Sasol Limited Q4 FY2022 earnings call

Management Statement and Operational Highlights

• Safety Focus: Prioritized safe operations, offered condolences for lost colleagues, with reduced lost workday cases but ongoing zero harm focus.
• Social Impact: Contributed ZAR 58 billion in taxes/royalties, spent ZAR 33.6 billion on majority black-owned businesses, invested ZAR 1.2 billion in skills development, ongoing wage negotiations.
• ESG Progress: Progress on 2030 GHG reduction target, procured over 600 MW of renewable energy in SA and Europe, gas supply progress in Mozambique, green hydrogen project in Sasolburg, Natref refinery repurposing pre-feasibility study, ISCC-PLUS certification at European sites.
• Financial Performance: EBITDA increased 48% to ZAR 72 billion, net debt reduced to US$3.8 billion, core headline earnings per share increased over 100%, dividends reinstated.

Segment Performance

• Energy Business:
  • Mining segment: Adjusted EBITDA increased 3% but was offset by lower volumes due to operational and safety challenges, and higher external coal purchases.
  • Gas segment: Adjusted EBITDA up 2% due to higher gas prices and production volumes.
  • Fuel segment: Adjusted EBITDA increased over 100% driven by higher crude oil prices, refining margins, and sales volumes.
• Chemicals Business:
  • Africa segment: Impacted by production challenges and supply chain disruptions but had 44% increase in adjusted EBITDA due to higher average sales basket price.
  • Chemicals America segment: Adjusted EBITDA up 72% but offset by lower sales volumes from base chemicals divestments and unplanned downtime.

Guidance

• 2023 Financial Year Expectations: Energy business expected stronger performance with mining productivity improvement, gas segment higher production volumes, SA liquid fuel sales volumes 53-56 million barrels, Secunda operations 7-7.2 million tonnes. Chemicals business expected sales volumes growth in Africa, America, and Eurasia segments.
• Capital Expenditure: Capital expenditure ZAR 23 billion in 2022, maintained and transform capital slightly higher in 2023, focus on risk-based capital allocation, venture capital fund for green economy.

Risks

• Operational Challenges: Supply chain disruptions, inflation, geopolitical tensions, natural disasters impacting operations, safety performance concerns, regulatory changes (e.g., carbon tax proposals).
• Market Volatility: Fluctuations in oil, gas, and chemicals prices, exchange rate impacts, potential recessionary risks affecting demand.

Question and Answer

Q: Excited by Sasol's initiative to start a venture fund. Is there a capital target for the venture? And by when will the ventures start operating?

A: Hanré Rossouw mentioned they hope to launch later this year, finalizing funding and governance.

Q: Could you please shed some light on your oil price hedging strategy, given the risk that oil prices could come down in the event of a global recession?

A: Hanré Rossouw said hedging cover reduced to around 45% for 2024, using put options for downside protection.

Q: The Synfuels production guidance is way below historical levels. Why so low?

A: Fleetwood Grobler mentioned recovery from previous year, full and phase shutdowns in Secunda, and gas supply impacts.

Q: What is the group's debt profile and refinancing strategy?

A: Fleetwood Grobler said net debt at USD 3.8 billion, focusing on shifting US dollar debt to rand-denominated, with refinancing plans for upcoming bonds.