Sasol (SSL) This fall 2022 Earnings Name Transcript

August 29, 2022

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Sasol (SSL -2.85%)
This fall 2022 Earnings Name
Aug 23, 2022, 3:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Contributors

Ready Remarks:

Tiffany Sydow

Good morning, and welcome to the presentation of Sasol Restricted’s annual outcomes for monetary yr 2022. Thanks for becoming a member of us at the moment. Our audio system at the moment are Fleetwood Grobler, president and CEO of Sasol, and Hanre Rossouw, Sasol’s chief monetary officer. In at the moment’s presentation, Fleetwood will cowl the enterprise efficiency for the ultimate yr, which additionally contains an replace of our ESG progress and milestones.

The monetary efficiency might be coated in additional element by Hanre, with Fleetwood concluding with a short replace on our future Sasol aspiration. You’ll then have a possibility to ask your questions in our Q&A session, which commences instantly afterwards. Earlier than we start, I would prefer to refer you to our disclaimer, which is summarized on the slide. This accommodates vital info concerning forward-looking statements which might be made on this presentation.

Please take a look at it in your individual time.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Good day, everybody, and welcome to our 2022 monetary outcomes replace. Within the final two years, we’ve got confronted a number of challenges each in South Africa and overseas. The outbreak of COVID considerably impacted the worldwide financial system, and the world remains to be adjusting to main provide chain disruptions. The battle in Ukraine, now coming into its six months, has brought about monumental upheaval in international power markets together with a devastating toll on human life.

Inflation is hovering throughout the globe, and recessionary considerations are rising. In South Africa, the civil unrest of July 21 and extra lately, the torrential rainstorms in April this yr largely concentrated in KwaZulu-Natal affected our capability to export merchandise and disrupted our operations. However this backdrop, we stay centered on assembly our short-term targets whereas recording progress on future Sasol aspirations. On this interval, we have been profitable to considerably strengthen our stability sheet by well-executed response measures with out the necessity for a rights subject.

We accomplished our strategy-led accelerated asset divestment program. And at the moment, I’m happy to announce the reinstatement of our dividends to our shareholders. As prior to now years, Workforce Sasol stepped up and delivered in a difficult working setting, and I categorical my honest appreciation for our individuals’s continued diligence, dedication, and help. I additionally wish to thank the Board of Sasol for its continued steering and help as we take important strides to a extra aggressive and sustainable future Sasol.

In recent times, we framed our technique to the triple backside line focus of individuals, planet and revenue. Sound ESG efficiency is key to our enterprise and integral to the supply of future Sasol objectives. Inside this framework, I’ll begin my presentation by offering a high-level overview of economic yr ’22. Sustaining secure operations is our main focus, significantly contemplating the tragic lack of 5 colleagues within the first half of this yr.

We’ll by no means relaxation in our pursuit of zero hurt. We attempt to eradicate work-related security incidents to make sure our workers return residence safely every day. Moreover, our intent to be a drive for social good is unequivocal and demonstrated within the some ways we positively affect the economies and help our communities within the areas the place we function. As our business is transitioning towards greener options, the simply transition towards that aspiration is foremost in our pondering.

On planet, our ambition to develop shared worth whereas accelerating our transition was affirmed by our future Sasol technique. We outlined concrete plan to speed up the decarbonization of our enterprise in opposition to two milestone dates, 2030 and 2050. As a reminder, we stepped up our 2030 greenhouse gasoline emission discount goal to 30% from a 2017 baseline and introduced our ambition to be at web zero emissions by 2050. We’re making important headway on our 2030 GHG discount pathway as Sasol executes the primary tranche of greater than 600 megawatts of renewable power within the subsequent two to a few years.

This equates to a good portion of our power wants in Secunda and is on an unmatched scale in South Africa. On the final factor, revenue, we achieved a step change enchancment in our profitability this yr. Whereas a few of this enchancment was supported by increased costs, additionally it is underpinned by a sturdy price and capital expenditure efficiency. These advantages have been, nonetheless, partly offset by operational challenges in our built-in South African worth chains that led to decrease manufacturing.

I am happy to report that we’ve got already improved our Synfuels plant output and coal stockpile state of affairs. I’ll now unpack our monetary yr ’22 efficiency additional. The well-being of our individuals and sustaining secure operations is our No. 1 precedence in pursuit of our zero-harm ambition.

Let me once more categorical our heartfelt condolences to the households and mates of the colleagues we misplaced, Themba Masilela, Moses Hlongoane, Takalani Masha, Gansen Naidoo and Lebogang Lebepe. Any lack of life is unacceptable. Our grave concern for the deterioration in our security efficiency was a supply of a major introspection that additional intensified our concentrate on security intervention. These efforts noticed an enchancment in our efficiency within the second half of the yr whereas we proceed to strengthen our secure operation capabilities and practices.

In consequence, misplaced workday circumstances proceed its downward trajectory whereas our recordable case fee stood at 0.27, marginally above final yr’s fee. We’re additionally addressing numerous actions with a specific concentrate on operational self-discipline, coaching, management and tradition to deepen understanding of dangers. I and my government workforce are personally dedicated to go away no stone unturned as we pursue our zero-harm goal. One other vital security metric we measure amongst many different issues is the incidence of fireplace, explosion and launch incidents.

This yr, we had 13 incidents with a reducing pattern with nice ongoing effort to entrench course of security fundamentals. On stability, we’re making good progress, however we will by no means be complacent, and all of us acknowledge the necessity for relentless commitments on focus and security. Our intent to be a drive for social good is integral to our enterprise technique whereas our objective, innovating for a greater world, evokes our journey to appreciate measurable socioeconomic advantages for communities in our working areas. Amongst a number of key examples, we contributed over ZAR 58 billion in taxes and royalties, up 19% from the earlier yr.

With South Africa being our largest tax jurisdiction, we stay one of many prime company taxpayers within the nation. Our whole measured procurement spend was ZAR 55.8 billion, of which ZAR 33.6 billion was spent on majority black-owned companies in South Africa. That is up 40% from final yr, demonstrating our ongoing dedication to sustainable transformation and black-based financial empowerment. Our ZAR 1.2 billion funding in abilities and growth makes us one of many largest traders in South Africa.

We proceed to fund roughly 600 undergraduate and post-graduate bursaries in monetary yr ’22 alone. Within the U.S., we help a number of universities and elementary science, expertise, engineering and arithmetic, or STEM schooling, as workforce growth pipelines are vital to our sustainability and variety objectives. Sasol stays a major investor in our communities, and I am very pleased with the main position we proceed to play in driving constructive socioeconomic change. Wanting on the state of our wage negotiations.

Now we have efficiently concluded 2-year wage settlement agreements with our commerce union companions each within the petroleum and industrial chemical substances sectors. Offering certainty to wage will increase is essential to our individuals and help with the creation of a extra harmonious working setting. Wage negotiations in each mining and Mozambique are ongoing. We stay dedicated to proceed working with our commerce union companions in pursuit of amicable agreements.

The plans for assembly our 30% greenhouse gasoline discount goal by 2030 are progressing effectively, which would be the actual basis to assembly our 2050 web zero ambition. Important progress has been made in procuring renewable power for each our Power and Chemical compounds companies. In South Africa, we’ve got agreed the important thing phrases with impartial energy producers to safe over 600 megawatt of photo voltaic and wind energy to start out coming on-line earlier than 2025. We’re aiming to ultimately procure 1,200 megawatt of renewable power capability by 2030.

This represents one of many largest renewable power procurement packages from the non-public sector in South Africa and might be a robust contributor towards South Africa’s ambition to implement important portions of renewable power. In Europe, we entered into a number of energy buy agreements for our German and Italian operations. This, along with the provision of CO2-neutral biomass-based steam to Brunsbüttel is predicted to scale back CO2 equal emissions by as much as 70 kilotons each year. On gasoline provide, we’ve got made important progress primarily based on our latest infill effectively drilling exercise the place preliminary outcomes point out that we will optimize our provide profile from current Mozambican belongings to increase our plateau manufacturing till 2028.

The manufacturing sharing settlement, or PSA mission, is progressing effectively and stays inside finances. We’re additionally partnering to pursue adjoining exploration acreage to entry extra gasoline. It is a large step ahead and ensures that we’ve got flexibility in our gasoline provide profile as we progress our 30% discount pathway. We’re advancing our negotiation on a time period sheet for 40 to 60 petajoules of LNG from 2026 onwards.

This technique offers flexibility of our gasoline provide profile. Taking a look at different low carbon enablers, we stay dedicated to play a number one position within the inexperienced hydrogen financial system in South Africa. In Sasolburg, the ultimate funding resolution for a inexperienced hydrogen mission was taken swiftly with the purpose of manufacturing the primary inexperienced hydrogen volumes towards finish 2023. I am additionally happy to report that we’re assessing inventive choices for repurposing the Natref refinery.

Right here, we’ve got accomplished a pre-feasibility research on a inexperienced hybrid refinery idea. This contains the introduction of bio-based feedstock as a sustainable pathway to transition the refinery to satisfy the nation’s steam fuels compliance requirements and scale back greenhouse gasoline emissions. Along with our accomplice, TotalEnergies, we’ve got developed and are implementing now a low-cost revolutionary answer that may produce clear fuels to compliant diesel towards the tip of 2023. That is very constructive step for us and in addition towards power safety for South Africa.

For our South African worth chain, one of many key enablers to attain our 2030 goal is the eventual turndown of coal-fired boilers, which requires a superb coal answer for Sasol. Now we have lately confirmed the feasibility of a superb coal answer, which allows our built-in greenhouse gasoline and air high quality enhancements in our Secunda operations. The phased shutdown of our boilers can’t be achieved with out the answer for the superb coal feedstock, which we use at the moment to supply steam and electrical energy required in our operations. Sasol Chemical compounds in a bit to obtain extra round and sustainable merchandise and to supply that had its first gross sales of sustainability-certified merchandise from decrease carbon depth renewable feedstocks from our mall web site in Germany.

As well as, we’ve got achieved ISCC+ certification at three largest of our European websites, particularly Marl, Brunsbüttel and Augusta, to begin using bio-based and round feedstocks. We proceed to make progress on our simply transition method, which incorporates leveraging current initiatives and a collaborative method with companions. Total, I am happy with the progress made, and we proceed to speed up exercise towards our 2030 goal in a value-enhancing manner. Taking a look at our environmental efficiency in monetary yr ’22.

Our greenhouse gasoline emissions diminished by roughly 7% in comparison with the 2017 baseline. This important discount is to a big extent on account of decrease manufacturing charges from our Secunda and Sasolburg operations. Taking into consideration the decrease manufacturing on this yr, GHG emissions can be practically 4% decrease from our ’17 baseline, exhibiting some progress being made on our mitigation initiatives. Notice that our 2017 baseline has been restated to account for the divestments and is in step with the World Enterprise Council and Sustainable Growth GHG protocol.

The affect of divestments isn’t included as a part of our 30% discount dedication. Though GHG emissions will improve with increased manufacturing volumes in monetary yr ’23, we count on continued enchancment from current discount ranges. Nonetheless, the bigger greenhouse gasoline discount will solely be realized after 2025 with the implementation of renewable power, transition gasoline, and phased boiler shutdowns. However, implementing our discount levers aren’t with out threat.

We perceive these dangers effectively. Our groups are working diligently to mitigate the potential impacts, which embrace from key transmission infrastructure, potential short-term provide chain constraints for renewable power and gasoline affordability. Turning now to our working setting. Up to now yr, we have been confronted with a number of challenges within the exterior working setting.

However true to the Sasol manner, we handle these impacts with higher ranges of flexibility and collaboration throughout Sasol, testing the effectiveness of our new working mannequin launched final yr. In response, we continued supply of our Sasol 2.0 transformation program to fight the results of upper inflation and price pressures. Following the heavy rainstorms in KwaZulu-Natal province this yr, we shifted chemical merchandise from rail to highway transport, the place attainable and checked out different loading areas. In Europe, we’re evaluating using different power sources to mitigate a number of the provide impacts attributable to the battle in Ukraine.

We’re additionally working constantly to take care of provide chain channels and alternate options to Rhine River visitors, which is severely disrupted by the decrease river ranges this summer season season. We proceed to interact with all stakeholders in response to regulatory coverage adjustments, most significantly, the latest proposed amendments to the carbon tax regime in South Africa, which may considerably affect our enterprise. By these difficult occasions, we prolonged complete help to our workers and communities to assist workers handle varied challenges owing to pandemics, pure disasters, wars and different humanitarian disaster. I’ll now contact on a number of salient factors concerning enhancements we proceed to document in enterprise profitability.

The Power enterprise benefited from a restoration in fuels demand publish the COVID-19 demand affect. This was offset by decrease manufacturing volumes in Secunda and Sasolburg operations following the feedstock and operational challenges, which impacted our South African worth chain. Our mining operations skilled setbacks within the first half of the monetary yr, and our productiveness and output are decrease in comparison with final yr. Nonetheless, we noticed enchancment within the productiveness within the second half and the coal stockpile restored to above the degrees indicated at half year-end.

In Mozambique, we delivered a robust efficiency, exceeding our productiveness plan and market steering on gasoline volumes. Regardless of the challenges related to the pandemic, the infill effectively drilling marketing campaign is progressing safely inside price and schedule. The Chemical compounds enterprise delivered a 21% improve in income this yr benefiting from a stronger common gross sales basket worth. Total volumes have been 12% decrease than the prior yr, largely as a result of divestment of the 50% of the U.S.-based chemical substances belongings concluded in December 2020 and decrease South African manufacturing.

Gross sales volumes for our Specialty Chemical enterprise divisions have been increased because the U.S. operational ramp-up continues. Nonetheless within the U.S., we additionally accomplished a profitable shutdown of the east cracker within the first half. I am additionally proud to announce that we’ve got accomplished the remaining divestments we focused particularly the Canada shale gasoline asset, ROMPCO shareholding dilution to twenty%, CTRG, and our European Wax enterprise.

In mining, in step with our zero-harm ambition, we’re making good progress in implementing our security remediation program to handle the findings from our earlier excessive severity incidents. We’re working to revive productiveness and keep wholesome stockpile ranges. This contains reaching focused productiveness ranges throughout all mines by centered efficiency initiatives. Moreover, we’re executing coal high quality enchancment alternatives to help optimum Secunda manufacturing, together with mixing, improved mine part deployment, and diminished variability by built-in resolution fashions.

Coal high quality typically deteriorates over the life span of a mine as operations transfer away from the upper high quality reserves, and that is no completely different in our case. Mine planning should adapt to cater for deterioration in high quality to optimize the reserves. We’re addressing our coal high quality enchancment by a mixture of short- and longer-term methods. These methods might embrace the procurement of higher-quality coal as a viable lever to stability the entire high quality contemplating the built-in margin of our Secunda product slate.

Throughout our South African gasoline and chemical operations, we’re centered on bettering the effectiveness of our shutdowns and pursuing technical choices to enhance reliability of our key gear. Taking a look at our worldwide operations. The ramp-up of our Lake Charles specialty items is constant as deliberate. The workforce is working intently with our JV accomplice within the Louisiana Built-in PolyEthylene JV to make sure secure operations.

Now we have additionally appointed a activity workforce to reply to potential gasoline provide constraints in Europe, which may affect all producers within the area. This contains evaluating different feedstocks the place technically possible. Regardless of a difficult operational yr, we noticed a major enchancment in monetary efficiency. I’ll contact on only a few monetary metrics earlier than I’ll hand over to Hanre, who will share extra particulars.

Our EBITDA elevated by 48% to round ZAR 72 billion. The stability sheet was strengthened, ending with a web debt of USD 3.8 billion at year-end, effectively under the goal of USD 5 billion. Core headline earnings per share elevated by greater than 100% to roughly ZAR 69 per share supporting the resumption of dividends to our shareholders. It is a large step ahead for Sasol, and we thank our shareholders for his or her persistence and help over the previous few years.

Whereas a number of the enchancment is supported by increased costs, it additionally demonstrates our resilience and agility to constantly adapt to a dynamic enterprise panorama. Our efforts beneath Sasol’s disaster response and Sasol 2.0 packages have benefited us vastly on this time. On that be aware, I’ll now hand over to Hanre to take us by the detailed monetary outcomes for the reporting interval.

Hanre RossouwChief Monetary Officer

Thanks, Fleetwood, and good morning, women and gents. It is a privilege for me at the moment to current Sasol’s monetary efficiency for the 2022 monetary yr. Having joined Sasol solely in April, I am briefly tempted to take credit score for all of the highlights of the outcomes. I would quite although give due to the Sasol workforce for welcoming me onboard and in addition give credit score to all of the dedication and particular person sacrifice made throughout Sasol over the past years to navigate the corporate by some very tough waters.

Let me begin the outcomes overview by offering some element across the macro setting, which was vital to the monetary outcomes for the interval. Maybe the overriding takeaway is the extent of volatility within the exterior setting affecting our enterprise with extremely important strikes in most of the key benchmark costs. We proceed to take pleasure in the good thing about important will increase within the oil and different power and chemical substances costs. We noticed Brent crude rising by 70% to common $92 per barrel and polyethylene, up 38%.

The rand remained comparatively flat for monetary yr ’22, however the closing fee was 14% increased, which negatively impacted the interpretation of our U.S. dollar-denominated debt. Feedstock costs have been impacted with ethane costs up by 86% following the rise in pure gasoline costs. We count on to see ongoing considerations within the close to time period across the future safety of pure gasoline provide.

Wanting ahead, we count on tight international power and chemical substances markets with elevated volatility and uncertainty from ongoing geopolitical occasions and the potential macroeconomic fallout from rising inflation and provide chain disruptions. Domestically, the South African financial system is confronted with a number of challenges together with excessive structural unemployment and financial constraints, which must be factored into enterprise planning. These challenges require continued agility and responsiveness in our enterprise. We stay dedicated to ship a aggressive Sasol by our continued price and capital allocation self-discipline and the Sasol 2.0 program.

Turning to the monetary outcomes. Now we have seen a major enchancment within the profitability of our group in comparison with the earlier monetary yr. We benefited from the robust restoration in costs, which I coated within the earlier slide, in addition to sturdy price efficiency. These advantages have been partly offset by a mixture of operational challenges in our built-in South African worth chain and provide chain disruptions, which Fleetwood spoke to earlier.

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Earnings earlier than curiosity and tax for the prior yr was impacted by noncash changes, each notably within the Chemical compounds Americas section, which included the ethylene spinoff impairment reversal and achieve on disposal of our U.S.-based Chemical compounds enterprise in addition to within the gasoline section, which included the impairment referring to the Synfuels refinery CGU. Noncash changes for this monetary yr contains unrealized translation and hedging losses of ZAR 5.2 billion and a web achieve of ZAR 9.9 billion on remeasurement gadgets, primarily from our asset divestments. On an adjusted EBITDA foundation, our income of roughly ZAR 72 billion was a rise of 48% in comparison with the prior yr with the advantages of our diversified power and chemical substances portfolio evident within the profitability combine. Core headline earnings of ZAR 68.54 per share elevated by greater than 100% in comparison with the prior interval, supporting the reintroduction of dividends to our shareholders with a ultimate dividend of ZAR 14.70 per share.

This represents a money return of over ZAR 9 billion to our shareholders. Return on invested capital normalized for facets similar to revenue on sale and hedging losses elevated to only in need of 22%. We stay dedicated to ship superior returns effectively above WACC, guaranteeing a worthwhile and sustainable enterprise sooner or later. The administration of threat stays key, and our stronger stability sheet will permit us to considerably scale back the necessity for hedging going ahead.

Let me now flip to the segmental highlights, beginning with the Power enterprise. Our mining section benefited from increased export costs, leading to a 3% improve in adjusted EBITDA in comparison with the prior yr. This was partly negated by a mixture of decrease volumes following the operational and security challenges, as already talked about, in addition to increased exterior coal purchases. Our gasoline section made good progress with the Mozambique drilling marketing campaign.

Adjusted EBITDA was up by 2% in comparison with the prior yr supported by increased gasoline costs in addition to increased manufacturing volumes. Our gasoline section delivered a robust efficiency, with adjusted EBITDA rising by greater than 100% in comparison with the prior yr. We benefited from increased crude oil costs, refining margins and better gross sales volumes on the again of improved demand. Turning to our Chemical compounds enterprise.

Our Africa section was impacted by a mixture of manufacturing challenges at our SA websites within the first half of the monetary yr in addition to provide chain disruptions, which affected the export of merchandise within the second half. Nonetheless, the common gross sales basket worth for the monetary yr was 29% increased on account of a mixture of improved demand, increased oil costs and tighter international provide circumstances. This resulted in a 44% improve in adjusted EBITDA. Now we have seen a robust ramp-up of our specialty chemical substances in our Chemical compounds Americas section as extra merchandise are being licensed to be used by our clients.

Adjusted EBITDA elevated by 72%, benefiting from the 58% improve within the common gross sales basket worth. This was offset by decrease gross sales volumes, following the bottom chemical substances divestments and the unplanned west cracker downtime within the final quarter of the monetary yr. As I’ve talked about, ongoing geopolitical tensions, inflationary pressures and elevated recessionary dangers will proceed to affect our enterprise and the precedence is to successfully handle the weather which might be beneath our management. When it comes to steering for the 2023 monetary yr, we count on typically stronger efficiency in our Power and Chemical compounds companies.

We anticipate productiveness at our mining enterprise to enhance in comparison with monetary yr ’22 as we concentrate on operational self-discipline and proceed to prioritize the security of our workforce. In our gasoline section, we count on increased manufacturing volumes as we begin seeing the advantages of the exploration and infill effectively drilling marketing campaign. Our South African liquid gasoline gross sales volumes will improve to a spread between 53 million and 56 million barrels on the again of improved operational efficiency and better fuels demand. With the anticipated enchancment in mining productiveness and operational stability, Secunda operations will produce increased volumes of between 70, apologies, seven million to 7.2 million tonnes.

This contains the affect of the total shutdown deliberate for September of this calendar yr. Turning to our Chemical compounds enterprise. Gross sales volumes for Chemical compounds Africa is predicted to be between 6% to 12% increased in comparison with the prior yr, following improved operational efficiency and restoration from provide constraints, which we skilled within the earlier yr. In Chemical compounds America, we count on gross sales volumes to be between 5% to 10% increased than the prior yr as Lake Charles continues to ramp up.

Chemical compounds Eurasia, the gross sales volumes are anticipated to be as much as 5% increased, primarily on account of improved market demand. There may be, after all, some threat to our Eurasia enterprise forecast, as Fleetwood has highlighted. I am happy to share the continued progress we’re making with our Sasol 2.0 transformation program, which goals to make sure that we stay aggressive and worthwhile even in a low worth oil setting. Taking a look at our efficiency for this yr, we realized ZAR 4.2 billion in web sustainable money mounted price financial savings, effectively above our goal of ZAR 3 billion.

This was partially offset by increased price as we launched worker short-term incentives and different shutdown-related expenditure, which was not in our monetary yr ’20 base. The good thing about these financial savings is clear within the revenue assertion as we managed to include money mounted prices to a mere 2% improve in comparison with the prior yr. We noticed a ZAR 2.6 billion gross margin enchancment, above our goal of ZAR 1.5 billion, by initiatives similar to feedstock optimization and debottlenecking of our vegetation. Capital expenditure remained inside our guided vary of ZAR 20 billion to ZAR 25 billion in 2020 actual phrases.

This was delivered by our risk-based capital allocation method, which incorporates initiatives similar to preventative upkeep and creating different low capital and noncapital options. I’ll present extra element on capital spend on the subsequent slide. Our working capital ratio was barely above our goal, primarily on account of increased valuation of stock and receivables following elevated costs. If we extrapolate for turnover for the final quarter of the monetary yr, although, the working capital to income ratio was 12.3%.

Given the volatility, which has performed out over the latest years, we’re revisiting the measure of 14% working capital to turnover ratio at interval finish and contemplating embedding a extra sustainable common all year long. As we enter the brand new monetary yr, we are going to proceed to focus our efforts on strict money mounted price administration and additional rising our gross margin by operational enhancements and realizing finest apply by market-driven methods. Based mostly on the present pipeline of concepts and initiatives, we’re assured that we’ll keep momentum in attaining the two.0 targets for the upcoming monetary yr and past. We proceed to prioritize capital spend to boost returns, defend our license to function and make sure that we’ve got a secure and dependable operations of our enterprise.

Our capital expenditure of ZAR 23 billion for the monetary yr was in step with steering, however increased than the earlier yr as we deferred capital expenditure on account of money preservation measures. Taking a look at our capital forecast for the brand new monetary yr. Our maintained and reworked capital might be barely increased in comparison with this yr, however nonetheless in step with our capital steering. That is largely as a result of PSA drilling marketing campaign gaining momentum and the deliberate full yr shutdown of our Secunda operations.

As we progress our 30% greenhouse gasoline discount program, we are going to begin incurring extra reworked capital. So far, spend was restricted to minor research prices. Right here, we count on to spend between ZAR 500 million to ZAR 1 billion in monetary yr ’23 with peak spend forecast for monetary years ’25 to ’27. Going ahead, our key capital targets stay unchanged with the reworked and maintained capital of ZAR 20 billion to ZAR 25 billion per yr in actual phrases.

The mixture capital for our transformation highway map of between ZAR 50 billion to ZAR 25 billion as much as 2030 is included on this annual spend steering. Our capital allocation framework shared in 2021 is aimed toward balancing the supply of our long-term technique, our local weather change ambitions and rising our shareholder returns. Our first and second order allocation rules make sure that we prioritize our maintained and reworked capital to proceed operations effectively into the longer term, whereas the sturdy stability sheet will help a sustainable dividend primarily based on a 2.5 to 2.8 occasions cowl of core HEPS. Progress alternatives, each natural and inorganic will then compete with further shareholder returns in a disciplined style to optimize risk-weighted returns of the portfolio.

Our accelerated asset divestment program is now full and delivered over ZAR 50 billion of proceeds. This has considerably contributed to our deleveraging success and diminished web debt to a extra snug stage for the enterprise. Our hedge cowl ratio has diminished considerably from monetary yr ’22 to ’23, and we now count on additional discount of the duvet ratio as we’ve got diminished the necessity for draw back safety. To help our 2050 ambition and the brand new worth streams being pursued all through the enterprise, we’re within the course of of creating a small enterprise capital fund aimed toward investing in start-up and early stage expertise within the inexperienced financial system.

This can even help our inside analysis and expertise capabilities by which we imagine Sasol could make a major international contribution to innovating for a greater world. In conclusion, I want to emphasize the nice progress made towards our monetary aims in a really difficult setting. Our group profitability and monetary place has improved dramatically over the past yr. Favorable macroeconomics have helped us, along with centered and well-executed plans and a technique, which is able to protect and develop long-term worth.

There may be, after all, rather more to do, however there’s additionally little doubt that we’ve got created a stronger platform. Our shareholders have been affected person in foregoing dividends over the previous few cycles. And at the moment, we’re proud to announce the resumption of dividends on the again of a a lot stronger stability sheet. We’re dedicated to sustaining a dividend, which is sustainable going ahead.

Now we have a transparent transition goal to 2030, which features a self-funded transition, and we’ve got full confidence in delivering the primary 30% greenhouse gasoline emissions discount by 2030 by well-defined levers. Past this, we are going to stability capital allocation of progress initiatives, which make financial sense with acceptable threat and shareholder return choices. We’ll prioritize extra impactful investments over time, which give wholesome and constant returns that are commensurate with the danger. Thanks for listening.

And I’ll now hand again to Fleetwood for the conclusion.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks, Hanre. As we glance to conclude the presentation of our year-end outcomes, I’ll now shift the main target to future Sasol. As we speed up plans to satisfy our 2030 GHG discount goal, we constructed the muse for attaining our 2050 web zero ambition. On this regard, we proceed to progress the techno-economic research on the pathways thought of for 2050 with extra element being developed.

Our GHG emission reductions might be achieved by transformational pathways that would additionally embrace acutely aware choices to chop again manufacturing in elements of the enterprise. We may, as an illustration, see our Secunda manufacturing slate shifting essentially past 2030, relying on demand profiles for power merchandise in the long term. We’re additionally enjoying a number one position in coastal inexperienced hydrogen export by the Boegoebaai alternative. By a minimal random of settlement with the Northern Cape Growth Company, we’re main the prefeasibility research to discover the potential of Boegoebaai as an export hub.

Sasol ecoFT, which goals to offer sustainable aviation fuels, or SAF, and associated feedstocks for chemical substances utilizing our personal confirmed Fischer Tropsch expertise has seen important curiosity within the latest interval. SAF stays probably the most promising pathways for the hard-to-abate aviation sector to decarbonize in future. The SAF drop-in providing is [Technical Difficulty]. Our honest apologies for this energy failure we skilled.

I feel we want extra renewable power earlier. Let me proceed. The SAF drop-in providing is a sexy aviation gasoline answer, and the market is predicted to develop massively within the years to come back. We’re refining our go-to-market technique and entered into a number of collaboration agreements with enterprise companions, feedstock suppliers, plane producers and different service suppliers to firmly place Sasol inside the creating SAF market.

The Lake Charles ramp-up continues to be a spotlight space within the quick time period. However past that, we imagine the location offers a number of enticing alternatives by colocation and growth as a sustainability hub with companions. We’re additionally bolstering our analysis and expertise capabilities to help the event of emergent and new inexperienced applied sciences wanted towards 2050. Inexperienced applied sciences is not going to solely contribute towards Sasol’s web zero plans, but additionally play a vital position within the broader societal transfer to web zero by utility of our applied sciences.

An instance of that is the latest Sasol and LOTTE Chemical compounds collaboration to develop supplies for electrical automobile batteries, the place lithium-ion batteries are prone to be the important thing energy supply for electrical autos in future. As talked about by Hanre, the enterprise capital fund we’re establishing will facilitate funding development of recent applied sciences by start-up alternatives. Now trying forward, there are a number of key areas the place we should keep our relentless focus to proceed delivering on our ambition to develop shared worth whereas accelerating our transition. At first, we should obtain zero hurt for our individuals.

Additionally vital might be to progress our local weather change and broader ESG objectives, which is key to our long-term sustainability. We’ll construct on the wonderful progress made this yr to drive additional execution of our 2030 highway map. Along with this, sustaining operational stability and centered quantity enchancment will make sure that we maximize worth from our well-invested belongings. Furthermore, delivering on our Sasol 2.0 targets will place us to be sustainably worthwhile and aggressive in a decrease oil worth world.

Supply of those objectives will allow the enterprise outcomes to in the end present sustainable shareholder returns. This concludes our outcomes presentation for at the moment. Hanre and I thanks for watching. We’ll now take a five-minute break earlier than we begin with a questions-and-answer session, which Tiffany Sydow from investor relations will facilitate.

Thanks.

Tiffany Sydow

Good morning, and welcome to the question-and-answer session associated to Sasol’s monetary outcomes announcement this morning. My identify is Tiffany, and I will be facilitating the question-and-answer session at the moment. With us within the room, we’ve got Fleetwood Grobler and Hanre Rossouw. And on my proper, we’ve got the remainder of the Sasol government administration workforce.

Welcome to the session. [Operator instructions] Turning to our first query for the day. Excited by Sasol’s initiative to start out a enterprise fund. Is there a capital goal for the enterprise? And by when will the enterprise begin working? From Tabo Matabata at NPV Investments.

Hanre, over to you.

Hanre RossouwChief Monetary Officer

Thanks, Tiffany. I share the joy. I feel the enterprise capital fund that we’re concentrating on offers us the flexibility to innovate additionally outdoors of Sasol, and I feel it hyperlinks properly to the analysis and expertise work that we do. I’ll hold you in suspense.

We hope to launch that later this yr. We’re finalizing the funding and governance facets of that, however hopefully share some extra information on that earlier than the tip of the yr.

Tiffany Sydow

Thanks, Hanre. I feel sticking with the theme of economic outcomes. Might you please shed some mild in your oil worth hedging technique given the danger that oil costs may come down within the occasion of a worldwide recession? From Richard Middleton at Excelsia Capital. And I feel if we will go on to the subsequent query as effectively, what can be the factors for Sasol to contemplate a mix of share buybacks and dividends going ahead? From [Inaudible] at Bateleur Capital.

Hanre RossouwChief Monetary Officer

Thanks, Tiffany. I feel the overarching facet for each questions are the capital allocation framework and threat administration construction that we’ve got. And I’ve received to first simply declare my private allergic reactions to hedging. I feel it is vital to not have a look at hedging in isolation, however as a part of a broader threat administration facet of the enterprise.

To that extent, we had extreme hedging, you can say. And the necessity for hedging, given our earlier important debt on the stability sheet, if we return to 2020, we had over $10 billion of debt. And at that stage, we had round 70% cowl of our oil manufacturing. Given the numerous discount in gearing, operational gearing has additionally improved.

We now see a decrease want for gearing — or for hedging, quite. And we have diminished the hedge cowl of oil to round 25% for the 2024 monetary yr. And that additionally now has a slight change in method, the place beforehand we used the zero price collars, we are actually utilizing extra put choices actually simply to purchase the draw back safety within the occasion of extreme drop in oil costs, which may come from a worldwide recession. When it comes to buybacks and dividends, once more, we referenced the capital allocation framework.

And actually, thereafter, the allocation of capital to our maintained and reworked and paying the bottom dividend, the surplus money then will both go into progress capital, as I discussed, each inorganic or natural, or be returned to shareholders. And to that extent, we’re joyful to contemplate each buybacks and particular dividends. We have not given any steering but on the stability of buyback and dividends by which we are going to think about, however we are going to think about that given the precise circumstances at the moment.

Tiffany Sydow

Thanks, Hanre. I feel shifting over to operational and enterprise outlook questions, I’ll direct these subsequent two inquiries to Fleetwood. The mining productiveness steering of 1,000 to 1,100 tons per CM per shift is effectively under my understanding of focused ranges of 1,200, 1,300 tons per CM per shift. What’s constraining the ramp-up in mining exercise? And that comes from Wade Napier at Avior.

And the second query round LCCP. What was the capability utilization at LCCP throughout FY ’22? What’s going to regular capability utilization be? And when do you count on to achieve this? This comes from Victor Seanie at Benguela World.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. Thanks, Tiffany. Thanks, Wade, for the query. So let me simply place first that our mining productiveness steering that we have given on the half year-end, that was attained by the second half of the yr.

And our outlook now’s constructing on that steering. So I feel what’s underpinning our focused mining productiveness enchancment is, to start with, our security remediation program. So that’s the bedrock of our mining operation. And so I’d be low to point any increased numbers earlier than we have not solidified our security basis and that remediation program.

And it is also about — you possibly can’t ship combined indicators to your mine workforce to say, what’s now the precedence? Is it now, first, security restoration? Or is it manufacturing productiveness? And so I feel the message is obvious. We’ll remediate the security. We’ll set real looking targets the place we will construct from over the past six months supply constructed from that going ahead, however in a really measured manner, ensuring that security is the first focus throughout that ramp-up of productiveness. So far as the second query with respect to the capability utilization of LCCP prior to now yr, I feel from the outset, we’ve got made it very clear that the completely different sections of the plant will see completely different ramp-up targets.

So we’re clear that our base chemical substances portion of the 50% that we’re proudly owning now on account of the divestment, that one is extra a commodity enterprise. And the ramp-up, after all, might be by the three years interval, which is now being attained by that. And so there’s a capability utilization of 90% plus within the varied items. I will not go into to the main points.

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And we’ve got had towards the tip of the final quarter, additionally some setback within the cracker the place we had some gear failure that needs to be rectified. Additionally, this isn’t something uncommon as you begin up a brand new plant, you undergo the bus cease of reliability points, and also you type that out after which get secure reliability operations. So so far as the bottom chemical substances half, I feel we’re monitoring effectively. Once we have a look at the opposite elements of the specialty, we additionally indicated very clearly to the market that we’ll have a five-year for our differentiated commodities and merchandise that we do.

So for instance, many of the oxalation ETO merchandise, the MEG, ethylene oxide in addition to the Ziegler fall extra into that class, which is a five-year ramp-up and there, we’re monitoring excellent. So we’re assembly our targets. So that is now in yr two that we have accomplished. So we’re going into the yr three.

And I feel we’re monitoring our factor. The specialty chemical substances, the place we have a look at the Guerbet alcohol and the very specialty surfactants that goes, for instance, in oilfield chemical substances purposes, these are on a 7-year trajectory of ramp-up. And we’re additionally following that in the meanwhile. So I’ll say, total, you possibly can’t put one quantity down.

You’ll want to have a look at the assorted merchandise and the purposes. However I am joyful that we monitor on that foundation, and we will have interaction into discussions to offer you extra granularity as we unpack the leads to the subsequent week.

Tiffany Sydow

Thanks, Fleetwood. There are a number of questions which might be queued by way of Refrain Name. If I may transfer over to the operator, please, and maybe we will begin with the primary two, Gerhard Engelbrecht from Absa after which shifting on to Adrian Hammond from SBG.

Questions & Solutions:

Operator

In fact. Gerhard Engelbrecht.

Gerhard EngelbrechtAbsa Capital Markets — Analyst

Is the road open? I hope you possibly can hear me.

Tiffany Sydow

Sure, we will. Gerhard, go forward.

Gerhard EngelbrechtAbsa Capital Markets — Analyst

It is good to, as you say, verbalized questions once more. Thanks for that. I’ve received three questions, if I could. The Synfuels manufacturing, I imply, let me begin saying this.

In F ’19, you had a two-phase shutdown, and also you have been producing at 7.6 million tons. So the Synfuels manufacturing steering is manner under that, the seven million to 7.2 million tonnes. Why so low? Is it simply due to coal high quality? And when do you count on Synfuels to be producing at optimum ranges once more? I suppose that is the primary query. Are you able to give us extra element in your procurement of LNG? The world of LNG has modified considerably since Russia invaded Ukraine.

How are you progressing? And might you give us a sequence and timing of occasions that should occur when it comes to FIDs on the Synfuels further eth reformers, the constructing of the regas or building of the regas services, and so forth.? After which simply the final query. You’ve got elevated your assumptions for rand oil. Your long-term assumptions that appears within the AFS by about 40%, but your gasoline producing companies stay impaired. Does it imply you’ve got included further unfavourable gadgets to offset the rise within the long-term assumptions? Or why have you ever not reversed these impairments?

Tiffany Sydow

Thanks, Gerhard. Fleetwood, if you happen to may begin with the primary few questions.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. Thanks, Gerhard. So the three questions, I’ll begin with the primary two, and I am going to additionally ask Simon and Priscillah to weigh in on that. And I feel Hanre can cope with the final query then.

So to start with, the steering that we have given for the Synfuels quantity output is knowledgeable by numerous areas. First, we’re recovering from our earlier yr. And as I discussed, with the mining productiveness, we’re on a trajectory to enhance. And so the steering have to be see in that mild that it is a real looking build up on a quantity base going ahead.

And so that is the one facet. The second facet, which is the total shutdown in addition to the section shutdown that we’ve got this yr in Secunda, that is the occasion that is virtually each 5 years, however that provides an extra limitation on quantity output in Secunda. So I’ll ask that Simon additionally weigh into that. After which so far as the LNG goes, when it comes to the development and the place we stand, let me ask Priscillah to weigh in.

First, over to Simon, after which take the gasoline query, Priscillah, please.

Simon BaloyiVice President, Engineering, Centralized Upkeep and Operations Assist

Thanks, Fleetwood. It looks like each time we communicate, myself and also you, we communicate concerning the whole shutdown. So I keep in mind a day the place we — or in Secunda, and we needed to put 4 bottlers of water, and we’re demonstrating easy methods to do a section and a complete shutdown. So that you’re certainly, right.

This yr, our steering is expounded to that. We might be taking a section whole shutdown, which begins coincidentally this Friday, and that may go on till round twenty fourth of September. The full portion of the shutdown shall come again round, I imply, 12 to 14 days. After which I feel that guides how we then seeing round 100 to 200 kilotons much less.

After which as you understand, once we began the merry marketing campaign for FY ’22 and a portion of ’23, we did give steering that we do not have as a lot gasoline as we want to have. In order that additionally does have an effect of round 100 to 150 kilotons. So taking all of that into consideration, I suppose, publish FY ’24, which we’ll be retaining in the course of the section occasions to round 7.6 and when you might have whole shutdown, we’ll nonetheless stay between 7.5.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks. Priscillah?

Priscillah MabelaneGovt Vice President, Power Enterprise

Thanks. Gerhard, thanks for the query. So maybe earlier than attending to LNG, it is applicable to only give an outline of the place we’re total in our gasoline sourcing technique as a result of it is really a portfolio of each our exploration and growth initiatives in addition to LNG. And it is fairly vital as we transfer ahead that we really stability the 2.

So we are literally making good progress when it comes to our total portfolio. You’ve got seen at the moment, earlier on, we have introduced the extension of the plateau to 2028. In the back of that, it offers us flexibility when it comes to how we carry LNG onboard, but on the similar time maximizing the exploration and growth of fairly a number of of our initiatives that we’re already engaged on. When it comes to LNG, we’re concentrating on to finalize the time period sheet by finish of this yr.

Once more, it is fairly vital that we attain the correct business phrases earlier than we commit ourselves. We’re in intense discussions and negotiations with our companions. That may allow us to in all probability take about six months or eight months to finish and finalize the FID in order that we will begin with the development. We’re additionally discussing timing with them, significantly given the truth that we have got now two extra years flexibility.

So the unique timeline was BO of 2026, and we want to create some flexibility as we have interaction going ahead. What’s extra vital for us is to make sure that the infrastructure in Maputo is definitely constructed greater than the precise contracting of the molecules. Hopefully, that offers you a great readability of the place we’re.

Hanre RossouwChief Monetary Officer

Thanks. And if I can soar in then simply on the impairment or your query round whether or not the stronger oil costs within the assumptions couldn’t have led to a reversal of impairment. There’s detailed disclosure on the impairment assumptions in Notice 9 of the annual monetary statements. And also you’re completely spot on that.

We did, after all, improve oil assumptions on the again of what may very well be short-term tightening of the oil market. So when it comes to our evaluation of the carrying worth of our belongings, we did should take into consideration that this might not — this probably wasn’t a structural change that may very well be lengthy lived. And it is also offset then by different assumptions which have had a unfavourable affect on the valuation. And I feel to that extent, we have highlighted carbon tax and the proposal additionally now as a measure that would detract worth on that carrying worth.

So on the premise of sensitivities, we have assessed and received to the conclusion that there is not any want at this level to reverse impairments. However after all, we’ll proceed to do the evaluation on an annual foundation.

Tiffany Sydow

Thanks, Hanre. Sticking with Refrain Name, I feel we had Adrian Hammond subsequent in line. Adrian, please go forward.

Operator

Sadly, Adrian’s line has dropped. Subsequent query we’ve got…

Tiffany Sydow

Nice. Can we transfer to Chris Nicholson, please?

Chris NicholsonMorgan Stanley — Analyst

I hope you possibly can hear me. My query is across the European Chemical enterprise. I am certain as many are fairly nervous about what’s occurring within the European gasoline markets. Might you inform me what occurs if Germany strikes to Stage 3? What would the affect be in your European Chemical companies in Germany and Italy or in Germany in particular? After which additionally possibly just a few steering on the place you see margins heading in that enterprise.

I imply, it might look from the dimensions of feedstock price will increase that they may very well be hitting unfavourable. What are your choices in that occasion?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks, Chris. I’ll ask Brad to weigh in on that. Suffice to say that we’ve got received numerous completely different conditions from North to South Germany and to Augusta and southern a part of Italy and Sicily, as a result of the sources of gasoline is completely different. One is supported from Africa.

The others are depending on the Russian gasoline. However however, I feel we have got a really clear understanding of the levers that we have to be careful for. And I’ll ask Brad to weigh in on that.

Brad GriffithGovt Vice President, Chemical compounds

Sure, joyful to do this. Thanks for the query, Chris. As Fleetwood stated, we have got a activity workforce engaged on our response to the diminished gasoline provide as do all of our business companions within the area. For Italy, let’s begin there first.

I feel we’re effectively positioned to have the ability to proceed our operations. Now we have the portfolio of gasoline provides in addition to liquid gasoline choices to have the ability to proceed these operations. In Marl, our giant web site in Central Germany, is definitely fed by our host firm, Evonik. They’ve introduced publicly that they are aspiring to restart their coal-fired energy station and steam technology in addition to change a few of their pure gasoline consumption over to LPG in step with the federal government’s steering on the gasoline community.

For Brunsbüttel, we do have choices as effectively. We have been engaged on liquid gasoline selections. One of many distinctive issues concerning the Brunsbüttel web site is that we additionally present a heating steam, low strain steam, to the group of Brunsbüttel. So we’re anticipating to have the ability to proceed to obtain pure gasoline to some extent there.

I feel if you happen to have a look at a number of the newest public info from the German authorities, they do sit at a better stage of storage than what they usually can be. That is clearly a priority whether or not they proceed to construct that up for the winter, and all of us proceed to watch that. When it comes to your questions on margins, definitely, margins are beneath strain. For those who have a look at each day gasoline costs, it does put strain on a few of our operations which might be giant gasoline customers.

And so we work with our clients to see what will be achieved to have the ability to cross it on. And we’re making selections, as Fleetwood talked about earlier, on different power provides, but additionally different sources of feedstocks. And the place mandatory, we are going to reasonable charges, and that is why we gave steering for fiscal ’23 that was a bit wider than standard, exhibiting a 0% to five%. As a result of if we proceed to see the strain on gasoline, then we probably can be making some selections on how a lot quantity we produce.

Tiffany Sydow

Thanks, Brad. I’ll change again over to the web platform. There are a number of variety of questions coming by on the operational theme. There are a number of questions round Mozambique gasoline.

I am going to cluster these collectively. The primary one comes from Adrian Hammond at SBG. If the plateau is prolonged to 2028, why is LNG nonetheless wanted by 2026? Synfuels volumes have been traditionally 7.6% to 7.8%. The Sasol return to this stage.

I feel a few of that has already been coated by Simon. What’s the present bottleneck? After which additionally on gasoline, there’s one other query from Siam Butter at Vetri. How is SOL addressing the sharply declining gasoline reserves in Mozambique? And what options have you ever checked out? And the way a lot capex is predicted to be spent? Are these sufficient to meet SOL wants whereas the corporate transitions to inexperienced hydrogen. Fleetwood, if you happen to may tackle these?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks, Tiffany. And I feel we’ve got mainly addressed the gasoline play in Mozambique. Priscillah has touched on that. So I can solely add to say that we might proceed our efforts to have a look at what are the alternatives in our close to fields that we function and inside our fields, so we had excellent success with this infill effectively drilling marketing campaign.

So we’re enthusiastic about that, and that knowledgeable additionally the extension of the plateau. And so we are going to do extra work and extra drilling in that regard. Furthermore, we’re busy with the PSA implementation mission. And that can even help us to consider, is there any extra gasoline that may be dedicated past the necessity for the Mozambican in-country energy station that may be the primary taker of the amount of gasoline over the interval that was dedicated.

However we additionally know that if we’ve got extra gasoline, we have got the chance to carry that gasoline to South Africa. And we’re busy finalizing all of these agreements with the Mozambican authorities, however they’re keen to assist us out on that foundation. However I feel the choices of gasoline is a key focus for the power workforce. And Priscillah has indicated that they wish to create optionality to not solely take into consideration our personal fields, but additionally the LNG and different adjacencies that we could also be harvesting in our personal space.

So I feel that may be a good abstract, I feel, of the place we’re.

Tiffany Sydow

Thanks, Fleetwood. I feel the subsequent query comes across the present NERSA most gasoline pricing from Herbert Kharivhe Investec. Re the gasoline costs, any challenges in imposing the present NERSA most gasoline worth that means costs may very well be greater than 90% increased?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. I feel the state of affairs with NERSA, and thanks, Herbert, we’ve got been participating with NERSA for the reason that first quarter of this yr to finalize inside the framework of the utmost gasoline pricing mechanism to come back by on a worth that may be real looking in at the moment’s setting, on condition that the utmost gasoline worth would have been ZAR 270 per giga-joule, however we didn’t suppose that’s real looking. Now we have proposed a unique worth stage. We have engaged with NERSA.

And at this time limit, we have not finalized that with NERSA. Now we have indicated that we’ll not implement this worth announcement that we talked about in August, and we want to resolve that with NERSA as a result of in the long run, that’s what they should assess is the rationality check for a sensible worth and that we’ll then — as soon as we have come to that settlement, we are going to take that ahead with our clients. And I can solely say our clients in Sasol are each in all earnestly ready for that engagement so that we have certainty of what the remainder of the yr would maintain in inside the grid pricing framework that was agreed already final yr with NERSA.

Tiffany Sydow

Thanks, Fleetwood. One other query from Herbert Kharivhe on the affect on mining productiveness. Larger-than-average rainfall is predicted this summer season. Might we see extra of the identical or decrease productiveness in mining and consequently, Synfuels? Is that this unavoidable with out contingencies in place?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. Thanks for that query. I feel, to start with, we’ve got indicated that one in all our mitigation levers to have a ratable coal provide is our stockpile stage. Now within the final yr this time, our stockpile stage was not in a really wholesome stage.

And when the wet season began, that exacerbated our capability to take care of stockpile stage. I feel this yr, we have got a really completely different method. We’ll keep our stockpile stage effectively above the 1.5 million tons. As a matter of truth, as we go now into the Synfuels shutdown that Simon referred to, that may final us to the tip of or on the final week of September.

We’ll make by rising the coal mining to the stockpile in order that we bolster that 1.5 million possibly to a spread of two million to 2.5 million tons or past. In order that once we entered into the wet season that we have extra safety by stockpile measures, and that we will mitigate that occasion.

Tiffany Sydow

Thanks, Fleetwood. A few monetary questions coming in for Hanre. The primary one from Adrian. Can Sasol attain funding grade credit score scores and detach from the sovereign ranking? After which I feel one other query on the capex outlook additionally from Adrian.

What’s the group capex outlook in nominal phrases for ’24, ’25, please? And what’s the future hedging ratio we will count on?

Hanre RossouwChief Monetary Officer

Thanks, Tiffany. When it comes to funding grade scores, sadly, in the meanwhile, the ranking companies does tie Sasol’s ranking to the sovereign. And except there is a important improve in offshore income within the area of fifty% plus, sadly, the sovereign grade credit standing will at all times be the ceiling for the corporate. We have been participating with the assorted ranking companies on that, however sadly, that is simply how issues work in the meanwhile.

When it comes to group capex outlook, in nominal phrases, I feel you possibly can safely apply a form of 4%, 5% inflation affect to the 20% to 25% steering. We’re very snug that the — form of the subsequent yr, as I’ve talked about, we might be in step with that steering. And so definitely, ’24, ’25 as effectively, it can cowl not solely the sustaining of our enterprise, but additionally the transformation wanted, the ZAR 15 billion to ZAR 25 billion that we have to spend to 2030 to satisfy our greenhouse gasoline targets. And the hedging.

I feel when it comes to hedging, as I’ve talked about, the hedging does come all the way down to round 25% for monetary yr ’24 when it comes to oil. And we’ll constantly reassess that stage. I feel as I’ve talked about earlier, it is a operate of the operational gearing that we count on within the enterprise, the monetary gearing significantly round our absolute and web debt stage. And we are going to — we do detailed Monte Carlo evaluation of sensitivity to the assorted outcomes.

So it relates not solely to grease, but additionally extra significantly on the rand-dollar trade fee as effectively, in addition to ethane and on coal. However basically, given the stronger stability sheet, as I’ve talked about, we do count on the hedging ranges to be extra across the decrease ranges that we’re seeing now in ’24.

Tiffany Sydow

Thanks, Hanre. When you are on the mic, one other two questions round debt. One comes from Adrian Hammond once more at SBG. Can Sasol — sorry, what’s the group — sorry, I’ve already coated that one.

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The debt profile comes from Stella Cridge at Barclays. The debt profile exhibits a spike of ZAR 2.8 billion in FY ’24. Might you give me your present ideas and on future funding and refinancing technique? Do you propose new financial institution loans or go to to the bond market as a part of the technique?

Hanre RossouwChief Monetary Officer

Thanks, Tiffany. So I feel when it comes to — and that is the place I would like to take credit score for the fixing of the stability sheet, however I stated I am going to not take credit score for something at the moment. However the stability sheet is in very impolite well being. I feel as we have talked about, we have got a web debt stage on the interval finish of USD 3.8 billion.

On a gross debt stage, we had simply over USD 6 billion. Successfully, all of our debt is U.S. {dollars}. So when it comes to refinancing technique, the important thing focus is to shift extra of that U.S.

greenback debt into rand-denominated debt that may higher match our money technology. When it comes to refinancings, sure, we have got ZAR 2.8 billion in monetary yr ’24. That pertains to a time period mortgage and a U.S. denominated bond.

After which we even have, in November this yr, one other $1 billion of bond that must be refinanced. We’re very snug that there is a vary of choices to refinance that. We have the RCF facility that we will very comfortably use as a bridge, we will use current money flows. After which we are going to have a look at different devices in addition to alternate options.

So not shedding sleep seemingly at the moment on the stability sheet. Thanks for that query.

Tiffany Sydow

Thanks, Hanre. I’ll transfer again to Refrain Name and take two questions from Alex Comer and Sashank Lanka. Operator, are you able to direct their questions, please?

Operator

Alex, your line is dwell.

Alex ComerJPMorgan Chase and Firm — Analyst

Sure. I’ve received a few questions. Initially, simply on this gasoline LNG state of affairs. The LNG worth may be very excessive in the meanwhile.

Is there a degree at which you determine to not go down that route and simply lower to beneath manufacturing to make your 30% goal? Or are you decided to go forward whatever the economics? That is the primary query. Secondly, simply on Natref, I see in your presentation, you talked about becoming a member of to a inexperienced refinery. So is that this resolution been made to maintain that Natref open? And what stage of capex might be required in an effort to make the brand new gasoline regs? After which my ultimate query is when it comes to the dividend, the two.5 to 2.8x cowl, how ought to we take into consideration the levers to tug that all the way down to the decrease cowl ratio?

Tiffany Sydow

Thanks. Hanre, if you happen to may tackle these please?

Hanre RossouwChief Monetary Officer

Let me begin with the dividend. As we have highlighted, the capital allocation framework incorporates our dividend coverage, which pertains to 2.5 to 2.8 occasions cowl of core HEPS. I feel vital maybe simply to notice that core HEPS excludes any fundings that excludes any hedging losses or beneficial properties. So we be sure that the traders get the total advantage of the money technology of the core enterprise.

To that extent, we stated that we’ll go to 2.5 occasions cowl if the web debt ranges dropped to under $4 billion in absolute phrases. We briefly — we have clearly hit that now briefly on the interval finish, however we are going to wish to see that maintain all through a interval to decrease that cowl from the two.8 to 2.5. Past that, as I’ve talked about, we can even return extra money to shareholders by facets similar to particular dividends or buybacks.

Tiffany Sydow

Thanks, Hanre. Fleetwood?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks, Alex. So I’ll tackle the Natref query, and I’ll ask Priscillah to weigh in on the LNG choices that we have a look at. So Alex, I imagine we’ve got introduced in all probability a few years in the past, what’s the capital requirement for getting Natref clear gasoline compliant, which was, if I recall — I am undecided, it was 4 billion plus at the moment the vary. We have given the vary to the market.

Now we’ve got achieved two issues within the pre-feasibility research and our operational overview with our accomplice TotalEnergies. Initially, we’ve got provide you with a really inventive option to get Natref output clear gasoline compliant on diesel for a really low funding. And I feel that is — I am not going to say the quantity, however it’s inside the operational expense realms which you can obtain that. And that we’ll then be prepared for by towards finish ’23, which means finish subsequent yr.

And on the petrol facet and jet on the clear fuels there, that may be a answer that we’re , and I am not going to provide the worth or the price vary at the moment as a result of it is a pre-feasibility sort of high quality that we’re busy with. However all I can say that it’s considerably decrease than the earlier clear fuels price or capex that we have signaled to the market. And we are going to come again, hopefully, inside the subsequent six months to get additional readability on that certain quantity. Priscillah?

Priscillah MabelaneGovt Vice President, Power Enterprise

Thanks, Fleetwood. Alex, good query. The easy reply isn’t any. We cannot do it at low price.

However having stated that, let me elaborate a bit. We’re a portfolio, as I’ve talked about. We’re concentrating on a blended worth of gasoline going ahead, which wants to interrupt even with turndown options. We do acknowledge that there might be some dilution however have been fairly vital for us that we proceed to ship the correct returns for our shareholders.

In order that stability goes to be fairly vital. So that is what we’re working towards. We’re additionally aware for the South African as effectively as a result of there are industries which might be going to require gasoline going ahead. So we’re hoping that there might be a predictable regulatory framework that ensures that there’s applicable gasoline on the inexpensive worth going ahead.

When it comes to our time period sheet negotiations and simply to notice that we’re aware of the present volatility out there, however we’re concentrating on a long-term contract that may really transcend the present cycle, hopefully. So with that, we do not count on that the volatility might be impacted considerably. Having stated that, key for us is for the infrastructure to be constructed, then we will discover different LNG sources which might be aggressive into the longer term.

Tiffany Sydow

Thanks, Priscillah. Sashank, if you happen to may go forward along with your questions, please?

Sashank LankaFinancial institution of America Merrill Lynch — Analyst

So I feel on my first query, this was partially requested by Alex. So simply following up on the response. Fleetwood, you probably did point out that petrol and jet gasoline, you are a lot decrease prices or turning into clear gasoline compliance. So I am simply questioning what modified versus the sooner capex steering or the quantity that was on the market out there and why you suppose it should be a lot decrease now.

And the second query is simply on hedging for ethane. I do know that in FY ’21, we did hedge virtually 30 million barrels. Clearly, ethane costs now are near $0.66 a gallon, which I am certain is impacting your margins within the U.S. enterprise.

So simply questioning, after I have a look at the hedging coverage for FY ’23, it does not seem to be you hedged thane no less than within the coming quarters. So simply questioning what’s driving that technique.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks, Sashank. I’ll cope with the clear gasoline capex. I feel we have talked about it earlier. So the one merchandise was the inventive manner of taking the capital out actually for the diesel clear fuels compliance.

In order that made the large distinction. After which, after all, while you herald your bio feedstock element, though on a hybrid foundation, so there can be a mixture. It does additionally assist to get capital down for the total clear gasoline answer on a petroleum base and crude base solely. I feel these have been the drivers that we’re seeing that assist us towards a decrease capex quantity.

However as I stated, we have achieved the pre-feasibility research. We have not received extra particulars now to disclose, however let’s try this work, after which we’ll sign rather more element.

Hanre RossouwChief Monetary Officer

Thanks. On the ethane hedging, we did do final yr 4 million. When it comes to this yr, the main target is de facto to get operational stability. I feel we have got flexibility in our U.S.

enterprise that we will get service provider ethylene as effectively. Bear in mind, we, after all, take ethane produced ethylene. So once we have a look at the present pricing ranges, on condition that there was a major spike within the ethane worth, we did not see it develop to truly lock within the increased worth. So we did not go into the marketplace for ’23.

’24, we are going to once more assess the pricing within the ahead curve. If it does lock in cheap returns for us on that enterprise, we are going to once more enterprise into the market. However I’ve received to emphasize that the — definitely, on the ethane and the coal facet, the hedging isn’t that materials within the larger context of the oil and the ZAR hedges that we do.

Tiffany Sydow

Thanks, Hanre, and thanks for these questions, Sashank and Alex. If we will transfer again over to the web platform. There’s two questions round our technique. The primary one comes from Peter Cambridge at Service provider Market.

Are you able to spell out how clear initiatives, clear power initiatives might be funded? And the second query comes from Tabo Matabata at NPV Investments. On the built-in environmental highway map at Secunda operations, is April 2025 the focused compliance date? And in that case, is there a threat of implementation of the initiatives if a few of them extends past April 2025? Fleetwood, if I may direct these to you, please.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. Thanks, Peter, and thanks, Tabo, for these questions. So to start with, the capital allocation framework that Hanre defined this morning is clearly going to information us additionally on these low or clear power initiatives or low carbon initiatives as we remodel. And I feel we are going to see no exception.

We even have indicated clearly that we’ll have sure parameters that we’ve got as studying from the mega mission we carried out in 2014 to 2019 within the U.S. And we’ve got indicated there, we is not going to put money into any giant mission greater than 10% of our market cap and another moderating issues. And we are going to nonetheless apply that. However that is inside the self-discipline of the capital allocation framework.

And I feel as we transfer into these nascent markets of unpolluted power within the likes of inexperienced hydrogen, one of many underpinning anchors in such a enterprise can be to safe an offtake. We is not going to put money into a mission like inexperienced hydrogen manufacturing, if we do not have certainty round offtake and what it means and the way it uncooked the capital that you’d be implementing it with. So I feel that is the best way we give it some thought at this time limit. And once we cross, once we get there, we are going to focus our disciplined capital allocation framework inside the alternative and want at that stage.

Once we have a look at the built-in environmental highway map at Secunda operations, we’ve got signaled all alongside that the SO2 answer is extra complicated when it comes to the implementation. So I feel that threat stays. Nothing has modified there. Now we have submitted a mixed utility inside the regulatory framework to have a look at the SO2 load-based compliance versus the concentration-based compliance.

And that’s now within the arms of the regulator. We hope to get readability on that within the subsequent yr or so. However that may even be one of many elements that inform such a threat or not. However I do suppose we’re very cognizant and we have been very open and trustworthy when it comes to that SO2 is in danger for that date.

And we’re working with the regulator to get readability on what’s the technical answer we are going to apply, however that is the state of affairs in the meanwhile.

Tiffany Sydow

Thanks, Fleetwood. There is a query from Wade Napier across the particular segments inside the Eurasia section underpinning the expectation of 0% to five% demand progress. Fleetwood, would you want to handle that one?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. I’ll ask Brad to weigh in. I suppose it is a necessary chemical substances section, however let me hear what Brad says.

Brad GriffithGovt Vice President, Chemical compounds

Sure. Wade, thanks for the query. I feel we have been guiding for the expansion of gross sales volumes versus prior yr. So we do count on to see 5% increased gross sales volumes in ’23 versus ’22.

We do see numerous our market sectors persevering with to get well. A few of these have been really fairly depressed throughout fiscal ’22. So automotive is one. We proceed to see a progress in demand for emission management catalyst and in addition in refining and course of catalysts.

So we do see that stepping up. And as Fleetwood talked about, important care chemical substances, we actually see that progress occurring at GDP ranges just about no matter recessions and pandemics, and I feel we noticed that again in 2020 and 2021. So we do count on to have the ability to get well these volumes. I feel, as I discussed earlier, the large query is what occurs with the economics? And we proceed to be — to work to cross on the price to our clients, but additionally making an allowance for what can the patron afford.

And in order that’s going to be a key issue for our outlook for this yr as as to whether we’ll be capable to proceed to run working charges at a few of these items to have the ability to generate constructive margins. And so we’ll monitor that very intently as a result of we do not wish to construct up inventories and discover the demand fall away.

Tiffany Sydow

Thanks, Brad. Earlier than we shut, there is a final Refrain Name query from Adrian. Operator, may you please join Adrian.

Adrian HammondSBG Securities — Analyst

Simply to come back again to Hanre’s dialogue on the greenback debt and shifting it to South African debt. Is it a state of affairs the place the debt cannot be funded in {dollars} earnings? And the way straightforward it’s to shift that to South African debt when it comes to penalties, otherwise you simply merely convert as soon as the prevailing greenback did matures? So I am simply attempting to consider what the implication is on changing. After which to come back again on the state of affairs with gasoline and coal, the outlook for South Africa. It’s acknowledged that you just intend lowering coal manufacturing by some 9 million tonnes.

Might you break down by 2030 the place that comes from? And so reconcile that with coal purchases. I be aware that you just do buy coal from Isibonelo mine, and that has life expectancy up till 2026. So what are your plans round that?

Hanre RossouwChief Monetary Officer

Thanks, Adrian. When it comes to greenback debt to rand debt conversion, as I’ve famous, we have got $6 billion of gross U.S. debt. And it relates again additionally to the maturity profile within the earlier query that we have the flexibility as these maturities are fairly straightforward to handle both to only settle the debt and subject rand debt sooner or later.

We have a DMTN as effectively, or we may purchase again the debt. I feel the wonderful thing about a stability sheet that is robust is that you’ve flexibility in varied choices. So money stream technology then can be utilized to only settle these debt or we will additionally use, we have got $2.8 billion in RCF facility that we will use as an interim measure to additionally stability the efficient refinancing of greenback debt with rand debt. However in the end, we’re concentrating on, as I’ve talked about, decrease debt in absolute phrases as effectively.

I feel when it comes to gasoline, coal utilization outlook, Fleetwood, would you wish to weigh in?

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Sure. Thanks, Adrian. So we’ve got indicated that discount from 2030 onwards. As I’ve indicated earlier this morning, we’re additionally a phased turndown of our boilers.

Now that’s not solely serving to us to achieve additionally our CO2 discount or emission goal reductions as a result of about 50% of the CO2 is developed or generated in utility block, and about 50% is generated in our course of block from gasification to Fischer Tropsch within the refinery and chemical facet of the method. So what we’re , and that is why we’re so excited, is that the superb coal answer will allow us to make use of invaluable feedstock that’s going by superb coal. And keep in mind, for each ton of coal we mine, there’s about 30% superb coal and about 60%, 70% coal that goes into gasification. So if we will use that superb coal, it’s a supply of feedstock, and we have to mine much less coal to attain that.

So that’s the half that we’re trying now, and that is a number of the work we have achieved prior to now 12 months. And that offers us additionally optionality. However I feel the entire mixture of pathways of superb coal utilization, the utilization of gasoline, the introduction of hydrogen into the gasoline loop to work away extra CO2 that is inherent into the gasoline circuit, flip that into merchandise, these are all of the alternatives that we have a look at, however I feel we effectively coated then to attain that discount from 2030 onwards. So far as Isibonelo go, I’ll ask Rhian to weigh in, when it comes to our focus with Isibonelo.

I feel you are fairly proper. We all know that, that contract comes to finish, however we’re additional choices. Rhian?

Unknown speaker

Sure. Thanks very a lot for the query. Isibonelo or Thungela has been a really loyal provider to Sasol over a few years. And the contract is coming to an finish.

We’re speaking to Thungela. The Thungela colleagues, on some choices, they do have additional reserves within the space and in addition know that we additionally personal reserves, the so-called Alexander block that we’re additionally taking a look at. That block will be mined, not essentially by ourselves, but additionally both — via open solid of strip mining or underground. We’re that, and we’ll have solutions quickly.

After which additionally, we want to keep in mind that there are another house owners of reserves round that space for Sasol. So we imagine that we’ll be coated. Thanks.

Tiffany Sydow

Thanks, Rhian. With that, we will wrap up the session at the moment. Thanks, Hanre and Fleetwood in your time and the remainder of the Sasol administration government workforce. In case you have any additional questions, please direct it to the Investor Relations workplace, we are going to fortunately reply.

Thanks once more in your participation at the moment. We want you a nice and secure day additional.

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Thanks.

Hanre RossouwChief Monetary Officer

Thanks.

Period: 0 minutes

Name individuals:

Tiffany Sydow

Fleetwood GroblerPresident, Chief Govt OFficer, and Govt Director

Hanre RossouwChief Monetary Officer

Gerhard EngelbrechtAbsa Capital Markets — Analyst

Simon BaloyiVice President, Engineering, Centralized Upkeep and Operations Assist

Priscillah MabelaneGovt Vice President, Power Enterprise

Chris NicholsonMorgan Stanley — Analyst

Brad GriffithGovt Vice President, Chemical compounds

Alex ComerJPMorgan Chase and Firm — Analyst

Sashank LankaFinancial institution of America Merrill Lynch — Analyst

Adrian HammondSBG Securities — Analyst

Unknown speaker

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