerns of possible anti-competitive
conduct in the diesel market.
We have reviewed the referral and do not agree with the Commission's
allegations. We are, accordingly, defending the matter.
Our activities in Iran
The divestiture of our share in ASPC continues to progress well, albeit slower
than initially anticipated. We concluded a memorandum of understanding with an
interested party regarding the disposal of ASPC. With effect from
28February2013, the investment is classified as a disposal group
held-for-sale. As at the date of this update, we are finalising closing
Further losses relating to the foreign currency translation reserve of
approximately US$100 million will be recognised in income once we finally
divest from ASPC. The devaluation of the Iranian currency may further
negatively impact our earnings. There may be further impairments linked to the
fair value of the ASPC asset as a result of the deteriorating Iranian
environment and the accounting requirement to recognise operating profits for
the period since October 2012, which may not be recuperated through the
divestiture process and disposal value.
NERSA gas tariffs
The Gas Act requires that the National Electricity Regulator of South Africa
(NERSA) approves maximum prices of the gas molecules and the tariffs for use
of gas infrastructure. In the case of Sasol Gas, such approval is required for
gas prices and tariffs applicable from 26 March 2014.
The prices are intended to set a ceiling above which traders, such as Sasol
Gas, cannot price. This is the first step towards standardising prices, as
required by the Gas Act. In line with the stipulated NERSA process, in
December 2012, Sasol Gas made its submission to the regulator, to apply for
the overall maximum price, as well as the class maximum prices. As required,
Sasol Gas also applied for the approval of its transmission tariffs and
further notified NERSA of its intended distribution tariffs, which are not
Under the current pricing system, customer's prices are charged on a bundled
basis, for the gas molecule and the use of the infrastructure, based on their
energy alternative. Under the new mechanism, the total charge will be
unbundled and there will be standard prices and tariffs. Whereas the previous
pricing regime resulted in a range of prices, within the same customer
classes, the main effect of the new pricing regime will be to standardise
prices so that customers with the same off-take volumes will pay the same
price. The suite of tariffs that a customer will pay will depend on a
customer's geographic location and whether a customer is supplied off a
transmission or distribution pipeline.
The new prices we will charge will be below the NERSA set overall and class
maximum prices.Sasol in its maximum price application also applied for a
mechanism to transition customers to the new pricing system. This was approved
by NERSA with some amendments.
Given that NERSA has recently published the reasons for its decision, Sasol is
still in the process of finalising its standard prices. These actual prices
are part of the commercial engagements that Sasol will undertake with its
customers. All customers will have to migrate to the standard prices, and will
be required to conclude new supply contracts with Sasol.
Sasol takes note of the release of the second discussion paper on carbon tax
issued by the South African National Treasury in May 2013. Sasol welcomes the
opportunity for further comment and engagement with government on the matter.
We are currently reviewing the proposals made and will comment in due course.
6. Guidance for the full year
We expect the global environment and South African economy to maintain a
modest recovery into the remainder of the 2013 financial year. However, the
continued weakening demand in Europe and lower growth in emerging markets and
the US remain a concern. We anticipate that crude oil prices will remain
stable over the near term. However, product prices are expected to experience
continued volatility. Uncertainty remains over the resolution of the European
debt crisis and concerns over the US debt ceiling.
We expect an overall solid production performance for the 2013 financial year
with our production guidance remaining unchanged:
oSasol Synfuels volume guidance based on current performance is anticipated
to be at the top end of the previously guided range of 7,2 to 7,4 million
tons for the full year;
oThe full year average utilisation rate at ORYXGTL in Qatar, taking into
account the statutory shutdown, is expected to be approximately 80% of
oFull year production at ASPC in Iran will be approximately 80% of
nameplate capacity; and
oOur shale gas venture in Canada will continue to show increased production
compared to the prior year due to the new wells coming on stream. At
present we are stabilising our production, as we have slowed down the
drilling of additional wells.
We remain on track to deliver on our expectations for improved operational
performance. As costs are incurred to improve plant stability and the weaker
rand continues to exert pressure on our South African businesses, we expect
that our normalised fixed costs will increase above the South African
producers' price index (PPI) inflation. Cost reduction is a specific target
within our short-term incentive scheme and, accordingly, management continues
to focus on controllable cost elements. The macroeconomic conditions continue
to be volatile, impacting our assumptions in respect of a stable crude oil
price and volatile product prices, stronger refining margins as well as the
weaker rand/US dollar exchange rate. We continue to focus on factors within
our control: volume growth, margin improvement and cost reduction.
An update on earnings guidance will be provided once we have a reasonable
degree of certainty on the full year results for the 2013 financial year,
taking into account any adjustments arising from our year-end reporting
closure process, as well as remeasurement effects. The potential impairment of
our investment in ASPC, as well as other possible impairments are not expected
to have an impact on headline earnings per share. The devaluation of the
Iranian currency may further negatively impact our earnings.
The forecast financial information appearing in this update is the
responsibility of the directors and has not been reviewed or reported on by
Sasol's external auditors. We will release Sasol's full-year results on
Monday, 9 September 2013.
7. Other matters
Income statement presentation
Sasol will be changing the presentation of its income statement for the 2013
financial year. In terms of International Financial Reporting Standards
(IFRS), the income statement can be presented by nature or by function. Sasol
currently presents its income statement by function. Sasol has elected to
change its income statement presentation to reflect how we effectively manage
our business as well as align to peers. Accordingly, Sasol will be reporting
its income statement by nature with effect from the 2013 financial year.
The income statement, and appropriate notes, in respect of prior reporting
periods, will be restated. The periods affected are as follows:
o30 June 2012
o30 June 2011
o31 December 2012
o31 December 2011
Change in independent auditors
In the spirit of good corporate governance, we have decided to rotate our
independent auditor, KPMG Inc. after more than 25 years of satisfactory
service as auditors, at the end of the 2013 financial year. The replacement
independent auditor will be appointed for the 2014 financial year, commencing
1July 2013. On 12 February 2013, the Sasol Limited Audit Committee selected
PriceWaterhouseCoopers as the new independent auditor, subject to approval by
the Annual General Meeting on 22November 2013.
Retirement of Senior Group Executive
Lean Strauss, Senior Group Executive responsible for international energy, new
business development and technology, announced that he would be retiring from
Sasol at the end of September 2013. During Lean's 31 years at Sasol, he has
made a remarkable contribution to the growth and development of the group. He
will remain available to the group on a consultancy basis.
8. Other events 2013
9 September Full-year 2013 financial results release
9 September Dividend declaration
14 October Dividend payment (Sasol ordinary shares)
25 October Dividend payment (ADRs)
22 November Sasol Limited Annual General Meeting
25 November CFO letter
9. Investor Relations contacts
Please feel free to contact us as follows:
+27 11 441 3113
The Investor Relations team:
oRaj Naidu Executive: Investor Relations and Shareholder Value Management
oSam Barnfather General Manager: Investor Relations Operations (Financial
oAmelia van den Berg (Financial contact)
Sponsor: Deutsche Securities (SA) Proprietary Limited
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 and cost
reductions. Words such as "believe", "anticipate", "expect", "intend", "seek",
"will", "plan", "could", "may", "endeavour" 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 under the
Securities Exchange Act of 1934 on Form 20-F filed on 12 October 2012 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: A billion is defined as one thousand million. All references to
years refer to the financial year ended 30 June. Any reference to a calendar
year is prefaced by the word "calendar".
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