Sasol Limited Q4 FY2021 earnings call

Management Statement and Operational Highlights

• Financial Performance: EBITDA increased 38% year-on-year to R48.4 billion, free cash flow improved 75%. Net debt-to-EBITDA at 1.5 times, gearing decreased from 117% in FY 2020 to around 61% at 30 June 2021.
• Operational Performances: Secunda volumes up 3%, Mozambique production up 2%, mining productivity down 1% but expecting improvement. Chemicals business strong cash flows, U.S. sales volumes 2% higher post-weather events.
• Sasol 2.0 Transformation: Ramping up, early results, workforce transition completed, future cost base benefiting from initiative.
• Safety and Sustainability: Safety indices improved, COVID-19 protocols maintained, significant investment in social impact programs, plans to decarbonize business and share improved climate change targets at Capital Markets Day.

Segment Performance

• Secunda Operation: Volumes up 3% despite operational challenges. Contribution not specified by revenue percentage.
• Mozambique Production: 2% higher. Contribution not specified by revenue percentage.
• Mining: Productivity down 1% due to full calendar operating shift system, but expects improvement. Contribution not specified by revenue percentage.
• Chemicals Business: Achieved strong cash flows. U.S. normalized sales volumes 2% higher after accounting for adverse weather. Joint venture with LyondellBasell for certain units running at higher rates. Contribution not specified by revenue percentage.
• Mozambique: Core to Sasol's feedstock transformation strategy, PSA project ongoing. Contribution not specified by revenue percentage.
• Asset Divestment: Advanced divestments to the value of US$3.8 billion since March 2020, program drawing to close. Contribution not specified by revenue percentage.

Guidance

• Deleveraging: Prioritize deleveraging balance sheet, sustain net debt-to-EBITDA below 1.5 times and net debt below US$5 billion by end of 2022.
• Capital Expenditure: Capital expenditure of R16 billion, focus on safety and asset integrity.
• Dividend: Dividend suspension continued until debt levels reduced.

Risks

• Economic Uncertainty: Prolonged economic uncertainty remains a risk.
• Coal Quality and Mining Productivity: Coal quality deterioration and slower-than-expected productivity improvement in mining.
• Weather Events: Impact on U.S. business sales volumes and operations.
• Carbon Tax: Impact on profitability.

Question and Answer

Q: Mining costs were higher than guided. What caused it?

A: Delayed change management in Fulco system implementation and coal quality deterioration, but improvement seen in July with productivity rates increasing.

Q: Impact of Canadian asset disposal on gas division OpEx and CapEx?

A: Sales price for Canadian assets was over $50 million, no exposure to OpEx or CapEx from Canada in future forecasts.

Q: When could dividends be reinstated?

A: Dividend reinstatement depends on balance sheet deleveraging, cash flow, and debt levels, details to be shared at Capital Markets Day.

Q: Impact of commodity chemical price moderation?

A: Chemical prices expected to moderate as supply normalizes, with some softness but North American business still expected to have healthy monthly runrates.

Q: ESG-related CapEx and greenhouse gas targets?

A: CapEx guidance includes ESG-related projects like feedstock renewal and SO2 abatement, with more details at Capital Markets Day on 2030 GHG reduction targets.