Sasol Limited

Good morning and welcome to Sasol Limited's presentation of the financial results for the financial year 2024. Thank you for dialing in and listening to our announcement today. My name is Tiffany Sido from Investor Relations and with me is Simon Beloy, President and CEO of Sasol and Andre Rousseau, Chief Financial Officer. Simon will start today's presentation with some opening remarks and an overview of the business performance. The financials will be covered in more detail by Hanre, and Simon will then conclude on strategy. We will have a Q&A session following the presentation, accessible through both the webcast and teleconference platforms. Before we get into the main agenda, I'd ask that you please take note of our forward-looking statement shown on the slide. Please peruse in your own time and note the important information regarding statements that are made in this presentation. Thank you, and I will now hand over to Simon to commence his presentation.

Good day, everyone, and welcome. In the past five months, since I started my tenure as president and CEO, I have drawn on 20 years of SouthSouth experience to implement a few decisive actions to bring about meaningful change. Let me share a few examples with you. In April, I commenced streamlining of SouthSouth's operating model. This entailed revising the portfolios of the group executive committee and senior leadership layers. These changes were made to improve accountability, collaboration, and to help create a clear focus between business of today and business of the future. Regarding strategy, we've already defined a framework to guide our priorities and ambition. This framework has two pillars. One, strengthen and grow, and two, transform. I'll touch on this in more detail shortly. Furthermore, recognizing the urgent need to improve our short-term performance, I implemented focus areas to unlock opportunities. This enabled us to deliver a strong fourth quarter performance. My vision for SASOL is to build a profitable and sustainable business. We must achieve this vision by safely delivering value to our shareholders, customers, communities, through inspired people. I am deeply honored to lead Sasol at this pivotal moment. Team Sasol is fully committed to ensure that we thrive as the pioneers of our great company had intended. We have an excellent portfolio of global assets and a solid customer base and integrated technologies. But what truly excites me is the people of Sasol. With nearly 30,000 employees worldwide, united by a shared purpose, Team Sasol is the true driving force behind our success. It is for this very reason that I'm saddened that we did not send all our team members safely home during FY24. This is not acceptable. Safety is a critical issue, and I'll spend more time on this topic shortly. Looking at the two pillars I've mentioned earlier, we are advancing with great urgency to strengthen our foundation, step up performance, and move towards full potential. This underpins our ambition to strengthen and grow the business and then drive its transformation. Recent improvement in our operational stability are early signs of progress towards strengthening our foundation. At this early stage of my tenure, there are three key messages I'd like to share with you. Firstly, I have a clear vision for SASOL to build a resilient, sustainable business that delivers value for all our stakeholders. Secondly, our recent actions are making an impact, but there is more that must be done to strengthen and grow our foundation business. And finally, we must transform Sassol for long-term sustainable performance by building on our strength. Towards the latter part of my presentation, I will circle back to strategy and our long-term outlook. While I'm confident that we can leverage social strength, our future aspiration must be grounded in what is realistic and achievable. This work will require more time to develop. We'll provide greater clarity at our next Capital Markets Day planned for Q4 FY25. Turning to safety, as I mentioned earlier, our performance is not acceptable. Having spent many years in operation, directly interacting with our frontline team members and service providers, I have firsthand knowledge of how much their families mean to them. This depends on my commitment that every one of us must return home safely to our loved ones each day. The fact that we are not achieving this weighs heavily on my heart. While we experienced lower hospitalization and less workday cases compared to FY23, we suffered five tragic fatalities. The colleagues we lost in FY24 are Francois Lobe, a 25-year-old electromechanic artisan from Safer Fontaine Mine. Dumisani Dumile, a 36-year-old scaffold builder from Secunda. Colani Dube, a 43-year-old continuous miner operator from Boise Sprite Mine. Sfiso Maduna, a 32-year-old industrial cleaning supervisor from Secunda. Tobisi Matlobo, a 31-year-old shuttle car operator from Tubelisha Mine. I'm also saddened to report that last week, we also lost 36-year-old Mzondilet Lamini, a scaffold builder from Secunda. I'm choosing to share more than just names as a way to honor these colleagues. They were our employees, but they were sons, husbands, fathers, and community members among many other roles. Each individual and loss we suffer is simply one too many, and we are leaving no stone unturned to reverse this trend. We have intensified our efforts to ensure that everyone is adhering to the right operational rigor with numerous interventions underway. Safety is a crucial leadership matter. We are actively increasing the presence of leaders in the field to confirm that the safety systems are working as we designed. Our leaders are engaging and supporting the teams to remove barriers to a safe working environment. I have mandated that all the people on site, regardless of rank and position, must speak up to stop work if they see unsafe practices or safety risks. With the full support of Team Sasol, these actions will further embed a culture where safety is at the forefront of everything we do to ensure that no one is left behind. I will now unpack a few salient aspects of our FY24 business performance. We saw operational improvements in the fourth quarter. This contributed to increase in production and sales volumes compared to FY23. As Team SASOL, we understand that the performance of one quarter is not enough. We must be consistent in our delivery to ensure that we meet our targets. Let me share a few notable highlights with you from FY24. Our mining full potential program is nearing completion. The benefits of this are reflected in productivity gains. While productivity in certain sections have been met and even exceeded, we have identified opportunities to further improve the lagging sections. We are fully unpacking these opportunities and we will provide feedback at our FY25 half-year results. A significant milestone was achieved in Mozambique with early gas flow from the PSA initial gas facility. We also continued with our improvement interventions at Secunda Operation, focusing on equipment availability and operational stability. I'm also delighted to share that our SASO Rewards loyalty program has reached an impressive 1.8 million subscribers since launching two years ago. This program contributed to an increase in retail fuel sales performance despite an overall decrease in sales volumes. Internationally, we continue to manage the utilization of our assets in response to continued weak demand. We are also focusing on increasing volumes of our high-margin products. Lastly, I'm pleased to announce the successful conclusion of our appeal related to 12A of the minimum emission standards in South Africa. This allows us to proceed with the implementation of the load-based integrated solution to reduce sulfur dioxide emissions in Secunda from 1 April 2025. A525 will be about stepping up delivery as we progress our pathway to full business potential. Let me spend a few minutes on some of the specifics we are focusing on. In mining, our benchmarking indicates that supply from our own mines remains the most cost-competitive for our value chain. Consequently, our focus will be on improving our own volumes, reducing unplanned coal purchases, and reducing production costs. We will achieve this by increasing the capacity at our mines and creating deployment flexibility. Additionally, we are implementing our coal quality improvement program, which focuses on coal and blend quality. A final investment decision on our distilling solution will also be made later this calendar year. As we refine our delivery planes, we will shift our focus from tracking productivity at mining to maximizing sellable production times at the lowest possible cost. Operational stability and rigour is key at our South African operations. This includes the execution of successful shutdowns and optimizing external spend. International Chemical is undergoing a research journey as we target various opportunities. Our journey began in April 2024 with the appointment of Anshik Herba as EVP International Chemicals. In FY25, we'll maintain momentum by focusing on improving efficiency and driving targeted innovation. We will embrace our go-to-market model to better align with evolving consumer demands. will also provide more competitive solutions to our customers. Additionally, we'll review and assess our asset portfolio. Here, we will take decisive actions on underperforming assets to ensure robust returns which are comparable to our peers. In Southern African Marketing and Sales, we aim to enhance margins through optimized channel placement and improving customer value proposition. On the regulatory front, risk to our business persists and managing this through proactive with critical stakeholders remains a priority. Flexibility in our strategy is also being considered to allow us to respond effectively to evolving regulation and policies. Our FY25 priorities are well aligned with our goal to strengthen our foundation business. This is underscored by safety, cash generation, and customer centricity. We are also building on stakeholder confidence and driving sustainability. In our commitment to financial resilience, we are focused on enhancing our cash generating and delivery. This we will do through improving margins and enhancing our cost competitiveness. Customers are pivotal to our continued success, and our promise to meeting their quality, service, timing, and innovation needs remains unwavering. We'll progress our plans to reduce our greenhouse gas emissions and carbon intensity. We're already seeing opportunities to optimize the GHG roadmap, also known as the Emission Reduction Roadmap for our South African value chain. We look forward to sharing more detail on this at our Capital Markets Day. We recognize that we cannot achieve our goals alone. Our stakeholders are crucial to our future, and we are working diligently to deliver on our promises. To conclude the first part of my presentation, I'll summarize the journey that we are on. The focus in FY24 was to position the organization for effective delivery. One of my first priorities was to streamline our operating model to improve focus, accountability, and collaboration. Looking to FY25, we must step up delivery as we define credible pathways to full performance and strengthen our balance sheet. We now have a more robust organization that is better positioned to drive improved performance in our journey to reach full potential. As part of this, we'll uphold rigorous cost and capital management practices to foster a culture of continuous business improvement. In this regard, we have updated our dividend policy, which Handra will discuss later. This change aligns dividends more closely with cash flow. While it will impact near-term payments, we remain committed to delivering shareholder returns. Beyond 2025, we will continue to prioritize operating performance while intensifying our focus on delivering future SaaS. Our efforts will be centered on pursuing value creation that aligns with our sustainability goals and drives growth. I am confident in our ability to succeed, and I'm excited to lead Team Sasol towards achieving success in FY25 and beyond. On that note, I now hand you over to Handre to unpack our financial performance in greater detail.

Thank you Simon and good morning ladies and gentlemen. As Simon has highlighted, we have navigated through significant challenges and achieved some improvements in the second half of the financial year. Despite these improvements, our financial results were impacted by a range of factors owing to operational issues and the challenging macro environment. Let me start with the macro environment that we had to navigate this financial year. Oil prices continued to soften in the second half of the financial year, decreasing by 3% when compared to the prior financial year, which was partially offset, however, by a 5% weaker rand. A 2% increase in the Rand oil price was realized compared to the prior year. However, the closing exchange rate was stronger, which positively impacted the translation of our US dollar denominated debt. We observed a 13% increase in petrol differentials, but diesel differentials were down 22% compared to last year, negatively impacting our fuels business. We continue to see some respite in lower ethane and energy input costs, contributing to slightly improved margins in our international chemicals business. However, energy input costs remain elevated compared to historic levels. SASL achieved polyethylene prices decreased by 8% due to persistent weak demand and global oversupply. Looking ahead, we expect continued pricing and demand volatility in the short term given the uncertain global market sentiment and ongoing geopolitical events. These challenges require continued agility and efforts to adapt to market demand and enhance margins. We must also maintain our cost and capital discipline through our business transformation program. Turning to the results for the financial year 2024. The underlying operating performance was mostly in line with the revised market guidance. Despite the improved business performance in the second half of the financial year, we experienced a significant decrease in our cash generation and profitability compared to the prior year. Cash fixed cost increased by 1%, well below inflation. Excluding inflation and exchange rate movements, cash fixed costs decreased by approximately 5%, reflecting focused cost reduction initiatives. Adjusted EBITDA and cash generated by operations decreased by 9% and 19% respectively. However, it's important to highlight the substantial improvement in the second half of the year compared to the first half. A loss before interest and tax was realized, which was negatively impacted by non-cash adjustments, most notably the impairment in the chemicals America segment relating to the speciality chemicals cash generating unit of R46 billion net of tax. The impairment reflects revised assumptions incorporating a weaker outlook for the value chain, including ethane, ethylene, and other product prices, due to slower-than-anticipated demand recovery. Persistent oversupply is likely to have a prolonged impact on prices and margins. Additionally, we've also seen higher discount rates further impacting the value in use. Although impairments are, of course, a non-cash adjustment, management remains committed to claw back value through various initiatives to improve the business performance of the international chemicals business, as well, of course, as of our broader portfolio. Our capital spend of R30 billion decreased by 2% compared to the prior year and ended lower than market guidance, mainly due to continued optimization of our capital portfolio and postponement of low-risk projects. It is key to note that the lower capital spend was without compromising on maintenance and reliability of our assets. Although free cash flow for the financial year decreased by 60% compared to the prior year, we saw a significant improvement from a negative 6 billion rand in the first half to a positive 8 billion rand free cash flow at the end of the financial year. This reflects the resilience and the resolve of Team SASL, and I have full confidence that we can step up performance going forward into the next financial year. The board has taken the tough decision to pass on the final dividend for the financial year 2024, bringing the full year dividend to two rand per share. We revised our dividend policy, which I'll talk about more a bit later. It is important to recognize how the diversification of our portfolio across the energy and chemical sectors enhances the overall stability and performance of our businesses and mitigates risk. This diversification has proven beneficial, reducing the impacts of low oil price in the past and is currently mitigating the effects of low chemical prices and softer market conditions. Our energy business, supported by reasonably stable oil prices, continue to underpin our profitability, although there remains a performance gap to reaching its full potential. We are implementing targeted plans to ensure we leverage the favourable market conditions provided by these stable oil prices. In our chemicals business, the slight increase in performance from especially our international segments is encouraging, given the challenging global economic climate. We will continue the reset of our international chemicals business, improving the overall contribution to the group going forward. By consistently evaluating and reviewing our portfolio, we aim to achieve robust returns from both businesses, allowing us to navigate economic challenges and paving the way for sustained profitability. Now shifting our focus to the variance in adjusted EBITDA, comparing the previous year with the latest year, with business segments starting on the energy side. Our mining business saw a 4% decline versus prior year, largely due to lower export coal prices and higher external coal purchase prices, partly offset by the higher internal transfer prices. We continued to focus on the mining turnaround interventions, which Simon referenced earlier, to increase output and improve cost competitiveness. Our gas business was down by 6%, mainly due to lower weighted average gas prices. The lower weighted average gas prices were driven by gas prices from Mozambique linked to the lower oil price. This was partially offset by increased sales volumes, driven by the additional wells that came online last year and the initial gas flow from the PSA license. In our fuel segment, adjusted EBITDA fell by 7%, mainly due to lower sales volumes and lower differentials on diesel, partly offset by a stronger RAND oil price and NARTREF refining margins. Turning to the chemicals business, Chemicals Africa decreased by 31% due to lower dollar-based sales prices. This was partially offset by the higher sales volumes for the year. In Chemicals America, adjusted EBITDA increased by more than 100% to approximately R3.5 billion due to higher sales volumes and improved ethylene and derivative margins as feedstock and energy costs reduced. Chemicals Eurasia increased by 19% due to higher sales volumes and lower margins driven by lower energy and feedstock costs. Margins, however, still remain low compared to historic levels. Improved performance in our international chemicals business represents some positive momentum in the current macro environment. We are also taking proactive self-help steps to reposition this business to be more resilient in the longer term. We launched our SASL 2.0 transformation program in 2020, which was designed to drive cost improvement initiatives and enhance profitability. I'm pleased to say that by financial year 2024, we successfully delivered a cumulative total of R16 billion of EBITDA enhancements, which has given us more headroom to withstand the impact of volatile economic environment and high inflation. We target an additional 2 to 4 billion rand of EBITDA enhancements in the financial year 2025 through further cost savings and gross margin enhancements. This will mark the successful completion of the SASL 2.0 program. Going forward, we will implement a continuous optimization approach to business transformation, emphasizing sustained cost management and ongoing margin improvement. This involves embedding the principles of SASL 2.0 into a culture of continuous optimization, ensuring ongoing free cash flow delivery. With our streamlined business structure, the new operating model will enhance our effectiveness and improve how we manage the business. Our ongoing commitment to cost optimization will ensure that SASL remains resilient and competitive in an ever-evolving global market. Shifting our focus now to our capital allocation framework, which remains pivotal to our investment decisions and the foundation of our financial strategy. Turning first to our dividend policy, a topic of considerable importance and one that we have engaged extensively on with shareholders. The significant disconnect between headline earnings and cash flow generation alongside elevated leverage levels has necessitated a revised approach to our dividend policy. Under this new policy, dividends will be calculated based on free cash flow before discretionary capital and dividends paid. It is important to note that dividends will only be distributed whilst our net debt remains sustainably below US$4 billion. This threshold is critical as it supports our overarching goal of deleveraging the balance sheet and creating financial flexibility. Unfortunately, as I noted earlier, given we ended the period marginally above the US$4 billion threshold, we did not declare a final dividend for the period further to the R2 per share interim dividend. We are committed to strengthen the balance sheet with the solid action plans that Simon unpacked earlier to improve cash flow generation and deliver sustainable shelter returns over the long term. We continue to refine our approach to maintenance capital, optimizing spend whilst ensuring the safety and reliability of our operations. Additionally, we are carefully balancing our transform capital to enable our greenhouse gas emissions reduction roadmap, thereby balancing our commitments to sustainability, growth and delivering of value to our shareholders. Looking ahead to the financial outlook for the financial year 2025. In mining, as Simon highlighted, we are shifting our focus from productivity metrics to closely tracking saleable production and optimizing the associated production cost. For financial year 25, we project saleable production to be between 30 and 32 million tonnes. In Mozambique, gas production is expected to increase by up to 5%, supported by the additional volumes from the PSA licence. the slight improvement and mining and increased gas volumes is projected to increase production from secunda operations to be between 7 to 7.2 billion tons in terms of sales we anticipate a zero to four percent increase in volumes for liquid fuels and chemicals africa compared to the prior year For our international chemicals business, we expect combined volumes from US and Eurasia to be in line with the prior year, with a focus more on improving margins through optimizing sales mix and reducing cost. Working capital to turnover ratio is expected to remain stable at around 15.5% to 16.5% on a rolling 12-month average basis, ensuring optimal inventory levels. Capital expenditure for maintain and transform is forecasted to be between 28 and 30 billion rand. This includes PSA and environmental compliance spend. Additionally, we have included approximately 1 billion rand towards growth-focused projects, including those in our Zafra joint venture. Following the streamlining of our executive portfolios, our businesses will now be managed as a Southern Africa energy and chemicals business, which effectively includes the South African value chain, and an international chemicals business, which combines our America and Eurasia chemical businesses. More detail on the disclosure relating to our new operating model will be provided later in the calendar year. In conclusion, as we navigate through financial year 2025, our strategic initiatives are set to strengthen our operational efficiency and ensure strict cost and capital management. This set of results will be my last message as the outgoing CFO, and I'm grateful for the opportunity to have been part of this dynamic organization. Thank you to my colleagues, especially to my finance team, for your support and unwavering dedication. I'm pleased to hand over the baton to Walt Bruns, who succeeds me as CFO, and I'm confident that he is well-positioned to lead Team SASL towards future success. I will now hand back to Simon to conclude with a longer-term strategic outlook. Thank you.