Reviewed Interim Financial Results for the six months ended 31 December 2018
Sasol Limited
(Incorporated in the Republic of South Africa)
(Registration number 1979/003231/06)
Sasol Ordinary Share codes: JSE: SOL NYSE: SSL
Sasol Ordinary ISIN codes: ZAE000006896 US8038663006
Sasol BEE Ordinary Share code: JSE: SOLBE1
Sasol BEE Ordinary ISIN code: ZAE000151817
("Sasol" or "the company")
Reviewed Interim Financial Results for the six months ended 31 December 2018
Sasol is a global integrated chemicals and energy company. Through our talented people, we safely and sustainably
create superior value for our customers, shareholders and other stakeholders. We integrate sophisticated technologies
in world-scale operating facilities to produce and commercialise commodity and specialised chemicals, gaseous and
liquid fuels, and lower-carbon electricity.
SALIENT FEATURES
FINANCIAL PERFORMANCE
- Earnings per share up 112% to R23,92
- EBITDA up 10% to R27 billion
- Core headline earnings per share up 18% to R21,45
- Normalised cash fixed costs contained to below inflation target
- Dividend per share* R5,90 (3,6x CHEPS)
* Our dividend policy is to pay dividends with a dividend cover on core headline earnings per share (CHEPS)
SAFETY
Safety Recordable Case Rate (RCR), excluding illnesses, improved to 0,26, regrettably two fatalities
ADVANCING US OPERATIONS AND LCCP*
- Delay and cost overrun disappointing
- Cost estimate revised to US$11,6 - US$11,8 billion
- LLDPE** producing products since February 2019
- HDPE*** ramping up, targeting 80% utilisation for full year
* Lake Charles Chemicals Project (LCCP)
** Linear low-density polyethylene plant
*** High density polyethylene plant
SOCIAL VALUE AND TRANSFORMATION
- Achieved Level 4 contributor status
- R9,4 billion in procurement from SA Black-owned businesses
- Invested R918 million in skills and socio-economic development
- Sasol South Africa declared first dividend of R11,44 per share, thereby benefiting our Khanyisa shareholders
OPERATIONAL PERFORMANCE
- Extended shutdown at SSO impacted production and sales volumes, run-rate post the shutdown averaging 7,8 mt
- Mining productivity up 8%
- Liquid fuels sales volumes up 4%, due to strong SSO and Natref performance
- ORYX GTL utilisation at 99%
- Ethylene supply constraints result in 3% decrease in Performance Chemicals sales volumes
- Base Chemicals volumes down 11%, impacted by SSO shutdown
Joint President and Chief Executive Officer, Bongani Nqwababa said:
"We recorded a satisfactory operational and financial performance against the backdrop of a volatile
macroeconomic environment and an uncertain geo-political climate, which impacted global demand
growth. Our production and sales performance was mixed with largely lower than expected production in the first
half of the financial year, mainly as a result of the longer than planned total shutdown at our Secunda Synfuels
Operations (SSO). However, our operational performance was enhanced by management interventions in previous
periods resulting in improved performances at Natref and Sasol Mining. Post the shutdowns, we are pleased to see
steady progress across our value chains.
As always, we remain focused on our key controllable factors, with safety, reliability of operations and cost
control being paramount. Our Continuous Improvement (CI) programme will be a key feature to deliver future
value to shareholders and improve our cost competitive advantage. This initiative is driven with the same
discipline and rigour that allowed us to deliver, and exceed expectations, on our Business Performance Enhancement
Programme and Response Plan targets."
Joint President and Chief Executive Officer, Stephen Cornell said:
"While the Lake Charles Chemicals Project (LCCP) fundamentals remain firmly intact, we acknowledge the disappointing
cost and schedule overrun. The project was impacted by several challenges, within and beyond our control, in the
fourth quarter of the previous calendar year. Despite incremental cash flows from the project being deferred due to
a schedule delay, we remain confident that the project will deliver the steady EBITDA(1) run-rate of US$1,3 billion
in financial year 2022. While this update will have an impact on our cash flow inflection point and gearing, we continue
to proactively protect our balance sheet, while managing the capital structure and gearing during these turbulent times.
Our short-term focus remains on productivity in the field, process safety and progressing units to mechanical completion
followed by beneficial operation. The linear low-density polyethylene (LLDPE) unit achieved beneficial operations on
13 February 2019, and is the first of seven LCCP production units to come online.
Our commitment to sustainable value creation for all our stakeholders, is underpinned by driving our roadmap to deliver
on our financial and sustainability goals, as well as contributing meaningfully to inclusive growth and development
of our fenceline communities.
We are mindful of the challenges we face, however, our management team is fully committed to ensuring Sasol is a
credible stakeholder partner with a compelling investment proposition that will deliver value to all stakeholders."
COMPELLING INVESTMENT CASE
WITH CLEAR FOCUS AREAS TO...
- Improve our safety performance in pursuit of achieving zero harm
- Delivery of LCCP commissioning, operations and business readiness
- Drive reliable and stable operations
- Maintain low cost and working capital competitiveness through CI(6)
- Balance sheet management while maintaining investment grade ratings and positioning the company for growth
LEADS TO
EBIT(2) GROWTH >5% CAGR(3) through the cycle
ROIC(4) (US$) >12% through the cycle
FCF(5) per share >US$6 in 2022
Dividend returns 40% by 2022 45% thereafter
1. EBITDA - Earnings before interest, tax, depreciation and amortisation 2. EBIT - Earnings before interest and tax
3. CAGR - Compound annual growth rate 4. ROIC - Return on invested capital 5. FCF - Free cash flow
6. CI - Continuous Improvement programme
Overview(1,2,3)
Our underlying cash generation remains sound, with earnings before interest, tax, depreciation and amortisation
(EBITDA)(4) increasing by 10% when compared to the prior period and normalised cash fixed cost contained to below
our inflation target. Our earnings growth was, however, slower than expected due to volatility in the oil price and
lower than expected production and sales volumes. As we are in the commissioning phase of the LCCP production
units, the delay in income from these units will result in lower earnings due to costs being recognised without
corresponding revenues.
Earnings attributable to shareholders for the period ended 31 December 2018 increased by 114% to R14,7 billion
from R6,9 billion in the prior period, largely due to the significant remeasurement items recorded in the prior
period. Headline earnings per share (HEPS) increased by 32% to R23,25 per share and earnings per share (EPS)
increased by 112% to R23,92 per share compared to the prior period.
Core headline earnings per share (CHEPS)5 increased by 18% to R21,45 per share compared to the prior period,
mainly as a result of higher average crude and product prices, the effect of the weaker rand/US dollar exchange rate
and higher margins in specialty chemicals measured in rand terms. This was partially offset by lower than expected
production and sales volumes due to the extended shutdown at SSO and external ethylene supply constraints
which impacted our European operations. Post the shutdowns, we are seeing much improved production in all of
our units with SSO performing at run-rates indicative of 7,8 million tons (mt)/per annum. We expect steady
progress in the second half and production to be in line with previous market guidance.
Sasol's core headline earnings were impacted by the following notable after tax once-off and period close items:
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Rand per Rand per Rand per
share share share
Headline earnings per share 23,25 17,67 27,44
Translation impact of closing exchange rate (0,52) 1,33 (0,09)
Mark-to-market valuation of oil and foreign exchange hedges (0,48) (0,78) 3,81
Khanyisa share-based payment 0,63 - 4,82
LCCP ramp-up depreciation 0,17 - 0,05
Reversal of provision for tax litigation matters (1,60) - -
Core headline earnings per share(5) 21,45 18,22 36,03
Average crude oil prices moved higher by 26%, however in December 2018, we saw the oil price trending much
lower at ~ US$50/bbl highlighting the volatility in supply demand balances. Whilst we benefitted from the higher oil
price in the first quarter, we have to ensure that we remain focused on cost, cash and capital conservation to
sustainably operate in volatile periods.
Excluding the effect of our hedging programme, the average rand/US dollar market exchange rate of R14,20
weakened by 6% from the prior period and the closing exchange rate weakened by 5% from R13,73 in June 2018 to
R14,36 in December 2018. The weaker closing exchange rate negatively impacted gearing and the valuation of our
foreign exchange derivatives and loans.
The movement in macroeconomic factors can be summarised as follows:
Half year Half year Full year
% change 31 Dec 18 31 Dec 17 30 Jun 18
Rand/US dollar average exchange rate 6 14,20 13,40 12,85
Rand/US dollar closing exchange rate 16 14,36 12,37 13,73
Average dated Brent crude oil price (US dollar/barrel) 26 71,33 56,74 63,62
Refining margins (US dollar/barrel) (2) 9,49 9,73 9,32
Average Henry Hub gas price (US dollar/million British
thermal unit) 15 3,36 2,93 2,95
1 Forward looking statements are the responsibility of the directors and in accordance with standard practice,
it is noted that these statements have not been reviewed and reported on by the company's auditors.
2 All comparisons to the prior period refer to the six months ended 31 December 2017. All numbers are quoted on
a pre-tax basis except for earnings attributable to shareholders.
3 All non-GAAP measures (such as normalised earnings before interest and taxation (EBIT), core headline earnings,
adjusted effective tax rate, etc.) have not been reviewed and reported on by the company's auditors.
4 EBITDA is calculated by adjusting earnings before interest and taxation for depreciation, amortisation,
remeasurement items, share-based payments and unrealised gains and losses on our hedging activities.
We believe EBITDA is a useful measure of the group's underlying cash flow performance. However, this is not
a defined term under IFRS and may not be comparable with similarly titled measures reported by other companies.
5 Core headline earnings are calculated by adjusting headline earnings with once-off items, period close adjustments
and depreciation and amortisation of significant capital projects, exceeding R4 billion which have reached beneficial
operation and are still ramping up, and share-based payments on implementation of B-BBEE transactions. Period close
adjustments in relation to the valuation of our derivatives at period end is to remove volatility from earnings
as these instruments are valued using forward curves and other market factors at the reporting date and could vary
from period to period. We believe core headline earnings are a useful measure of the group's sustainable operating
performance. However, this is not a defined term under IFRS and may not be comparable with similarly titled measures
reported by other companies.
EBITDA and core headline earnings constitutes pro forma financial information in terms of the JSE Limited Listings Requirements
and should be read in conjunction with the basis of preparation and pro forma financial information.
Operational performance overview
Sasol experienced some challenges with regards to our operational performance in the first quarter of the year,
largely due to the extended planned shutdown at SSO which impacted production and sales volumes across the
value chain. We did however deliver a stronger operational performance in the second quarter of the year and are
maintaining stable operations. Our current production run-rates at SSO support an annualised run-rate of
7,8 million tons. In Europe, our operations maintained their good performance, but were affected by external
ethylene supply constraints which impacted sales volumes.
The highlights of our business performance are summarised below:
- Mining's productivity continues to improve although we have not yet achieved targeted productivity levels. Our
productivity rate improved by 8% from 1 099 t/cm/s in the prior period to 1 187 t/cm/s in December 2018. Supply
to our internal value chain remains sufficient and our stock pile has been restored to levels above our working
capital target. We are now planning to reduce external purchases to pre-2017 strike levels;
- Production volumes from our Eurasian Operations decreased by 8% mainly resulting from external ethylene
feedstock supply shortages and planned shutdowns;
- ORYX GTL continued to deliver an exceptional performance, with an average utilisation rate of 99%;
- Natref improved its performance by 43% and achieved a production run-rate of 641m3/h;
- The planned Steam Station 2 shutdown at Sasolburg Operations (SO) was completed ahead of schedule and
achieved stable operations post the shutdown. A detailed study was undertaken that proved the viability of
specific SO assets, which are not gas dependent, to have a useful life beyond 2034. The useful life of these
assets was therefore extended to 2050;
- Liquid fuels sales volumes increased 4%, enabled by the strong performance from Natref, and increased sales to
wholesale and commercial customers;
- Sales volumes from our Performance Chemicals business decreased by 3%, mainly as a result of a force majeure
in Europe triggered by external ethylene supply constraints; and
- Base Chemicals sales volumes decreased by 11%, impacted by the extended shutdown at SSO and lower fertiliser
demand. Our 50% joint venture high density polyethylene plant (HDPE) in the US with INEOS Olefins and
Polymers USA is ramping up to expectations and delivered 91 kt of saleable product for Sasol for the six months.
A detailed production summary and key business performance metrics for the financial year for all our businesses
were published on our website, <a href="http://www.sasol.com" target="_blank">www.sasol.com</a>, on 8 February 2019.
Cost, cash and capital performance
Cash fixed costs, excluding capital-growth and once-off business establishment costs, increased by 4,3% which is
1,7% below our inflation target. Our cost management processes remain a key focus to protect and improve our
competitive position, while ensuring that we maintain safe and sustainable operations. As indicated previously,
Sasol is targeting a longer term sustainable inflation rate of 6%.
Our net cash position decreased by 7%, from R17 billion in June 2018 to R16 billion as at 31 December 2018 mainly
due to the funding requirements of the LCCP. Loans raised during the period amounted to R28 billion, mainly for
funding of our growth projects. During the period, we utilised an additional US$1,7 billion of the US$3,9 billion
Revolving Credit Facility (RCF), in order to meet the group's funding requirements. In addition, in September 2018
Sasol raised bonds in the US capital markets to the value of US$1,5 billion (maturity in 2024) and US$0,75 billion
(maturity in 2028), respectively. The proceeds of the bonds were used to repay a portion of the outstanding LCCP
project asset finance facility.
Working capital increased R2,1 billion from June 2018, mostly as a result of higher feedstock prices. Inventory
holding in days reduced by 11% compared to June 2018.
Cash generated by operating activities increased by 79% to R25 billion compared with R14 billion in the prior period.
This is largely attributable to favourable Brent crude oil and product prices and a weaker rand/US dollar exchange
rate.
Actual capital expenditure amounted to R30 billion. This includes R16 billion (US$1,1 billion) relating to the LCCP. Our
capital expenditure estimate for the full year has been revised to R52 billion largely due to optimisation of the
capital portfolio.
Due to funding of the LCCP, more than 85% of our debt is now US dollar denominated. Given the significantly
weaker closing exchange rate of R14,36, gearing increased to 48,9%, which is above our target and previous market
guidance. The exchange rate increased gearing by approximately 2% compared to our internal forecast. The higher
capital cash flows on the LCCP during November to December 2018 further impacted gearing increasing it to 48,9%.
Net debt to EBITDA increased to 2,17 times for the same reasons. While this is above our target of 2,0 times and
previous market guidance, our investment grade credit ratings remain intact. Notwithstanding the current oil price
and exchange rate volatility, as well as the increased expenditure on the LCCP, we still plan to manage the balance
sheet debt metrics to within investment grade credit ratings.
Our dividend policy is to pay dividends with a dividend cover range based on CHEPS. Taking into account the impact
of the current volatile macroeconomic environment, capital investment plans, the current strength of our balance
sheet, and the dividend cover range, the Board has declared a gross interim dividend of R5,90 per share
(18% higher compared to the prior period). The dividend cover is 3,6 times at 31 December 2018 (31 December 2017:
3,6 times).
Update on hedging activities
Sasol continues to monitor opportunities to optimally protect its trading portfolio and balance sheet. The group
entered into a number of hedging transactions relating to the crude oil price, rand/US dollar exchange rate, ethane
price and the coal price.
Our hedging programme for financial year 2019 has been completed, with ~70% of our exposure to the rand/US
dollar exchange rate and ~80% of our oil exposure hedged. We are currently executing on our hedging programme
for financial year 2020 with US$613 million of our exposure to the rand/US dollar exchange rate already hedged as
at 31 December 2018. In January 2019, we hedged an additional US$87 million, thereby increasing our total cover to
US$700 million.
The current ethane hedging programme is being executed to cover the existing ethane cracker in the US. Hedging
for the LCCP cracker is planned to match the start-up schedule.
Should attractive hedges become available in the market at an acceptable cost, we will enter into additional hedges
in mitigation against these financial risks. The volumes hedged, exposure and floor prices for financial years 2019
and 2020 are detailed in the Analyst Book available on our website, <a href="http://www.sasol.com" target="_blank">www.sasol.com</a>.
Continuous improvement (CI) and digitalisation
Our group wide CI programme, aimed at improving the robustness and competitiveness of our business, has a
medium-term target to increase our Return on Invested Capital (ROIC) for our foundation businesses by at least
two percentage points by financial year 2022. The targeted ROIC increase is off a 30 June 2017 base, normalised for
remeasurement and once-off items, and excluding assets under construction.
To date, we have completed industry benchmarks against our global peers for the majority of our functions and
major value chains. Based on the outcome of these, a number of value enhancing opportunities with a high
probability to meet our financial year 2022 ROIC target have been identified. Approximately R2 billion of value has
been unlocked with specific gross margin, cash fixed costs and balance sheet initiatives in the first half of financial
year 2019. This benefit was offset by the impact of production interruptions during the period.
Digitalisation is a significant lever for our CI programme, with specific focus on improving the quality and availability
of data across all areas of the business to enable automation, advanced analytics and improved decision making
and operations.
We have made good progress with our focused asset review process. The majority of our reviewed assets will be
retained, with some earmarked for growth while others will be enhanced through detailed improvement plans.
Although the initial asset reviews are nearing completion, the asset portfolio will be continuously reviewed to
achieve a high grade portfolio and ensure optimal performance against our targets.
Effective tax rate
The decrease in our effective corporate tax rate from 31,6% to 24,1% was mainly as a result of the successful
outcome of the Sasol Oil tax litigation matter resulting in the reversal of the provision of R1,3 billion. The adjusted
effective tax rate, excluding equity accounted investments, remeasurements and once-off items, is 29,0%
compared to 26,4% in the prior period due to lower energy efficiency allowances.
Satisfactory operational performance, higher oil and product prices (1,3)
Operating Business Units
Mining - improving productivity rates while striving towards zero harm
Normalised earnings* decreased by 3% to R2,8 billion compared to the prior period, mainly as a result of lower
sales volumes to SSO and higher royalty taxes of R260 million associated with our capital expenditure. We did
however benefit from higher selling prices to SSO and a 12% increase in export coal prices, although our export
volumes were 6% lower when compared to the prior period.
Normalised unit cost of production increased by 5% to R299 per ton compared to the prior period, which is below our
inflation target. Our stock pile has been restored to levels above our working capital target and supply to our
internal value chain remains sufficient. We remain focused on maintaining safe and reliable operations and
increasing production in line with our internal plans. We are therefore targeting a normalised unit cost of
production of between R295 to R304 per ton for the full year.
Exploration and Production International (E&PI) - strong operational delivery from Mozambique and
Gabon
Normalised earnings* amounted to R812 million for the period.
Our Mozambican producing operations recorded an EBIT of R1,2 billion largely due to higher sales prices, which was
partly negated by lower demand in the Mozambican gas market. We maintained stable operations during the period
and remain on track to achieve our targeted volumes for the year.
Our Gabon asset recorded an EBIT of R335 million compared to R47 million for the prior period due to higher sales
prices and a 3% increase in production volumes.
Our Canadian shale gas asset in Montney generated an operating loss of R363 million compared to the operating
loss of R437 million excluding the partial impairment of R2,8 billion in the prior period.
Strategic Business Units
Energy - volume improvement offset by product mix margin impact
Our normalised earnings margin improved by 1% to 23% compared to the prior period, mainly as a result of higher
crude oil prices (48%), weaker rand/US dollar exchange rates (18%) and higher liquid fuels volumes (2%), partially
offset by the margin impact resulting from more sales volumes sourced from Natref as a result of the longer than
planned SSO shutdown (15%). Liquid fuels sales increased by 4% due to higher wholesale and commercial sales on
the back of higher SSO and Natref production. The higher sales to wholesale and commercial customers resulted in
lower margins relative to the retail channel which was impacted by poor market conditions in South Africa.
Normalised earnings* increased by 38% to R10 billion when compared to the prior period. We continued to focus
on cost containment and reduced our normalised cash fixed costs to R7,0 billion, which is 0,9% below inflation.
ORYX GTL contributed R956 million to EBIT mainly due to higher Brent crude oil prices and a 1% increase in
production volumes. ORYX GTL maintained the prior period average utilisation rate of 99%. In December 2018, a
leak was discovered in the waste heat boiler of one of the reformer reactors. We therefore expect to have an
extended shutdown to repair the waste heat boiler. We anticipate an average utilisation rate of 90% for the full
year.
In Nigeria, Escravos GTL (EGTL), production volumes were 25% lower compared to the prior period largely due to an
unplanned shutdown. Maintenance activities have since been completed and the plant is back in production.
Optimisation efforts to reduce costs and improve plant efficiency continue.
In line with our strategy to increase our South African retail presence, we continue to target 15 new Retail
convenience centres for the financial year, which will include greenfield developments as well as other oil company
conversions increasing our retail outlets to 411, excluding any divestments.
Performance Chemicals - robust market demand, adversely impacted by supply constraints
Sales volumes (normalised for the PASG transfer(1)) decreased by 3% compared to the prior period, mainly due to
planned shutdowns and a force majeure in Europe, triggered by external ethylene supply constraints. We continued
to take advantage of the strong demand for our organics and advanced materials products and expanded our
footprint in differentiated markets. The margins for our European and US specialty businesses remained strong in
rand terms, benefitting from robust demand and favourable market conditions.
Normalised earnings*, adjusted for the transfer of PASG to Base Chemicals, decreased by 8% to R3,7 billion
compared to the prior period, mainly due to lower sales volumes, growth costs associated with the LCCP and the
extended shutdown at SSO.
Our Organics business was impacted by the force majeure in Europe, however, in rand terms we have seen strong
margins over the period. Wax sales volumes decreased due to the disposal of our Alexandria Wax business in
financial year 2018, as well as lower paraffin sales. Our Advanced Materials business delivered a solid performance
and maintained robust margins. We expect our annual sales volumes (excluding LCCP) for Performance Chemicals
to be 1 to 2% higher than the prior year.
Excluding growth costs associated with our projects in the US and Brunsbuttel and foreign translation effects, cash
fixed costs were contained to 3,3% for the period, which is below our inflation target.
1 In line with Sasol's updated strategy, we have reorganised the Chemical portfolio to support our value-based
growth strategy. Consequently, we have transferred the Phenolics, Ammonia and Specialty Gases (PASG) results from
Performance Chemicals to Base Chemicals, effective 1 July 2018. Ammonia and Specialty Gases are managed by Energy.
The metrics have been restated for the transfer.
Base Chemicals - higher prices, but volumes under pressure
Our business benefitted from higher US dollar chemical prices with our average sales basket price increasing by
10%. We have seen a significant increase in our US Polymers basket sales price as we transitioned merchant
ethylene sales to downstream derivatives following the ramp-up of our HDPE plant. The HDPE price differential was
US$900/ton for the period compared to the spot merchant ethylene price of US$400/ton.
Sales volumes decreased by 11% mainly due to the extended planned shutdown at SSO and lower fertiliser demand.
Notwithstanding this decrease, we are expecting annual sales volumes (excluding US produced products), to be 1%
lower for the full year.
Normalised earnings*, adjusted for the transfer of PASG from Performance Chemicals, decreased by 15% to
R2,5 billion compared to the prior period mainly due to lower sales volumes. Our cash fixed costs, normalised for
growth and once-off items increased by only 2,9%, which is below our inflation target. Our results includes the
reversal of an impairment of R949 million (R683 million after tax) on our integrated ethylene assets in Sasolburg
due to the useful life extension from 2034 to 2050. The useful life extension further resulted in a lower depreciation
charge of R139 million which is partly offset by higher depreciation in the US with the new plants and infrastructure
reaching beneficial operation.
Our 50% joint venture HDPE plant with INEOS Olefins and Polymers USA is ramping-up to expectations and is
expected to achieve an average utilisation rate of approximately 80% for the full year.
* Normalised earnings represent reported EBIT adjusted for remeasurement items and the closing rate translation effects.
We believe normalised earnings are a useful measure of the group's sustainable operating performance. However,
this is not a defined term under IFRS and may not be comparable with similarly titled measures reported by other
companies. Normalised earnings constitutes pro forma financial information in terms of the JSE Limited Listings
Requirements and should be read in conjunction with the basis of preparation and pro forma financial information.
Advancing projects to enable future growth
- Update on the Lake Charles Chemicals Project (LCCP):
As at the end of December 2018, engineering and procurement activities were substantially complete and
construction progress was at 84%. Our overall project completion was 94% and capital expenditure amounted
to US$10,9 billion.
The first derivative unit, linear low-density polyethylene (LLDPE) reached beneficial operation on
13 February 2019, approximately two months late. Utilities to support the early process units were fully
operational by end November 2018. These utilities together with LLDPE comprised ~40% of the LCCP total cost,
prior to the revised estimate.
Unfortunately, during the last quarter of calendar 2018, several factors within and beyond our control impacted
the completion schedule and associated cost for the remaining units resulting in the overall project capital cost
estimate being revised from US$11,13 billion to a range of US$11,6 - 11,8 billion. The difference between the upper
and lower end of the range is a contingency and weather provision of US$200 million.
Management maintains our unrelenting focus on delivering the remaining units per the revised schedule and we
are confident that the fundamentals for the LCCP - being, among others, a feedstock advantaged plant, a world
scale highly integrated facility, diverse product slate with high margin products and world class logistics and
infrastructure - remain intact. We maintain our guidance that the project will deliver a steady state EBITDA of
US$1,3 billion in financial year 2022.
More details on the project can be found in our updated project factsheet at <a href="https://www.sasol.com/investor-" target="_blank">https://www.sasol.com/investor-</a>
centre/lake-charles-chemicals-project/lake-charles-chemicals-project-fact-sheet.
- Focusing on our asset base in Africa:
In Mozambique, the Production Sharing Agreement (PSA) reservoirs have proved more complex than expected
with reduced expectation of recoverable volumes. The remaining uncertainty coupled with a lower-for-longer
forecast in the oil price, suggest a revised development concept maximising the use of existing wells and
processing facilities. A PSA Phase 1 project decision for feasibility studies is planned for the last quarter of
calendar year 2019, with a Field Development Plan amendment to be submitted in December 2019. Phase 1 gas
results confirm resource cover for Central Termica de Temane (CTT), formerly known as the Mozambique Gas to
Power Project (MGtP), and which was also confirmed via an independent resource certification study. A gas term
sheet is being negotiated for gas supply to Electricidade de Mocambique (EDM) for CTT.
The initial appraisal of the Phase 2 Pande gas reservoirs has been completed. The drilling results indicate gas
volumes to be at the lower end of expectations. An extension of the commercial assessment period has been
granted to enable further appraisal and development of the gas markets. Focused efforts are underway to
assess the range of options and possibilities to sustainably secure and source gas feedstock.
Sasol is one of four participating interest owners of the Etame Marin Permit, and holds a 30% participating
interest, with VAALCO Gabon SA being the operator. In September 2018, VAALCO through its wholly owned
subsidiary and other Etame participating interest owners, announced the receipt of the Presidential Decree
approving the successful execution of an amendment to the Etame Marin Production Sharing Contract (PSC) in
Gabon between the government of Gabon and the Etame participating interest owners. The amendment
provides for a 10 year extension of the three exclusive exploitation areas under the PSC until September 2028.
Maintaining our focus on safety and sustainable value creation
We continued to deliver our broader sustainability contributions during the period:
- Safety remains one of our top priorities and is a core value. We are deeply saddened to report that we
experienced two tragic fatalities at our Sasol Mining operations. The corrective actions from the investigations
include adapting our systems and processes applicable to weekend work and our service provider interface
which have been implemented.
- Our 12 month rolling RCR for employees and service providers, excluding illnesses, is 0,26 at December 2018 as
compared to 0,30 at December 2017. Although this is an improvement, we remain vigilant and aware of the need
to improve our safety performance by implementing our high severity injury programme. Importantly, we have
adapted our leadership development programmes to include frontline supervisor training that focuses on team
engagement, together with an alignment of our critical safety behaviours within Sasol's culture transformation
programme.
- The transition to a lower carbon economy is a prerequisite to avoid the most severe impacts of climate change.
Sasol is committed to playing our part in this transition in the areas where we operate. In this regard, Sasol will
be providing more information on our climate change management approach during our financial year 2019
reporting cycle.
- In South Africa, the carbon tax was voted on by the Standing Committee on Finance in Parliament on 5 February
2019. The initial carbon tax will be R120 per ton of carbon dioxide equivalent (CO2e) with a number of tax free
allowances. This will now progress to the National Assembly.
- Energy efficiency improved 5% from the 2015 baseline. These improvements are largely due to energy saving
projects and initiatives implemented from 2015 and a refinement of the calculation methodology. This was
further enhanced by optimisation initiatives across our operations. Sasol's South African energy efficiency for
the half year improved by 6,6% from the 2015 baseline. We are on track to meet our 2030 objective of a 15%
improvement from the 2015 baseline.
- We continue to measure our comprehensive climate change response in accordance with our key performance
indicators. Our total greenhouse gas (GHG) emissions for all operations globally are projected to reduce
marginally to 65,5 million tons when compared to 67,1 million tons in the prior year. Our GHG emissions intensity
(measured in CO2e per ton of production) is projected to be lower at 3,57 compared to 3,77 in 2018. This is largely
due to the shutdowns experienced at our Secunda facilities.
- Sasol has consistently communicated our commitment to meeting our air quality compliance obligations
through air quality improvement roadmaps. We intend applying for a further round of postponements as
currently provided for in law to complete execution of the air quality roadmaps, in a safe manner, towards
compliance with all relevant minimum emission standards, save for sulphur dioxide (SO2). We continue to
participate in an ongoing engagement process with both the Department of Environmental Affairs and the
Portfolio Committee on Environmental Affairs in relation to the challenges that we face in meeting the SO2 new
plant standards for our boiler plants.
- In line with our commitment to responsibly manage our water use, results for the half year related to water
management, reflect a decrease in total water usage from 67,3 million m3 to 66,0 million m3 and a decrease in
river water use from 54,1 million m3 to 52,7 million m3. Potable water use has increased from 6,0 million m3 to
6,4 million m3.
- From a product stewardship perspective, we continue to implement efforts to enhance product transport safety
performance by growing rail transport and increasingly deploying technology to eliminate road transport
incidents. In response to the global plastics waste challenge, Sasol will participate and develop joint solutions
with industry through our associations. To this end, Sasol has joined the recently-announced Alliance to End
Plastic Waste, a global initiative of companies along the plastics value chain aimed at eliminating plastic waste in
the environment.
- During the period, we paid R21,6 billion in direct and indirect taxes to and received direct tax refunds of
R3,1 billion from the South African government. Sasol remains one of the largest corporate taxpayers in South
Africa, contributing significantly to the country's economy.
- We invested R918 million in skills and socio-economic development during the period, which includes our
Ikusasa programme, the Sasol Siyakha Trust which finances small, medium and macro enterprises, bursaries,
graduate development, learnerships and artisan training programmes. The Ikusasa programme focuses on
education, health and wellbeing, infrastructure, and safety and security in the Secunda and Sasolburg regions.
- Sasol delivered on our commitments towards sustainable transformation and B-BBEE during the past three
years. Sasol achieved a Level 4 contributor status well ahead of our planned 2020 timeframe. During the past six
months our expenditure with black-owned suppliers amounted to R9,4 billion representing 67% of the R14
billion targeted for the 2019 financial year.
- On 8 February 2019 the Sasol South Africa Limited Board declared an interim dividend of R11,44 per ordinary
share to the benefit of Khanyisa shareholders.
Business performance outlook* - improved production performance and continuation of cost focus
The current economic climate continues to remain highly volatile and uncertain. While oil price and foreign
exchange movements are outside our control and may impact our results, our focus remains firmly on managing
factors within our control, including volume growth, cost optimisation, effective capital allocation, focused financial
risk management and maintaining an investment grade credit rating.
We expect an overall improved operational performance for the year ending 30 June 2019, with:
- SSO maintaining post shutdown run-rates, targeting the upper-end of 7,5 to 7,6 million tons;
- Liquid fuels sales volumes of approximately 57 to 58 million barrels in line with our previous market guidance;
- Base Chemicals sales volumes, excluding US produced products, to be 1% lower for the financial year;
- Performance Chemicals annual sales volumes to be between 1% to 2% higher (excluding LCCP);
- Gas production volumes from the Petroleum Production Agreement (PPA) in Mozambique to be between
114 bscf to 118 bscf;
- ORYX GTL to achieve an average utilisation rate of 90% due to a leak discovered in December 2018 in the waste
heat boiler of one of the reformer reactors. We therefore expect to have an extended shutdown to repair the
waste heat boiler;
- Normalised cash fixed costs to remain in line within our inflation assumption of 6%;
- Capital expenditure, including capital accruals, of R52 billion for 2019 and R30 billion for 2020 as we progress
with the execution of our growth plan and strategy. Capital estimates may change as a result of exchange rate
volatility and other factors;
- Gearing and net debt to EBITDA will be managed within our Board approved levels of between 45% and 49% and
2,0 times and 2,3 times respectively;
- Rand/US dollar exchange rate to range between R13,85 and R14,50; and
- Average Brent crude oil prices to remain between US$60/bbl and US$65/bbl.
* The financial information contained in this business performance outlook is the responsibility of the directors and
in accordance with standard practice, it is noted that this information has not been audited and reported on
by the company's auditors.
Tax litigation and contingency
As previously reported, the South African Revenue Service (SARS) issued revised assessments for Sasol Oil (Pty) Ltd
(Sasol Oil) relating to a dispute around our international crude oil procurement activities for the 2005 to 2014 tax
years. Following an unfavourable ruling for Sasol Oil by the Tax Court on 30 June 2017, Sasol Oil made a provision in
its financial statements of R1,3 billion, including penalties and interest, which covers the 2005 to 2014 tax years. On
9 November 2018, the Supreme Court of Appeal (SCA) upheld an appeal filed by Sasol Oil and set aside the ruling by
the Tax Court. The SCA effectively confirmed Sasol Oil's view that the grounds argued by SARS for additional
taxation of Sasol Oil's international crude oil procurement activities has not been fulfilled. On the basis of this
judgement, Sasol Oil has reversed the accrual of R1,3 billion. On 29 November 2018, SARS applied to the
Constitutional Court for leave to appeal against the SCA decision. On 4 February 2019, the Constitutional Court
dismissed SARS' application with costs with the arguments that the matter falls outside the jurisdiction of the
Court and, in any event, bears no reasonable prospect of success.
In addition to the above litigation, the potential liability relating to the ongoing dispute with SARS in relation to its
revised assessments for the 2013 and 2014 tax years based on a different primary ground of assessment regarding
Sasol Oil's crude oil procurement activity amounts to R13 billion (including interest and penalties as at 31 December
2018). Sasol Oil disagrees with SARS' assessment for the 2013 and 2014 periods. This tax dispute remains the
subject of an ongoing appeal with the Tax Court lodged by Sasol Oil. A possible obligation may arise for the tax
years subsequent to 2014, which could give rise to a future potential liability.
Further, as reported previously, following a SARS request for information on Sasol Financing International Plc (SFI)
which performs an off-shore treasury function for Sasol, SARS proceeded to an audit over a number of years. This
audit culminated in the issuance of a final audit letter on 16 February 2018. Consequently, revised assessments
were issued by SARS in respect of the 2002 to 2012 tax years. SFI has co-operated fully with SARS during the course
of the audit related to these assessments. SFI, in consultation with its tax and legal advisors, does not support the
basis of these additional assessments for all the years. Accordingly, SFI submitted objections and/or appeals (as the
case may be) to the revised assessments as the legal process unfolds. In addition, Sasol has also launched a judicial
review application against the SARS decision to register SFI as a South African taxpayer. SARS' answering affidavit
in this litigation was submitted on 8 February 2019 and SFI will respond accordingly. The dispute relates to the
place of effective management of SFI. The potential tax exposure is R3,2 billion including interest and penalties as
at 31 December 2018.
Sasol is committed to compliance with tax laws and any disputes with tax authorities on the interpretation of tax
laws and regulations will be addressed in a transparent and constructive manner.
Change in directors
There were no changes in directors during the six months ended 31 December 2018.
Declaration of cash dividend number 79
An interim gross cash dividend of South African 590 cents per ordinary share (31 December 2017 - 500 cents per
ordinary share) has been declared for the six months ended 31 December 2018. The cash dividend is payable on the
ordinary shares and the Sasol BEE ordinary shares. The Board is satisfied that the liquidity and solvency of the
company, as well as capital remaining after payment of the dividend is sufficient to support the current operations
for the ensuing year. The dividend has been declared out of retained earnings (income reserves). The South African
dividend withholding tax rate is 20%. At the declaration date, there are 624 606 120 ordinary and 6 331 347 Sasol
BEE ordinary shares in issue. The net dividend amount payable to shareholders who are not exempt from the
dividend withholding tax, is 472 cents per share, while the dividend amount payable to shareholders who are
exempt from dividend withholding tax is 590 cents per share.
The salient dates for holders of ordinary shares and Sasol BEE ordinary shares are:
Declaration date Monday, 25 February 2019
Last day for trading to qualify for and participate in the interim dividend (cum dividend) Tuesday, 12 March 2019
Trading ex dividend commences Wednesday, 13 March 2019
Record date Friday, 15 March 2019
Dividend payment date (electronic and certificated register) Monday, 18 March 2019
The salient dates for holders of our American Depository Receipts are:(1)
Ex dividend on New York Stock Exchange (NYSE) Thursday, 14 March 2019
Record date Friday, 15 March 2019
Approximate date for currency conversion Tuesday, 19 March 2019
Approximate dividend payment date Friday, 29 March 2019
1 All dates approximate as the NYSE sets the record date after receipt of the dividend declaration.
On Monday, 18 March 2019, 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, 18 March 2019. Share certificates may not be dematerialised or
rematerialised between 13 March 2019 and 15 March 2019, both days inclusive.
A supporting presentation and webcast will be available on the Company's website at <a href="https://www.sasol.com/investor-centre" target="_blank">https://www.sasol.com/investor-centre</a>
/financial-reporting/annual-integrated-report/interim-results and will begin at 15:00 (SA), 13:00 (GMT) and 8:00 (CST)
on 25 February 2019.
On behalf of the Board
Mandla Gantsho Bongani Nqwababa Stephen Cornell Paul Victor
Chairman Joint President and Joint President and Chief Financial Officer
Chief Executive Officer Chief Executive Officer
Sasol Limited
22 February 2019
The interim financial statements are presented on a condensed consolidated basis.
Income statement
for the period ended
Full year Half year Half year Half year Half year Full year
30 Jun 18 31 Dec 17 31 Dec 18 31 Dec 18 31 Dec 17 30 Jun 18
Audited Reviewed Reviewed Reviewed Reviewed Audited
US$m* US$m* US$m* Rm Rm Rm
14 121 6 579 7 250 Turnover 102 944 88 153 181 461
(5 961) (2 678) (3 237) Materials, energy and consumables used (45 960) (35 887) (76 606)
(549) (253) (267) Selling and distribution costs (3 794) (3 388) (7 060)
(713) (330) (329) Maintenance expenditure (4 676) (4 424) (9 163)
(2 138) (1 013) (1 042) Employee-related expenditure (14 789) (13 574) (27 468)
(27) (16) (12) Exploration expenditure and feasibility costs (167) (213) (352)
(1 278) (619) (591) Depreciation and amortisation (8 392) (8 301) (16 425)
(1 192) (530) (412) Other expenses and income (5 850) (7 102) (15 316)
(1) (89) 32 Translation gains/(losses) 454 (1 190) (11)
(1 191) (441) (444) Other operating expenses and income (6 304) (5 912) (15 305)
112 57 62 Equity accounted profits, net of tax 876 766 1 443
2 375 1 197 1 422 Operating profit before remeasurement 20 192 16 030 30 514
items and once-off Sasol Khanyisa
share-based payment
(771) (317) 42 Remeasurement items 599 (4 244) (9 901)
Sasol Khanyisa once-off share-based
(223) - - payment - - (2 866)
1 381 880 1 464 Earnings before interest and tax (EBIT) 20 791 11 786 17 747
133 89 30 Finance income(1) 420 1 192 1 716
(292) (126) (18) Finance costs(2) (252) (1 689) (3 759)
1 222 843 1 476 Earnings before tax 20 959 11 289 15 704
(432) (266) (356) Taxation (5 057) (3 562) (5 558)
790 577 1 120 Earnings for the period 15 902 7 727 10 146
Attributable to
679 515 1 038 Owners of Sasol Limited 14 740 6 901 8 729
111 62 82 Non-controlling interests in subsidiaries 1 162 826 1 417
790 577 1 120 15 902 7 727 10 146
US$ US$ US$ Rand Rand Rand
Per share information
1,11 0,84 1,68 Basic earnings per share 23,92 11,29 14,26
1,10 0,84 1,67 Diluted earnings per share 23,76 11,25 14,18
* Supplementary non-IFRS information. US dollar convenience translation, converted at average exchange rate of R14,20/US$1
(31 December 2017 - R13,40/US$1; 30 June 2018 - R12,85/US$1).
The income statement has been translated from rand to US dollar for convenience purposes in order to enable offshore
shareholders to interpret the financial performance in a universally measured currency. This constitutes pro forma
financial information in terms of the JSE Limited Listings Requirements and should be read in conjunction with the
basis of preparation.
1 Finance income decreased due to lower dividend income. This is mainly due to the divestment from Petronas Chemicals
Olefins Sdn Bhd in March 2018.
2 Finance costs decreased mainly due to the adoption of the amendment to IAS 23 'Borrowing Costs' on 1 July 2018,
which resulted in a higher capitalisation of costs.
Statement of comprehensive income
for the period ended
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Reviewed Reviewed Audited
Rm Rm Rm
Earnings for the period 15 902 7 727 10 146
Other comprehensive income, net of tax
Items that can be subsequently reclassified to the income statement 3 817 (3 189) 6 068
Effect of translation of foreign operations* 4 169 (3 348) 5 237
Effect of cash flow hedges** (452) 343 1 233
Fair value of investments available-for-sale - 15 13
Tax on items that can be subsequently reclassified to the income statement 100 (199) (415)
Items that cannot be subsequently reclassified to the income statement 56 (146) (54)
Remeasurements on post-retirement benefit obligations 5 (204) (80)
Fair value of investments through other comprehensive income 99 - -
Tax on items that cannot be subsequently reclassified to the income (48) 58 26
statement
Total comprehensive income for the period 19 775 4 392 16 160
Attributable to
Owners of Sasol Limited 18 601 3 570 14 727
Non-controlling interests in subsidiaries 1 174 822 1 433
19 775 4 392 16 160
* The impact of exchange rates against the rand at 31 December 2018 (R14,36/US$1, R16,47/EUR1), (31 December 2017
R12,37/US$1, R14,84/EUR1; 30 June 2018 R13,73/US$1, R16,04/EUR1), resulted in the translation gains/(losses)
recognised in other comprehensive income.
** These amounts include a loss relating to the interest rate swaps of R48 million (31 December 2017 - R189 million;
30 June 2018 - R286 million) on reclassification from the cash flow hedge reserve to profit and loss. In addition,
a derivative gain of R57 million (31 December 2017 - R16 million; 30 June 2018 - R52 million) was recognised in the
income statement relating to the ineffective portion of the hedge.
Statement of financial position
at
Full year Half year Half year Half year Half year Full year
30 Jun 18 31 Dec 17 31 Dec 18 31 Dec 18 31 Dec 17 30 Jun 18
Audited Reviewed Reviewed Reviewed Reviewed Audited
US$m* US$m* US$m* Rm Rm Rm
Assets
12 196 13 446 12 643 Property, plant and equipment 181 552 166 331 167 457
12 044 10 945 12 814 Assets under construction 184 007 135 399 165 361
196 190 194 Goodwill and other intangible assets 2 792 2 355 2 687
801 782 763 Equity accounted investments 10 961 9 679 10 991
109 49 90 Post-retirement benefit assets 1 292 612 1 498
298 276 300 Deferred tax assets 4 302 3 414 4 096
429 312 503 Other long-term assets*** 7 223 3 857 5 888
26 073 26 000 27 307 Non-current assets 392 129 321 647 357 978
8 154 9 Assets in disposal groups held for sale 136 1 904 113
6 - - Short-term investments - - 85
2 139 2 337 2 173 Inventories 31 203 28 903 29 364
2 406 2 668 2 125 Trade and other receivables 30 515 32 996 33 031
112 399 181 Short-term financial assets 2 602 4 934 1 536
1 247 1 334 1 106 Cash and cash equivalents 15 876 16 493 17 128
5 918 6 892 5 594 Current assets 80 332 85 230 81 257
31 991 32 892 32 901 Total assets 472 461 406 877 439 235
Equity and liabilities
16 240 17 053 16 434 Shareholders' equity 235 997 210 950 222 985
410 483 435 Non-controlling interests 6 241 5 972 5 623
16 650 17 536 16 869 Total equity 242 238 216 922 228 608
6 512 6 015 7 940 Long-term debt 114 013 74 402 89 411
530 345 502 Finance leases 7 216 4 273 7 280
1 104 1 352 1 088 Long-term provisions 15 621 16 725 15 160
867 919 845 Post-retirement benefit obligations 12 141 11 374 11 900
64 71 59 Long-term deferred income 850 879 879
10 38 30 Long-term financial liabilities 433 475 133
1 887 2 208 2 004 Deferred tax liabilities 28 773 27 312 25 908
10 974 10 948 12 468 Non-current liabilities 179 047 135 440 150 671
3 14 3 Liabilities in disposal groups held for sale 44 178 36
1 071 1 397 713 Short-term debt** 10 243 17 278 14 709
140 77 88 Short-term financial liabilities 1 264 948 1 926
3 147 2 907 2 753 Other current liabilities 39 519 35 945 43 196
6 13 7 Bank overdraft 106 166 89
4 367 4 408 3 564 Current liabilities 51 176 54 515 59 956
31 991 32 892 32 901 Total equity and liabilities 472 461 406 877 439 235
* Supplementary non-IFRS information. US dollar convenience translation, converted at a closing exchange rate of
R14,36/US$1 (31 December 2017 - R12,37/US$1; 30 June 2018 - R13,73/US$1).
The Statement of financial position has been translated from rand to US dollar for convenience purposes in order
to enable offshore shareholders to interpret the financial performance in a universally measured currency.
This constitutes pro forma financial information in terms of the JSE Limited Listings Requirements and should be
read in conjunction with the basis of preparation.
** The Sasol Inzalo Public preference share debt was settled in September 2018. Included in short-term debt is
an additional draw on the Revolving Credit and other loan facilities.
*** Includes the US investment tax credits receivable of R1,5 billion (US$104 million).
Statement of changes in equity
for the period ended
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Reviewed Reviewed Audited
Rm Rm Rm
Balance at beginning of period* 228 608 217 234 217 234
Movement in share-based payment reserve 681 505 3 942
Share-based payment expense 327 453 823
Deferred tax (122) 52 166
Sasol Khanyisa transaction** 476 - 2 953
Total comprehensive income for the period 19 775 4 392 16 160
Transactions with non-controlling shareholders - - (51)
Dividends paid to shareholders (4 897) (4 836) (7 952)
Final distribution to Sasol Inzalo Public Shareholders (1 372) - -
Dividends paid to non-controlling shareholders in subsidiaries (557) (373) (725)
Balance at end of period 242 238 216 922 228 608
Comprising
Share capital*** 9 888 29 282 15 775
Share repurchase programme - (2 641) -
Retained earnings 195 789 179 306 184 352
Share-based payment reserve*** (424) (12 551) (4 021)
Foreign currency translation reserve 32 653 19 940 28 500
Remeasurements on post-retirement benefit obligations (1 846) (1 928) (1 844)
Investment fair value reserve 105 45 43
Cash flow hedge accounting reserve (168) (503) 180
Shareholders' equity 235 997 210 950 222 985
Non-controlling interests in subsidiaries 6 241 5 972 5 623
Total equity 242 238 216 922 228 608
* On 1 July 2018, the group adopted IFRS 9 'Financial Instruments'. The new accounting standard has been applied
prospectively. The impact of the adoption of the new standard is a reduction of R121 million on the opening
shareholders' equity position. This was adjusted for in the current year as the impact is immaterial.
** A non-controlling interest has not been recognised on the Sasol Khanyisa transaction as the accounting for
the transaction is similar to an option over Sasol shares granted for no consideration. Any ultimate value created
for participants in the Khanyisa transaction will be granted in the form of SOLBE1 shares.
*** The Sasol Inzalo transaction was terminated in September 2018 and as such the share capital relating to the
transaction was cancelled and the share-based payment reserve was reclassified to retained earnings in accordance
with IFRS. In addition, on 7 September 2018, 16 085 199 Sasol Limited preferred ordinary shares were repurchased
from Sasol Inzalo Public Funding (RF) (Pty) Ltd at a purchase price of R542,11 per share as per the shareholders
authorisation obtained at the Annual General Meeting held on 17 November 2017.
Statement of cash flows
for the period ended
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Reviewed Reviewed Audited
Rm Rm Rm
Cash receipts from customers 103 145 86 844 178 672
Cash paid to suppliers and employees (78 377) (72 834) (135 795)
Cash generated by operating activities 24 768 14 010 42 877
Dividends received from equity accounted investments 1 423 1 052 1 702
Finance income received 343 1 106 1 565
Finance costs paid (2 494) (1 864) (4 797)
Tax paid (1 339) (4 070) (7 041)
Cash available from operating activities 22 701 10 234 34 306
Dividends paid (4 897) (4 836) (7 952)
Dividends paid to non-controlling shareholders in subsidiaries (557) (373) (725)
Cash retained from operating activities 17 247 5 025 25 629
Total additions to non-current assets (31 736) (30 574) (55 891)
Additions to non-current assets (30 433) (27 734) (53 384)
Decrease in capital project related payables (1 303) (2 840) (2 507)
Additional cash contributions from/(to) equity accounted investments 54 (76) (164)
Proceeds on disposals and scrappings 53 8 2 316
Purchase of investments (167) (57) (124)
Other net cash flow from investing activities 114 (37) (116)
Cash used in investing activities (31 682) (30 736) (53 979)
Final settlement to Sasol Inzalo Public Shareholders (1 372) - -
Proceeds from long-term debt 20 470 18 746 24 961
Repayment of long-term debt (12 478) (3 151) (9 199)
Proceeds from short-term debt 7 827 29 1 957
Repayment of short-term debt (1 629) (2 636) (2 607)
Cash generated by financing activities 12 818 12 988 15 112
Translation effects on cash and cash equivalents 348 (256) 954
Decrease in cash and cash equivalents (1 269) (12 979) (12 284)
Cash and cash equivalents at the beginning of period 17 039 29 323 29 323
Reclassification to held for sale - (17) -
Cash and cash equivalents at the end of the period* 15 770 16 327 17 039
* Includes bank overdraft.
Segment report
for the period ended
Earnings before interest and
Turnover tax (EBIT)
Full year Half year Half year Half year Half year Full year
30 Jun 18* 31 Dec 17* 31 Dec 18 31 Dec 18 31 Dec 17* 30 Jun 18*
Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed
Rm Rm Rm Segment analysis Rm Rm Rm
23 995 11 973 12 584 Operating Business Units 3 425 215 1 561
19 797 10 015 9 906 - Mining 2 661 2 864 5 244
4 198 1 958 2 678 - Exploration and Production International 764 (2 649) (3 683)
178 760 86 740 101 403 Strategic Business Units 16 240 12 178 22 852
69 773 32 746 43 623 - Energy 9 565 5 748 14 081
43 979 22 017 23 011 - Base Chemicals 3 076 2 541 918
65 008 31 977 34 769 - Performance Chemicals 3 599 3 889 7 853
52 7 26 - Group Functions 1 126 (607) (6 666)
202 807 98 720 114 013 Group performance 20 791 11 786 17 747
(21 346) (10 567) (11 069) Intersegmental turnover
181 461 88 153 102 944 External turnover
* Restated for the transfer of the Phenolics, Ammonia and Specialty Gases businesses from Performance Chemicals to Base Chemicals.
Revenue by major product line
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Reviewed Reviewed Reviewed
Rm Rm Rm
Base Chemicals 22 668 21 634 43 239
Polymers 12 346 11 254 22 679
Solvents 6 441 6 583 13 172
Fertilisers and explosives 2 333 2 164 4 129
Other base chemicals 1 548 1 633 3 259
Performance Chemicals 34 349 31 504 64 016
Organics 26 193 24 091 49 001
Waxes 4 387 4 450 8 462
Advanced materials 3 769 2 963 6 553
Upstream, Energy and Other
Coal 1 826 1 878 3 446
Liquid fuels and crude oil 39 633 28 960 62 555
Gas (methane rich and natural gas) and condensate 2 991 2 762 5 412
Other (IP, refinery services) 991 936 1 815
Revenue from contracts with customers 102 458 87 674 180 483
Revenue from other contracts (franchise rentals, use of fuel tanks and fuel 486 479 978
storage)
Total external turnover 102 944 88 153 181 461
Salient features
for the period ended
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Selected ratios
Earnings before interest and tax margin % 20,2 13,4 9,8
Finance costs cover times 8,5 7,0 4,1
Net borrowings to shareholders' equity (gearing) % 48,9 38,0 42,4
Net debt to EBITDA (annualised) times 2,2 1,7 1,8
Dividend cover(1) times 3,6 3,6 2,8
Share statistics
Total shares in issue million 630,9 681,4 645,6
Sasol ordinary shares in issue million 624,6 653,0 623,1
Sasol BEE ordinary shares in issue million 6,3 2,8 6,4
Sasol preferred ordinary shares in issue million - 25,6 16,1
Treasury shares (share repurchase programme) million - 8,8 -
Weighted average number of shares million 616,2 611,5 612,2
Diluted weighted average number of shares million 620,5 613,8 615,9
Share price (closing) Rand 425,00 428,18 502,86
Market capitalisation - Sasol ordinary shares Rm 265 455 279 602 313 323
Market capitalisation - Sasol BEE ordinary shares Rm 1 302 1 107 1 918
Net asset value per share Rand 379,70 346,10 359,60
Dividend per share Rand 5,90 5,00 12,90
- interim Rand 5,90 5,00 5,00
- final Rand - - 7,90
1 With effect from 23 February 2018, the Board approved a change in the base of the dividend policy from HEPS to CHEPS.
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Other financial information
Total debt (including bank overdraft) Rm 131 578 96 119 111 489
- interest-bearing Rm 130 800 94 952 110 052
- non-interest-bearing Rm 778 1 167 1 437
Finance expense capitalised(1) Rm 3 440 1 634 3 568
Capital commitments (subsidiaries and joint operations) Rm 58 640 69 813 63 276
- authorised and contracted Rm 187 515 150 520 179 172
- authorised, not yet contracted Rm 40 555 46 322 40 687
- less expenditure to date Rm (169 430) (127 029) (156 583)
Capital commitments (equity accounted investments) Rm 1 018 717 893
- authorised and contracted Rm 618 404 536
- authorised, not yet contracted Rm 620 652 623
- less expenditure to date Rm (220) (339) (266)
Guarantees (excluding treasury facilities)
- maximum potential exposure Rm 77 469 75 528 80 260
- related debt recognised on the balance sheet Rm 74 328 70 676 76 199
Effective tax rate % 24,1 31,6 35,4
Adjusted effective tax rate(2) % 29,0 26,4 27,3
Number of employees(3) number 31 430 31 000 31 270
Average crude oil price - dated Brent US$/barrel 71,33 56,74 63,62
Average rand/US$ exchange rate 1US$ = Rand 14,20 13,40 12,85
Closing rand/US$ exchange rate 1US$ = Rand 14,36 12,37 13,73
1 Finance expense capitalised increased due to the adoption of the amendment to IAS 23 'Borrowing Costs' on 1 July 2018.
2 Effective tax rate adjusted for equity accounted investments, remeasurement items and once-off items.
3 The total number of employees includes permanent and non-permanent employees and the group's share of employees within
joint operations, but excludes contractors and equity accounted investments' employees.
Reviewed Review Audited
Half year Half year Full year
31 Dec 18 31 Dec 17 30 Jun 18
Rm Rm Rm
Reconciliation of headline earnings
Earnings attributable to owners of Sasol Limited 14 740 6 901 8 729
Effect of remeasurement items for subsidiaries and joint operations(1) (599) 4 244 9 901
Impairment of property, plant and equipment 2 2 715 7 623
Impairment of assets under construction - 50 1 492
Impairment of other assets - 15 -
Reversal of impairment(2) (957) (69) (354)
(Profit)/loss on disposal of non-current assets (27) (36) 7
Loss/(profit) on disposal of investment in businesses - 83 (833)
Scrapping of non-current assets 376 1 453 1 654
Write-off of unsuccessful exploration wells 7 36 312
Realisation of foreign currency translation reserve - (3) -
Tax effects and non-controlling interests 168 (339) (1 843)
Effect of remeasurement items for equity accounted investments 15 (1) 11
Headline earnings 14 324 10 805 16 798
Headline earnings adjustments by segment
- Mining 7 (7) 34
- Exploration and Production International 7 2 835 4 241
- Energy 122 1 249 971
- Base Chemicals (820) 148 4 499
- Performance Chemicals 85 1 116
- Group Functions - 18 40
Remeasurement items (599) 4 244 9 901
Headline earnings per share Rand 23,25 17,67 27,44
Diluted headline earnings per share Rand 23,08 17,60 27,27
1 Included in the prior period is the scrapping of our US gas-to-liquids (GTL) project amounting to R1,1 billion
(US$83 million) and a partial impairment of our Canadian shale gas assets of R2,8 billion (CAD281 million).
2 Includes the impact of the partial reversal of the previous impairment of the Chlor Vinyls cash generating unit
as a result of the Sasolburg useful life structural change in the integrated ethylene value chain. The performance
of this CGU is highly sensitive to the rand/US dollar exchange rate and US$ product prices. Macroeconomic factors
are outside of the control of management and as such we continue to monitor these assets.
The reader is referred to the definitions contained in the 2018 Sasol Limited financial statements.
Basis of preparation
The condensed consolidated interim financial statements for the six months ended 31 December 2018 have been
prepared in accordance with International Financial Reporting Standards, IAS 34 'Interim Financial Reporting', the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements
as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa,
2008, as amended, and the JSE Limited Listings Requirements.
The condensed consolidated interim financial statements do not include all the disclosures required for complete
annual financial statements prepared in accordance with IFRS as issued by the International Accounting Standards
Board. The condensed consolidated interim financial statements are prepared on a going concern basis. The Board
is satisfied that the liquidity and solvency of the company is sufficient to support the current operations for the
next 12 months.
These condensed consolidated interim financial statements have been prepared in accordance with the historic
cost convention except that certain items, including derivative financial instruments, liabilities for cash-settled
share-based payment schemes, financial assets at fair value through profit or loss and financial assets designated
at fair value through other comprehensive income, are stated at fair value.
The condensed consolidated interim financial statements are presented in South African rand, which is Sasol
Limited's functional and presentation currency. The accounting policies applied in the preparation of these
condensed consolidated interim financial statements are in terms of IFRS and are consistent with those applied in
the consolidated annual financial statements for the year ended 30 June 2018, except for the adoption of IFRS 9
'Financial Instruments', IFRS 15 'Revenue from Contracts with Customers' and an amendment to IAS 23 'Borrowing
Costs' with effect from 1 July 2018. Both IFRS 9 and IFRS 15 were adopted using the modified transition approach,
where the comparative financial information is not restated as permitted by the standard. The amendment to IAS
23 is applied prospectively.
The condensed consolidated interim financial statements appearing in this announcement are the responsibility of
the directors. The directors take full responsibility for the preparation of the condensed consolidated interim
financial statements. Paul Victor CA(SA), Chief Financial Officer, is responsible for this set of condensed
consolidated interim financial statements and has supervised the preparation thereof in conjunction with the
Senior Vice President: Financial Control Services, Brenda Baijnath CA(SA).
New International Financial Reporting Standards adopted
IFRS 9 'Financial Instruments'
IFRS 9 provides a single classification and measurement approach for financial assets that reflects the business
model in which they are managed and their cash flow characteristics. The group's financial assets are classified as
measured at amortised cost, fair value through profit or loss, or fair value through other comprehensive income.
The group elected to recognise the fair value gains and losses on its current unlisted equity investments through
other comprehensive income. Due to the limited unlisted investments held, this change in measurement basis from
amortised cost to fair value had an insignificant effect on Sasol's accounting, and therefore no transition
adjustment is presented.
For financial liabilities the existing classification and measurement requirements of IAS 39 will remain the same.
Under IFRS 9, impairments of financial assets classified as measured at amortised cost are recognised on an
expected loss basis which incorporates forward-looking information when assessing credit risk, with the expected
losses recognised in profit or loss. The effect of the change was inconsequential on Sasol's accounting as the
expected loss basis is not significantly different from the stringent debtor management policies currently applied
by Sasol, and therefore no transition adjustment is presented.
The adoption of IFRS 9 did not have a significant impact on the group's accounting policies relating to financial
assets and financial liabilities.
The IFRS 9 hedge accounting requirements are not effective for the group until the International Accounting
Standards Board's macro hedging project is finalised.
IFRS 15 'Revenue from Contracts with Customers'
Under IFRS 15, revenue from contracts with customers is recognised when a performance obligation is satisfied by
transferring a promised good or service to a customer. A good or service is transferred when the customer obtains
control of that good or service. The transfer of control of Sasol's energy and chemical products usually coincides
with title passing to the customer and the customer taking physical possession, with the group's performance
obligations primarily satisfied at a point in time. Amounts of revenue recognised relating to performance
obligations over time are not significant. The accounting for revenue under IFRS 15 therefore represents an
inconsequential change from the group's previous practice for recognising revenue from sales with customers, and
therefore no transition adjustment is presented.
An analysis of revenue from contracts with customers by product is presented. Amounts presented for
comparative periods include revenues determined in accordance with the group's previous accounting policies, but
the differences are inconsequential.
Amendment to IAS 23 'Borrowing Costs'
The amendment to IAS 23 clarifies that if any specific borrowing remains outstanding after the related asset is
ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when
calculating the capitalisation rate on general borrowings. Previously, if any specific borrowing remained
outstanding after the related asset was ready for its intended use or sale, Sasol recognised the finance costs
related to this borrowing in profit and loss.
The adoption of the amendment has been applied prospectively from 1 July 2018 and had a material impact on the
group's earnings for the period as Sasol has a large number of projects to which borrowing costs are capitalised.
The impact of applying the amendment for the period ended 31 December 2018 is:
Half year Half year
31 Dec 18 31 Dec 18
(pro forma Half year
results Adjustment (results
before on IAS 23 after
amendment) amendment amendment)
Rm Rm Rm
Non-current assets
Property, plant, equipment and assets under construction 364 610 949 365 559
Income statement
Finance costs (1 201) 949 (252)
IFRS 16 'Leases' (Effective for the group from 1 July 2019)
IFRS 16 will be applied by the group from 1 July 2019. Under the new standard, all lease contracts, with limited
exceptions, will require a lessee to recognise a right of use asset representing its right to use the underlying leased
asset and a lease liability representing its obligation to make lease payments.
The adoption of the standard will have a material effect on the group's financial statements, significantly increasing
the group's recognised assets and liabilities. We expect an increase in the depreciation expense and also in cash
flows from operating activities as the lease payments will be reflected as financing outflows. The group will apply
the full retrospective approach permitted by the standard, which requires restatement of the comparative period's
financial information.
Based on the group's current assessment, the impact is expected to be between R9 billion - R12 billion of additional
liabilities that will be recognised on the statement of financial position with a corresponding lease asset. The
additional lease liability will add between 3,8% - 5,1% on gearing.
Pro forma financial information
Core headline earnings, Normalised EBIT, EBITDA and US dollar convenience translations included in this
announcement constitutes pro forma financial information.
The pro forma financial information is the responsibility of the board of directors and is presented for illustrative
purposes only. Because of its nature, the pro forma financial information may not fairly present Sasol's financial
position, changes in equity, results of operations or cash flows. The underlying information, used in the preparation
of the pro forma financial information, has been prepared using accounting policies which comply with IFRS and are
consistent with those applied in the published group consolidated annual financial statements for the year ended
30 June 2018.
This pro forma information has not been reported on by the group's auditors, being PricewaterhouseCoopers Inc.
Related party transactions
The group, in the ordinary course of business, entered into various sale and purchase transactions on an arm's
length basis at market rates with related parties.
Significant events and transactions since 30 June 2018
In accordance with IAS34 'Interim Financial Reporting', we have included an explanation of events and transactions
which are significant to obtain an understanding of the changes in our financial position and performance since
30 June 2018. There were no significant acquisitions and disposals since 30 June 2018.
Financial instruments
Fair value
Fair value is determined using valuation techniques as outlined unless the instrument is listed in an active market.
Where possible, inputs are based on quoted prices and other market determined variables.
Fair value hierarchy
The table below represents significant financial instruments measured at fair value at the reporting date, or for
which fair value is disclosed at 31 December 2018. This includes the US dollar bonds, interest rate swap, crude oil
put options and zero-cost foreign exchange collars which were considered to be significant financial instruments
for the group based on the amounts recognised in the statement of financial position and the fact that these
instruments are traded in an active market. The calculation of fair value requires various inputs into the valuation
methodologies used. The source of the inputs used affects the reliability and accuracy of the valuations. Significant
inputs have been classified into the hierarchical levels in line with IFRS 13.
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices that are observable for the asset or liability (directly or indirectly).
Level 3 Inputs for the asset or liability that are unobservable.
IFRS 13 Carrying Fair
fair value value value
Instrument hierarchy Rm Rm Valuation method Significant inputs
Listed long-term Level 1 (47 027) (46 155) Fair value Quoted market price for the
debt same or similar instruments
Derivative financial Level 2 933 933 Forward rate interpolator Foreign exchange rates,
assets and model, discounted market commodity prices, US$
liabilities expected cash flows, swap curve, as appropriate
numerical approximation,
as appropriate
For all other financial instruments, fair value approximates carrying value.
Independent review by the auditors
These condensed consolidated interim financial statements, including the segment report for the six months ended
31 December 2018 have been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified conclusion thereon.
The individual auditor assigned to perform the review is Johan Potgieter. A copy of the auditor's unmodified review
report on the condensed consolidated interim financial statements is available for inspection at the company's
registered office, together with the condensed consolidated interim financial statements identified in the auditor's report.
The auditor's report does not necessarily report on all of the information contained in this announcement of interim
financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditor's engagement they should obtain a copy of the auditor's report together with the accompanying condensed consolidated
interim financial statements from the company's registered office.
Registered office: Sasol Place, 50 Katherine Street, Sandton, Johannesburg 2090
Private Bag X10014, Sandton, Johannesburg 2196
Share registrars: Computershare Investor Services (Pty) Ltd, 15 Biermann Avenue, Rosebank 2196
PO Box 61051, Marshalltown 2107, South Africa, Tel: +27 11 370 5000 Fax: +27 11 688 5248
JSE Sponsor: Merrill Lynch South Africa Proprietary Limited
Directors (Non-executive): Dr MSV Gantsho* (Chairman), Mr C Beggs*, Mr MJ Cuambe (Mozambican)*,
Ms MBN Dube*, Dr M Floel (German)*, Ms GMB Kennealy*, Ms NNA Matyumza*, Mr ZM Mkhize*,
Mr MJN Njeke*^, Ms MEK Nkeli*, Mr PJ Robertson (British and American)*, Mr S Westwell (British)*
Directors (Executive): Mr SR Cornell (Joint President and Chief Executive Officer) (American),
Mr B Nqwababa (Joint President and Chief Executive Officer), Mr P Victor (Chief Financial Officer)
*Independent ^Lead independent director
Company Secretary: Mr VD Kahla
Company registration number: 1979/003231/06, incorporated in the Republic of South Africa
Income tax reference number: 9520/018/60/8
Ordinary shares JSE NYSE
Share code: SOL SSL
ISIN: ZAE000006896 US8038663006
Sasol BEE Ordinary shares
Share code: SOLBE1
ISIN: ZAE000151817
American depository receipts (ADR) program:
Cusip number 803866300 ADR to ordinary share 1:1
Depositary: The Bank of New York Mellon, 22nd Floor, 101 Barclay Street, New York, NY 10286,
United States of America
Sandton 25 February 2019
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, 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, executing our growth projects (including LCCP),
oil and gas reserves, cost reductions, our Continuous Improvement (CI) programme 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 are discussed more fully in our most recent annual report on Form 20-F filed on
28 August 2018 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".
Additional information on our business performance is included in the analyst book available on our
website: <a href="http://www.sasol.com" target="_blank">www.sasol.com</a>
Date: 25/02/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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