Sasol Limited

Good morning and welcome to Sassell Limited's Financial Year 2023 results presentation. Thank you for taking the time to listen to our announcement today. My name is Tiffany Sido from Investor Relations and with me today is Fleetwood Grobler, President and CEO of Sassell and Handre Rousseau, Chief Financial Officer. Fleetwood will start today's presentation with an overview of the business performance. The financials will be covered in more detail by Handre and Fleetwood will conclude with a brief update on our strategy. The Q&A session will commence immediately thereafter, where you will have an opportunity to ask your questions via the webcast or teleconference facility. I'd now like to refer you to our forward-looking statement on the slide. This contains important information regarding statements that are made in this presentation. Please have a look at it in your own time. I will now hand over to Flitu to commence today's presentation.

Good day everyone and welcome to our annual financial results update for 2023. To frame our performance for the period, there is a distinct set of factors which contributed. We continue to face macro challenges with headwinds on demand and pricing, particularly in the chemicals alongside persistent inflation with elevated feedstock and energy costs. We are also encountering specific challenges in our operating environment, notably in South Africa, where we have been impacted by the performance of state-owned enterprises. However, in addition to benefiting from an elevated oil price and a weaker RAND dollar exchange rate, we've also seen real progress in the mitigation actions that we have taken in the areas within our control. This is driving better performance in areas like Secunda operations, amongst others, More resilience with the ability to reset to more aggressive targets on SUSL 2.0 following recent outperformance and progress towards the longer term goals. Given this backdrop, our financial results for the year is reflective of these mixed factors. One particular noteworthy impact is evident in the significant impairment on the Synfuels liquid fuels refinery. Suffice to say that in Secunda operations, the various chemicals gas generating units in the integrated value chain still show significant headroom. André will discuss this in more detail later. More broadly, the cost and operating challenges we have faced have required us to reassess the steps we need to take to ensure SASL remains a sustainably profitable organization. We are taking stock of our current reality while intensifying our attention on priority actions to deliver on the reset phase of our strategy. We need to remain realistic and focused on delivery as we head into another financial year. As with previous results presentations, I will start by covering some of the business highlights for the year across our people, planet and profit pillars. For some 18 months between November 21 and March 23, we did not experience any workplace fatalities. Regrettably, This changed with the tragic passing of Mr. Gauta Mithlaba from Secunda Operations and Mr. Stiffin Glovo from Mining, both in the last quarter of this financial year. We express our heartfelt condolences to their families. Notwithstanding these fatalities, safety remains deeply ingrained in our ethos as we see positive trends in our safety performance. I will unpack this in greater detail shortly. Our commitment to social well-being in our communities remains undeterred as evidenced by the over 850 million rand we've invested in various programs. We remain active contributing to community upliftment initiatives that realize positive and beneficial outcomes for the most vulnerable in our society. On our planet pillar, we continue to progress our renewable energy procurement program. We are well on track to achieve 1,200 megawatts of large-scale renewables integration in our SA value chain by 2030. In Mozambique, our gas drilling campaign continues to yield positive results, providing additional flexibility in our sustainability roadmap. We are also expanding sustainable aviation fuel or SAF opportunities through our proposed joint venture with Topso, which I will talk about later. On the profit pillar, Cecil delivered a marginally weaker set of financial results for FY23 for the reasons I mentioned earlier. Despite continued volatility over the period, the board declared a final dividend of 10 Rand per share in line with our dividend policy. Turning to safety, I already mentioned the two tragic fatalities we experienced in the second half of the financial year 23. Any loss of life or harm is unacceptable, and we remain resolute in our commitment to creating a caring, sustainable and zero-harm workplace. We ended the year with more lost workday cases compared to the previous years, mainly driven by higher activity on the back of the total East factory shutdown. Important in this decrease in our high severity incident rate is moving from 16 in financial year 22 to under 10 this year, supported by our dedicated efforts to drive our safety, health, and environment interventions. Our fires, explosion, and release of severity rate also reflected a downward trajectory for the period. Our high severity injury prevention program remains the backbone for improving our sheep performance, and we have now shifted our focus to further maturing it. Through our humanizing safety initiative, focus remains on showing care through every layer of the influence instead of a compliance driven approach only. we remain committed to improving our safety performance and constantly adapting and streamlining our approach to align with evolving reporting requirements. Looking at the operating environment, a combination of a few material factors continues to pose near-term challenges to our business. This includes global economic volatility and in South Africa specifically, an uncertain regulatory environment and other business challenges. All this taking place against a backdrop of far-reaching policy shifts such as the recalibration of the relations between the US and China and the move towards more muscular industrial policy as we are seeing with the Inflation Reduction Act or IRA in the US. The IRA combined with the European Union's carbon border adjustment mechanism could potentially have a significant impact on industrial policies and global trade relations, contributing to the uncertain business environment. The legal and regulatory environment in South Africa includes a range of complexities, such as the domestic gas price, environmental compliance, fuel blending mandates, and carbon tax. We continue to navigate these challenges and uncertainties through proactive engagements with all stakeholders. This includes ongoing engagements with NURSA to facilitate approval of our gas price applications for financial years 23 and 24. Pending approval, we have not been allowed to increase prices since financial year 22, despite the impact of rising inflation, higher capital costs and commodity prices. Looking at environmental compliance, in July 23, we communicated that SUSL's application for an alternative emission load basis for sulfur dioxide from our Secunda boilers was declined by the National Air Quality Officer. SUSL has subsequently lodged an appeal of this decision with the Minister of Forestry, Fisheries and the Environment and await the decision. Challenges also exist around renewable energy investments, with some now at risk of being undermined by grid allocation uncertainty. Constrained grid capacity in certain resource-rich provinces in South Africa is making it increasingly difficult to bring renewable energy projects online. Investment and upgrades of the transmission network will be critical to alleviate this risk. In terms of other business impediments, Many of these are well known, such as persistent load shedding and infrastructure constraints, in particular the poor performance of the national provider of rail and port logistics services. Although I think it is important to be specific about these areas of uncertainty as we move forward, it is also important to keep them in perspective. I would firstly reiterate that we have constructive dialogue around these issues across a range of stakeholders. And secondly, we are progressing well in making our business more resilient. As we recap our social strategy shared at the Capital Markets Day in September 21, we defined a path to realize our net zero ambition along three horizons. reset our business to enable us to transition and ultimately reinvent ourselves to a more sustainable company. At that time, certain assumptions of what the world would look like and how SASL would perform underpinned these horizons. Since then, our operating environment and the reality has changed materially. We believe we are on the right strategic pathway, although the macro economy has not developed in the way that we or others anticipated at the time. The headwinds that I've talked to at length make it critical to double down our efforts to deliver on the reset phase of our strategy to ensure that we have a business that's as resilient as possible with a robust balance sheet to support it. This will help create financial headroom to self-fund our transition and progress our long-term goals while continuously calibrating that against our means and affordability. In the past year, we remained committed in stabilizing our business through our operational mitigation plans and have seen good progress in this regard. Looking at our energy business, Our mining productivity of 951 tons per continuous miner per shift was 3% lower than the prior year due to unplanned safety stoppages and operational challenges experienced earlier in the year. The second half of the year, our focused efforts realized a 5% improvement in productivity while we diligently progressed the rollout of our full potential program. In Mozambique, production was 2% higher than the prior year, reflecting a strong production performance, which was underpinned by the additional wells brought online in our PPA license. Secunda Operations' production for the year was 1% higher than prior year, despite the planned total yeast factory shutdown. This performance was achieved as a result of management interventions to reduce the impact of coal quality variability and higher availability of natural gas. Owing to this performance, the energy business recorded a 1% improvement in gross margin. In the chemicals business, chemicals Africa sales volumes for the financial year were 1% higher than last year, despite ongoing infrastructure challenges in South Africa. Chemicals America sales volumes were 9% higher when compared to the prior financial year. In response to market demand and pricing pressures, we adjusted our operational rates downward during the first half of the year. However, I'm pleased to share that we have since raised our utilization rates and have achieved monthly production records on several units at our Lake Charles Chemicals Complex. In Europe, after normalizing for the wax divestment, sales volumes decreased by 19%. The lower sales volumes were due to reduced demand and customer destocking across most of our business divisions, with production rates at several of our units also proactively reduced to avoid inventory build. For chemicals, gross margin is down 20%, reflective of a weak macro environment with reduced global demand and higher energy and feedstock costs. A pivotal focus of our endeavors in the second half of the year was to improve the quality and productivity of coal supply in our Secunda operations. I am pleased to report that our full potential program designed to provide sustainable improvement across all our collieries, is starting to deliver early gains. We commenced in January 23 with the first colliery, Safer Fontaine, and have seen improvement in production over the last six months and will continue to build on this momentum. Learnings from this phase will be embedded in the rollout at Shondorny and Tubelisha collieries in the coming months. We have successfully maintained the coal stockpile within the targeted levels of 2 million tonnes through the increase in own production and a successful coal purchasing strategy. We are progressing several levers to improve productivity and coal quality over the short to medium term. I talked through this in great detail at interim results, which includes mechanical interventions for roof control, improve coal blending to minimize the variation of coal quality to secunda facility, and continuous minor interventions to limit the cutting of stone in the roof and in the floor of the coal seam. Collectively, these shorter-term levers are all necessary to unlock higher production output from secunda operations, which is what we have built into our plan for financial year 24. Beyond this, I will reiterate that we need to implement the medium to longer term levers to restore production back to historic levels. These include the completion of the full potential program rollout, employment of a destoning technology to remove sinks from the coal, and unlocking additional reserves to place and to replace the existing Isibunelo supply contract coming to an end. We conducted a successful destoning test using our own coal which was concluded in March of this year. The results are promising and we are aiming to make a final investment decision for our destoning facility during this financial year 24. Lastly, the appointment of focused executive leadership positions for mining was the right thing to do. And we are seeing the benefits in terms of operational learnings and a much higher level of transparency. With the imminent retirement of Rian Rademan as Executive Vice President Mining, I am pleased to confirm that his successor is Herman Venholdt, our current Senior Vice President of Mining. In turn, Herman's successor is also an internal candidate, Sandile Siyaya, currently on the Mining Exco. Both appointments are effective 1 November 23 and will ensure leadership continuity at mining, which is a key to ongoing delivery of our initiatives. In South Africa, we stepped up reliability at both Secunda operations and Natref in the second half of the financial year through a range of technical interventions, as demonstrated in our delivery against market guidance for both sites. Furthermore, our teams ensured a successful total shutdown of the East factory at Secunda and increased natural gas availability at the site to maximize production. Looking ahead, we will continue our reliability improvement initiatives, ensure ongoing mitigation of coal quality challenges, and proactively manage the risks associated with the legal and regulatory challenge as outlined earlier. At our international sites, we successfully completed Train 2 repairs at Oryx, allowing us to achieve stable operations on both trains, which bodes well for ongoing improvement in utilization rates at that plant. We proactively reduced some of our operating rates in the US and European businesses in response to weaker market demand and pricing pressures. we will continue to manage operating rates to mitigate financial losses until we see a recovery in the market. As anticipated at half-year, the performance of all our U.S. units improved in the second half of the financial year, and the Ziegler unit reached 100% available capacity by the end of quarter three per our guidance. The commercial ramp-up of our Lake Charles specialty chemical units will continue throughout financial year 24. Turning to our Mozambique gas drilling campaign, I am delighted to report that the positive results we see across our licenses. We continued our in-fill well drilling on our PPA license, increasing well stock from 19 to 24, which contributed to the higher production rates at Secunda Operations. Our PSA development project remains on track progressing within budget and schedule despite the inflationary and other pressures. Another important milestone is the completion of the construction and commissioning of the initial gas facility which is a precursor to the integrated gas facility which is still to come. We are awaiting regulatory approval of the initial facility which enables us to for gas to flow to our operations earlier in South Africa while we wait for the CTT project to come online. Our exploration strategy has also resulted in a successful gas discovery in block PT5C, which is located in southern Mozambique, which could bolster our reserves and further extend our plateau. Of course, It is still early days and there is further exploration and appraisal work required to determine commercial viability. In line with our commitment to secure sustainable future gas, we've already invested approximately US$530 million in Mozambique in plateau extension projects. Our success in Mozambique gives us more feedstock flexibility towards the end of the decade, which is a critical step towards meeting our greenhouse gas reduction targets by 2030. Given the factors I've outlined, covering both internal and external dynamics, I will now touch on just a few financial metrics before I hand over to Andrei. Our adjusted EBITDA reduced by 8% to around R66 billion. Earnings were significantly impacted this year by the write-down of our Synfuels liquid fuels refinery cash generating unit. Our net debt, now standing at US$3.8 billion, is down marginally, with a net debt to EBITDA of 1.3 times significantly below our covenant levels. Core headline earnings per share decreased by 30% to R47.71 compared to the prior period. In line with our commitment to maintain shareholder returns, as I've already mentioned, we declared a final dividend of 10 Rand per share. We continue to benefit from our SUSL 2.0 transformation program, mitigating some of the higher inflation and lower margin volatility in recent years. Furthermore, we are stepping up some of the targets as we head to the finish line in financial year 25. On that note, I will now hand over to Andre to take us through the detailed financial results for the reporting period.

Thank you, Fleetwood, and good morning, ladies and gentlemen. As Fleetwood highlighted, our financial results were impacted by a range of factors owing to the challenging external operating environment as well as internal operational issues. Encouragingly, we have seen significant business improvement in the second half of the financial year. I'm confident that we will build on this momentum to enhance business performance. We continue to work hard to mitigate the factors within our control, and I will talk more about our progress on cost and capital management supported by our SASL 2.0 program. Additionally, we endeavor to remain agile and build resilience in a complex operating environment. To start with, some specifics on the impact of the macro environment. After support from a rising oil price in the first half of the year, we were negatively impacted by a softening of the oil price in the second half, resulting in an overall decrease of 5% when compared to the prior financial year. This was offset by the rand weakening 17% to an average of R17.77 to the dollar. The weaker closing exchange rate of R18.83 negatively impacted the translation of our US dollar denominated debt. We saw our commodity chemical prices decrease due to poor demand and additionally capacity build in Asia resulting in excess supply. This is evident in the 29% decrease in polyethylene prices compared to the previous period. We have seen some respite in lower ethane and energy prices in the latter part of the year. positively contributing to margins in our chemicals business. However, this continues to be at elevated levels compared to historic levels. Chemical margins and global demand remain depressed, negatively impacting our chemicals business, particularly in America and Europe. Looking ahead, we expect the uncertain global economic environment to continue weighing on prices and demand in the short to medium term, with continued volatility in oil prices and weaker margins for the refined products and chemicals. We anticipate higher ongoing inflation, which requires us to carefully manage our cost and capital strategies. Our strategic response is based on three pillars to navigate the challenging landscape and ensure our resilience. Firstly, Our adaptability to market dynamics requires an ability to swiftly adjust our strategies and operations in response to changing market conditions. By staying agile, we are able to effectively mitigate risks. Secondly, margin optimization is critical and includes improving operational efficiencies and streamlining processes. And thirdly, we will continue to improve our cost competitiveness through ongoing cost and capital discipline, assisted by our SASL 2.0 program. I have full confidence in Team SASL's ability to adapt and thrive amidst this uncertainty. Turning now to our financial results for the year, it is key to recognize that our profitability was not only impacted by factors within our control, but also by multiple factors beyond our control, Given the challenging backdrop, our EBITDA decreased by 8% compared to the previous financial year, with cash generated by operations increasing by 15%. We continue to benefit from our diversified energy and chemicals portfolio evident in the profitability mix, with the energy business contributing 56% of total EBITDA generation. I will unpack the EBITDA performance per segment later in the presentation. Our earnings before interest and tax for the year were significantly impacted by re-measurement items, which includes a combination of impairments, reversals, exploration write-offs, and asset disposal gains in the prior year. The most notable impairment relates to the Secunda Liquid Fuel Refinery Cash Generating Unit, or CGU. I will provide more detail regarding this in the next slide. Lastly, our core headline earnings of R47.71 per share decreased by 30% compared to the previous year. We continue to strengthen the cash flow generation ability of our business, which supports a final dividend of 10 Rand per share declared. The development of our Emissions Reduction Roadmap, or ERR, demonstrates our commitment to sustainably carving out a path to achieve our 2030 greenhouse gas emissions reduction target, as well as compliance with air quality requirements. As we progress our sustainability journey, we need to continuously evaluate and refine our roadmap, ensuring we follow a measured and balanced approach to balance the people, planet and profit impact of our transition. With this in mind, we have revised our reference case that was dependent on gas to restoring secunda volumes back to historic levels. We have reassessed the affordability associated with additional gas and, as such, incorporated lower production volumes post-2030. This adjustment, together with other factors such as current lower volume output of Secunda, higher cost of capital, higher feedstock cost, and changes in capital assumptions, resulted in the full impairment of the Secunda liquid fuels refinery, CGU, of approximately R35 billion. It is important to note that the Secunda Chemicals Cast Generating Unit, CGU, are demonstrating resilience with no impairment incurred due to the production of higher value products. We are diligently evaluating and progressing various technology and feedstock solutions that could potentially aid in partially restoring our production volumes. It is important to note that the maturity of these solutions need to be progressed before it be considered in the impairment assessment. I will now provide some detail on the business segments, starting with the energy business. Our mining business saw a 16% decline in adjusted EBITDA, mainly as a result of lower export sales volumes and prices, as well as higher external coal purchases given our lower productivity. We have seen incremental improvement in productivity since the implementation of our full potential program. Our gas business benefited from higher internal gas prices, although our selling price to the external market remained flat, pending the nursery decision on our financial year 23 and 24 pricing applications. The increase in adjusted EBITDA of 3% was supported by the weaker exchange rate and lower cash fixed costs. In our fuel segment, adjusted EBITDA was up by 5% compared to the previous year, supported by the higher RAN per barrel oil prices. This was offset by the lower NARTREF refining margin on the back of higher crude oil premiums incurred in the first half of the financial year. Turning to the chemicals business, Chemicals Africa saw a 10% decrease in adjusted EBITDA compared to the previous year, mainly due to its lower sales prices. This was offset by slightly higher sales volumes, despite the planned total Secunda East factory shutdown in the financial year compared to a phased shutdown in the previous financial year. In Chemicals America, adjusted EBITDA was down by 96%, compared to the previous year, driven by lower sales prices, as well as higher feedstock costs, mainly in the first half of the financial year. Overall ethylene and derivative margins improved in the second half as feedstock costs reduced, but margins remained significantly below levels seen in prior years, continuing to negatively impact profitability. Chemicals erasures adjusted EBITDA decreased by 74% compared to the previous period, impacted by higher feedstock and energy costs associated with the ongoing war in the Ukraine. Energy costs reduced in the second half of the financial year, resulting in significant inventory devaluations and impacting profits. Given this, as well as weaker demand, production rates at several of our units were reduced. Turning now to our SASL 2.0 transformation program, we are pleased with the savings we have realized to date, which has given us more headroom to withstand the impact of the volatile economic landscape and higher inflation. We have realized over 7 billion rand in net sustainable annual cash fixed cost savings and 6.4 billion rand gross margin improvements since the start of this program, exceeding our targets for both of these metrics to date. This was achieved mainly through the implementation on continuous assessment and refining of the operating model, as well as embedding market-driven strategies to improve customer experience and increasing profitability of our products. Given the high inflationary environment, we have also updated our capital target from the R20 to R25 billion in FY20 real terms to R26 to R32 billion in FY23 real terms. Our maintain and transform capital for the financial year remained well within this targeted range. We continue to embed a risk-based capital allocation approach in accordance with our capital allocation framework. Lastly, we manage working capital ratio to turn over close to our 12-month rolling average target of 15.5% to 16.5%. Although marginally above this range on a 12-month basis, we ended the year at 12.4% through focused management interventions. Given the impact of the external operating environment, we need to intensify our efforts to remain resilient, profitable and cash generative. We have therefore pushed to reset our targets for financial year 24 and 25 by increasing our targets for cash fixed cost and gross margin improvement by more than 20%. This amounts to an additional R4 billion in annual EBITDA enhancements by financial year 25. Our focus remains on bolstering the strength and maturity of our pipeline of initiatives, and we are confident that we will maintain momentum in achieving the 2.0 targets for the coming financial years. Looking next at the outlook for the financial year 24. In mining, we expect productivity to step up to between 975 to 1,100 tons per continuous miner per shift. as we continue to roll out our full potential program to the remaining colonies. In our gas segment, we have increased the volume guidance to 113 to 119 billion standard cubic feet, as we are seeing the benefits of the investment in our gas drilling campaign in Mozambique. The increase in production volumes at our Secunda operations is directly linked to the performance of our mining operations. As such, we forecast volumes of 7 to 7.3 million tonnes for the year, with our South African liquid fuel sales volumes to range between 51 and 54 million barrels. In our chemicals business, sales volumes for Chemicals Africa is expected to be between 0 to 5% higher compared to prior year, following the recovery from the operational challenges in the first half and supply constraints we experienced. In Chemicals America, we expect sales volumes to be between 0 to 5% higher than the prior year as we increase utilization rates supported by the anticipated improvement in market conditions. We will continue to monitor conditions and adjust our plant operating rates in response, ensuring minimal inventory buildup. Chemical Eurasia sales volumes are expected to range from 5% lower to 5% higher than prior year, given the significant volatility and uncertainty that remains in the operating environment. We continue with prudent capital management with the objective to invest appropriate capital to safeguard asset reliability across all our operations whilst progressing our transform objectives. Our maintain and transform capital for the financial year of 30 billion Rand includes the total Secunda factory shutdown, as well as the ramp up of capital spend on the PSA project, which remains within budget and schedule. We have also seen an increase in capital spend towards our compliance roadmap, which includes our environmental and Clean Fuels II projects. To date, minimal discretionary growth capital has been incurred, with spend mainly towards the Sassel Green Hydrogen Pilot Project, which produced our first green hydrogen. Total capital of R31 billion exceeded our market guidance of R27 to R28 billion, mainly driven by higher-than-expected inflation and weaker RAND dollar exchange rates, which impacts a substantial portion of our capital portfolio. Our capital forecast of R33 to R34 billion for the financial year 2024 in nominal terms is aligned with our SASL 2.0 targets. We continue to ensure our capital strategy aligns with our overarching vision of operational excellence, reaching our greenhouse gas reduction target and sustainably growing within a dynamic operating landscape. In wrapping up then, a reminder that our capital allocation framework continues to serve as the foundation of our investment decisions as we assess capital requirements across competing priorities. We continue to prioritize our sustenance capital to ensure we have sustainable operations well into the future. As we progress our emissions reduction roadmap, our pathways are becoming increasingly well-defined. We continuously evaluate and enhance our capital spend towards our roadmap. We remain focused on the best risk-adjusted returns And in achieving this, we are dedicated to explore all opportunities to utilize our capital more effectively while understanding our limits and risks. Our current net debt of $3.8 billion decreased slightly compared to the comparative period, and we continue to work towards our goal of further reducing debt levels. Our liquidity headroom of nearly $6 billion is well above our target to maintain liquidity in excess of $1 billion. We have further significantly optimized our debt maturity profile through the successful refinancing of our near-term debt maturities, which was a critical achievement given the current volatility and market uncertainty. A key priority remains sustainable returns to our shareholders. I am pleased with the declaration of our final dividend, as Fleetwood also mentioned, which brings our total financial year 23 dividends to over R10 billion. In our second order of allocation, our approach to discretionary capital will revolve around prioritization of long-term growth initiatives in collaboration with partners, such as the proposed Topso joint venture. Another example of ensuring efficient capital allocation to support our growth ambitions is Sasol Ventures, our venture capital fund launched in February. Since then, we have refined the investment strategy for the fund and actively evaluated a number of opportunities. As we move forward, the portfolio will be deliberately and carefully formulated, ensuring investment into technologies which will support the delivery of our strategy. Thank you for listening, and I will now hand back to Fleetwood to provide more detail on the progress made in the delivery of our strategy.