Sasol Delivers Solid Operational Performance

Monday 09 March 2015 13:50
Salient features

- Strong group-wide operational performance

- 3% increase in liquid fuels sales volumes for Energy business in Southern Africa

- Performance Chemicals and Base Chemicals sales volumes up 5% and 1% respectively

- Normalised cash fixed costs 0,7% below inflation

- Headline earnings per share up by 6% to R32,00

- Business Performance Enhancement Programme annual cost savings target increased to at least R4,3 billion

- Decisive management action taken in response to lower international oil prices

- Safety Recordable Case Rate (RCR) excluding illnesses improved to 0,32

- Lake Charles Chemicals Project making good progress

Maintaining momentum

President and Chief Executive Officer, David E. Constable says:

"The changes made to our business since 2011, have resulted in a more effective and cost-conscious organisation. Through the various improvements that have been introduced, we are not only more resilient as a company, but far better equipped to maintain momentum and respond decisively to an evolving global landscape.

Overall, we continued to deliver strong operational and cost performance despite the volatile macro-economic environment. With oil prices moving dramatically lower over the last six months, the management team has formulated a comprehensive Response Plan to conserve cash and further refine our organisational structures and near-term strategies.

The benefits of the detailed work we are doing now will ensure that Sasol emerges from the current challenging environment as an even leaner and more focused business."

Interim financial results overview*

Earnings attributable to shareholders for the six months ended 31 December 2014 increased by 54% to R19,5 billion from R12,7 billion in the prior period. Headline earnings per share increased by 6% to R32,00 and earnings per share increased by 53% to R32,04 compared to the prior period.

However, excluding the impact of remeasurement items, net once-off charges, movements in our share-based payment expense and lower unrealised profit in inventory, earnings attributable to shareholders decreased by 23% from the prior period.

Profit from operations of R30,0 billion increased by 39% compared to the prior period. This achievement was due to an overall strong operational performance from our Regional Operating Hubs (ROHs) coupled with increased sales volumes and improved margins in our Performance Chemicals and Base Chemicals Strategic Business Units. The group's profitability was further enhanced by a 9% weaker average rand/US dollar exchange rate (R10,99/US$ for the six months ended 31 December 2014 compared with R10,08/US$ in the prior period). This benefit was partially offset by a 19% decline in average Brent crude oil prices (average dated Brent was US$89,00/barrel for the six months ended 31 December 2014 compared with US$109,83/barrel in the prior period).

Over the period, we maintained a strong operational performance across our ROHs. In tandem, our Energy business in Southern Africa increased its liquid fuels sales volumes by 3% compared to the prior period. Furthermore, our Chemicals businesses delivered an exceptional performance, having consistently reported increased sales volumes over the past two years. Normalising for the impact of the sale of our Solvents Germany and Sasol Polymer Middle East (SPME) businesses and due to focused marketing and sales initiatives, sales volumes for Performance Chemicals and Base Chemicals increased by 5% and 1%, from the prior period.

Our ORYX GTL plant sustained a solid performance, with an average utilisation rate of 91% for the period, despite an earlier than planned shutdown during December 2014.

Normalised cash fixed costs increased by only 6,1%, 0,7% below the South African producers' price index (SA PPI) of 6,8% for the period. This was achieved despite a challenging South African cost environment in respect of labour, maintenance and electricity charges. A key focus area for the management team since 2013 has been delivering on our company-wide Business Performance Enhancement Programme, where we have made significant progress in reducing our cost base sustainably.

Cash flow generated from operations increased by 21% to R34,0 billion compared with R28,1 billion in the prior period. This includes a decrease in working capital of R1,8 billion in the current period, due to lower commodity prices. Our net cash position improved by 29% from R38,0 billion in June 2014 to R48,9 billion as at 31 December 2014. Capital expenditure over the period amounted to R22,1 billion, which is in line with our expectations.

As previously announced, our revised dividend policy is a dividend cover range which will be based on headline earnings per share. The interim dividend cover was 4,6 times at 31 December 2014 (31 December 2013: 3,8 times). Taking into account the current volatile macro-economic environment, capital investment plans, our cash conservation initiative, the current strength of our financial position, and the dividend cover range, the Sasol Limited board of directors has declared an interim dividend of R7,00 per share (12,5% lower compared to the prior period).

* All comparisons refer to the prior period as the six months ended 31 December 2013. Except for earnings attributable to shareholders, all numbers are quoted on a pre-tax basis.

Business Performance Enhancement Programme delivering results

As part of our Business Performance Enhancement Programme, the process of implementing organisational structures and employee placements to align with our updated operating model will be concluded by the end of June 2015. As at 31 December 2014, nearly 1 500 voluntary separations and early retirements were approved by the company.

We still expect cost savings of R4,0 billion by financial year 2016 off a 2013 cost base. We have identified further savings opportunities and now forecast an exit run rate of at least R4,3 billion by the end of financial year 2016. Cost trends are still forecast to track SA PPI from financial year 2017.

At 31 December 2014, the programme realised actual sustainable benefits of R991 million. For the end of the financial year we expect sustainable savings to increase to approximately R1,5 billion.

As part of our Response Plan actions, we plan to deliver further cash cost sustainable savings of R1 billion annually. These savings will be achieved through additional organisational structural refinements, a 30-month freezing of between 500 and 1 000 vacancies, and focused supply chain cost base reduction initiatives.

Response to lower international oil prices

In response to a lower-for-longer oil price environment, we announced our Response Plan on 28 January 2015. We have set a 30-month cash conservation target range of between R30 billion to R50 billion, using 31 December 2014 as the baseline. This cash conservation target range supplements our current Business Performance Enhancement Programme sustainable cost savings target of at least R4,3 billion per year, from financial year 2017.

Our Response Plan target of R30 billion to R50 billion will be realised from the following key areas:

- capital portfolio phasing and reductions - target of R13 billion to R22 billion;

- capital structuring - target of R8 billion to R12 billion;

- further cash cost reductions - target of R4 billion to R7 billion of which R1 billion per annum will be considered sustainable at the end of the 30-month period; and

- working capital and margin improvements - target of R5 billion to R9 billion.

As previously announced, decisive measures have already been agreed to and key decisions have been taken to conserve cash, including the delay of our gas-to-liquids (GTL) plant in the US, the change to our dividend policy as well as the further optimisation of our organisational structures.

Profit outlook (*)- strong production performance and cost reductions to continue

The global economic environment remains volatile and uncertain. We expect oil prices to remain low for the rest of the 2015 calendar year. We also expect the rand exchange rate to be impacted by quantitative easing in the Eurozone, uncertainties relating to the interest rate normalisation by key central banks and infrastructure constraints in South Africa. Both oil price and rand exchange rate developments are outside of our influence, and therefore our focus remains firmly on factors within our control, which include volume growth, margin improvement and cost optimisation.

Oil and other commodity price risk hedging are evaluated on an ongoing basis. The market is constantly monitored for risk management opportunities, taking cognisance of integration benefits and the strength of Sasol's balance sheet.

We expect an overall strong production performance for the 2015 financial year, with:

- Liquid fuels product volumes for the Energy SBU in Southern Africa to be approximately 59 million barrels;

- The average utilisation rate at ORYX GTL in Qatar to be above 90% of nameplate capacity;

- Base Chemicals normalised sales volumes to be slightly higher than the previous financial year with margins under pressure due to lower international oil prices;

- Performance Chemicals sales volumes to outperform the previous financial year on the back of increased market demand;

- Average Brent crude oil prices to be at least 30% lower during the second half of the financial year compared to the first half;

- Normalised cash fixed costs to follow SA PPI;

- Capital expenditure of R45 billion for 2015, R65 billion in 2016 and R60 billion in 2017 as we progress with the execution of our growth plan and strategy;

- Our balance sheet gearing up to a level of between 2% and 7% at year-end; and

- The Response Plan cash flow contribution from all streams to range between R6 billion and R10 billion.

(*) The financial information contained in this profit outlook is the responsibility of the directors and in accordance with standard practice, it is noted that this information has not been reviewed and reported on by the company's auditors.

Declaration of cash dividend number 71

An interim gross cash dividend of South African 700,00 cents per ordinary share (31 December 2013 - 800,00 cents per ordinary share) has been declared for the six months ended 31 December 2014. The interim cash dividend is payable on the ordinary shares and the Sasol BEE ordinary shares. The dividend has been declared out of retained earnings (income reserves). The South African dividend withholding tax rate is 15% and no credits in terms of secondary tax on companies have been utilised. At the declaration date, there are 650 879 016 Sasol ordinary, 25 547 081 Sasol preferred ordinary and 2 838 565 Sasol BEE ordinary shares in issue. The net dividend amount payable to shareholders, who are not exempt from the dividend withholding tax, is 595,00 cents per share, while the dividend amount payable to shareholders who are exempt from dividend withholding tax is 700,00 cents per share.

The salient dates for holders of ordinary shares and Sasol BEE ordinary shares are:

Declaration date Monday, 9 March 2015

Last day for trading to qualify for and participate in the

final dividend (cum dividend) Wednesday, 1 April 2015

Trading ex dividend commences Thursday, 2 April 2015

Record date Friday, 10 April 2015

Dividend payment date Monday, 13 April 2015

The salient dates for holders of our American Depository Receipts are [1]:

Ex dividend on New York Stock Exchange (NYSE) Wednesday, 8 April 2015

Record date Friday, 10 April 2015

Approximate date of currency conversion Tuesday, 14 April 2015

Approximate dividend payment date Thursday, 23 April 2015

1. All dates are approximate as the NYSE sets the record date after receipt of the dividend declaration.

On Monday, 13 April 2015, dividends due to certificated shareholders on the South African registry will either be electronically transferred to shareholders' bank accounts or, in the absence of suitable mandates, dividend cheques will be posted to such shareholders. Shareholders who hold dematerialised shares will have their accounts held by their CSDP or broker credited on Monday, 13 April 2015.

Share certificates may not be dematerialised or re-materialised between Thursday, 2 April 2015 and Friday, 10 April 2015, both days inclusive.

Conference call webcast available on Sasol's website

David Constable, President and Chief Executive Officer and Paul Victor, Group Financial Controller will host an analyst conference call and webcast at 15h00 (South Africa) / 13h00 (United Kingdom) / 08h00 (US EDT) to discuss the results. The conference call webcast can be accessed from Sasol's website www.s/… .

Detailed supplementary information regarding the interim financial results, such as the conference call presentation, the full earnings release and the analyst book, is available on the Investor Centre on www.s/… .

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, 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 29 September 2014 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.

About Sasol:

Sasol is an international integrated energy and chemicals company that leverages the talent and expertise of our more than 32 400 people working in 37 countries. We develop and commercialise technologies, and build and operate world-scale facilities to produce a range of high-value product streams, including liquid fuels, chemicals and low-carbon electricity.

For all media related queries, please contact:

Alex Anderson, Head of Group Media Relations

Telephone +27(11)441-3295

[email protected]

Source: Sasol Limited