Sasol Limited

Good morning and welcome to Sasel Limited's interim results presentation for financial year 25. Thank you for dialing in and listening to our announcement. My name is Tiffany Sido from Investor Relations. With me is Simon Beloyed, President and CEO of Sasel and Walt Bruns, Chief Financial Officer. Simon will open today's presentation with the business performance update. Walt will then provide a detailed overview of the financials, followed by Simon's closing remarks. We will then have a Q&A session immediately after the presentation through the webcast and teleconference facilities. Before we get into the main agenda, I'd like to ask that you please take note of our forward-looking statement shown on the slide. Please peruse this in your own time. Thank you, and now handing over to Simon to commence his presentation.

It has now been nearly a year since I started my tenure as President and CEO of SASOL. From the outset, I understood that addressing the challenges facing SASOL will be more like running a marathon rather than a sprint. I am pleased to share that we are making good progress in this marathon. While we continue to encounter challenges, our understanding of the obstacles we face has deepened. we now have a clear path on the way forward. We have already taken and will continue taking decisive actions to restore the health of our business. As a marathon runner myself, I know that staying on course requires resilience, focus, and discipline. In today's presentation, I will provide an overview of our journey, the progress we have made, and the opportunities and the risks that still remain. Following this, Walt will delve into our financial performance in greater detail. Our journey is guided by our strategic ambition, strengthening our foundation, growth and transformation. We are committed to unlocking full value and building a more sustainable future Sasol. Our short-term focus remains enhancing delivery from our foundation businesses to maximize free cash flow generation. For Financial Day 25, we have defined five key priorities to guide us on our journey. These five priorities are, first and foremost, all our employees and service providers must go home safely each day. I'm grateful we have not had any fatalities since August 2024. As a management team, we are reinforcing personal and leadership accountability. Secondly, in international chemicals, our research journey has commenced. This will improve profitability and reposition the business as globally competitive. Thirdly, key decisions to restore our South African value chain have been taken, with this donning as a critical enabler to unlocking performance in the near term. Fourthly, we remain committed to a balanced and measured approach in transforming our business, ensuring ongoing value creation across all stakeholder groups. Our Emission Reduction Roadmap, or ERR, is the blueprint to achieve that. We are refining our roadmap to ensure air quality compliance, reduction in carbon intensity, and value enhancement for all our stakeholders. Finally, free cash flow generation is critical for strengthening our balance sheet, as well as funding our growth and transformation in the future. These priorities underpin our ambition to strengthen the foundation business, which will support shareholder returns. We remain committed to providing a more strategic and long-term business outlook at our Capital Markets Day, or CMD, and I'll share more on this agenda later. I'll now spend some time unpacking our performance in the first half of the financial year. Turning now to safety, as I mentioned earlier, we have remained fatality-free since I last spoke to you in August 2024, which is a positive step. However, our safety performance still has room for improvement, and we remain committed to ensuring a safer workplace for everyone. Our safety incidents were elevated for the first half of the financial year, largely due to the second shutdown, where we have approximately 40,000 people on site, engaged in various maintenance activities. No major fires, explosions, and releases have been reported during the first half. Unfortunately, we had a fire at our NatRef Refinery in early January. We are proactively reviewing our workplace safety systems and practices to drive a reduction in process safety incidents. Our chief fundamentals, which are outlined in August 2024, remain unchanged, with a focus on the following. One, driving a safety culture change through leader-led initiatives, emphasizing frontline engagement and accountability. Two, fostering a stronger collaboration with our service providers to ensure safety standards are consistently applied and maintained throughout our operations. Three, we have successfully enhanced our integrated system to streamline processes, improve visibility, and strengthen risk management through centralization and standardization. Lastly, we are embedding industry best practices within our high severity incident prevention program. Our aim is to ensure safety is prioritized, integrated into everyday practices and at the forefront of everything we do. This approach will ensure that everyone goes home safely each day. I will now touch on a few salient aspects of our financial performance. We have experienced microeconomic headwinds, which included lower oil prices, lower refining margins, and lower for longer chemicals market downturn. Notwithstanding the headwinds, our operational challenges, Team Sasol continued to prudently manage costs, optimize capital spend, and prioritizing value over volume to counteract the impact of the internal and external obstacles we faced. Adjusted EBITDA for the period ended at 24 billion rands, 15% lower than the previous year. Free cash flow performance improved by more than 80%, supported by proactive management actions. This is slightly below our expectation, but we expect a recovery in the second half with all major shutdowns now behind us. The focus for the remainder of Financial F25 will be driving cost discipline, operational stability, and sustainable working capital practices to unlock cash generation. As shared in August, International Chemicals commenced with a research journey as we target various opportunities and take decisive actions to ensure robust return comparable to our peers. We are focusing on three core strategic initiatives, cost efficiency, market focus, and asset optimization. These are underpinned by an expanded set of detailed levers and good progress has been made to date. Actions included streamlining the organizational structures and implementing a fit for market operating model. We also refined value proposition for commodity positions and specialty products to prioritize higher margin solutions. This shift from a volume-driven to a value-driven approach ensures stronger focus on margin expansion over scale. We mentioned previously that we are reviewing and assessing the performance of our global asset portfolio to ensure we maximize value over volume from all our assets. This process goes beyond just asset sales. It's about determining the best course of action to deliver value for our shareholders. Depending on the asset's performance and market condition, this may involve fixing the asset, selling, or motherboarding certain assets. As part of this, we have decided to motherboard three underperforming assets in Germany, Italy, and the U.S. to improve overall margins and cost efficiency. These levers support our target for financial year of an EBITDA uplift of $100 to $200 million from a financial year 24 baseline. We are targeting an EBITDA margin exceeding 10%, which brings us closer to the average of our industry peers. We will continue to target more uplift and see significantly greater potential from international chemicals. We will share more on the next phases and targets at CMD. Moving now on to South African energy and chemicals, coal quality challenges persisted, but our plans to address this has progressed well. In December 2024, we made a final investment decision, or FID, for a distilling solution that will enhance the coal quality supplied to Secunda operation. This solution will repurpose our existing export beneficiation plant and is more cost-effective and will be implemented earlier than previously communicated. We expect it to be operational in the first half of FY26. Further focus remains on maximizing coal supply to our operations at the lowest possible cost and best quality. To this end, we are improving our operational flexibility and deepening our understanding of the geology we are facing. We are increasing the drilling capacity and investing in critical infrastructure. Improved flexibility will allow more sections to be deployed in good geological areas. This action will assist us in improving volumes and quality. But as with many changes to our mine plan, this will take time. The continued impact of poor coal quality and variability over the past few years has negatively impacted gasifier availability at secondary operations. To address this, we are increasing maintenance efforts for a general overhaul of our fleet of gasifiers to improve availability. Once completed, we anticipate the full benefit of destoning on production volumes by the end of financial year 27. However, we will start to see the benefits of destoning as soon as the plant is commissioned. At NatRef, I am pleased to announce that we have successfully completed repairs following the fire in January 2025 and the refinery is now back online. Within our gas business, we took FID on the junction compression project and our PPA license in Mozambique. This project supports the gas plateau extension as well as the extended natural gas supply to our customers until mid-2028. Beyond this, South Africa will need to transition to LNG as the only viable solution for the external market. There is no more possibility of any further extensions from existing Mozambican resources. In fuels, our marketing and sales team increased sales volumes in the higher margin mobility channel compared to previous year, despite a downward trend in the market. This growth underscores our strategic focus on optimizing channel mix to prioritize higher margin market channels in both fuels and chemicals. In fuels, this pertains to the shift to a higher margin retail sale, while in chemicals, it is about placing products in regions with the highest net bag price. This helped Chemicals Africa to achieve a higher average basket price. Looking ahead, we are optimizing external spend by improving how we manage our costs and contracts without compromising on maintenance. This together with our latest focus to achieve the production of between 6.8 and 7 million tons at sequential operations will support achieving an oil break-even cost of below $60 per barrel for financial year 2025. Further details on volume uplift and cost reduction will be shared at CMD later this year. A key priority is to transform our business responsibly. That involves delivering on our responsibility to reduce our carbon intensity, but in a way that delivers value and supports economic growth in South Africa. As I previously said, our ERR is the blueprint to achieve that. our GHG reduction target for Sasol Group remains unchanged, 30% by 2030. To be clear, we have not changed what we are aiming for, but we have optimized how we are going to get there, making sure we protect value along the way while remaining compliant with air quality legislation. Initially, our roadmap was built on four key levers, which included the use of LNG as a transition feedstock. As we said before, the higher market pricing of LNG makes it uneconomical to use for own production. We had to adapt our roadmap, ensuring that we remain on track while responding to evolving market conditions. All the other levers remain unchanged, including energy efficiency and the integration of renewable energy. We have made good progress on our renewable energy commitment. To close the gap, we are now considering renewables in excess of 1,200 megawatts, as well as other value-accretive business building opportunities like sustainable carbon feedstocks and carbon offsets to reduce our emissions. To ensure we preserve value, our ERR is maximizing secundary operation production for as long as possible with no planned turn-down in volumes. Our optimized roadmap is set to restore secundary operation to 7.2 million tons per annum in financial year 2030, a significant step up from the previously communicated 6.7 million tons per annum. However, as natural gas declined, we expect production to decrease beyond 2034 and we will optimize the site to ensure it remains profitable. The revised roadmap has lowered our capital requirements to between 11 and 16 billion rands from our previous range of 15 to 25 billion rands. There is still potential for further reduction as we continue to optimize our roadmap. We will review this approach going forward in conjunction with the evolving macro and regulatory landscape, including carbon tax and policy direction. At SASOL, we welcome the latest developments on carbon tax in South Africa, as proposed in February 2025 budget review document, which recently became available. This is a positive outcome, not only for SASOL, but for the broader South African industrial sector, supporting sustainable and pragmatic transition efforts going forward. The revised ERR ensures that SASL remains integral to the South African economy as we pursue a just transition at a pace aligned with market demand, focusing on protecting jobs, supporting the communities we operate in, and maximizing stakeholder value. Our business has far-reaching multiplier impact across various sectors and the communities which we operate. Through direct and indirect impact, our integrated value chain supports around 500,000 jobs and contributes approximately 5% to the GDP and 12% to the national tax base. Beyond our economic contribution, our social impact is significant. SASOL has been ranked as the third largest social investor in South Africa, reflecting the tangible impact we have in changing people's lives. Over the past five years, we have invested nearly 3 billion rands in socio-economic development programs, including community health investments, infrastructure, and skill development programs. Similarly, our education programs have impacted over 10 million learners globally, with the Sasol Foundation awarding more than 2,900 bazaaris to underprivileged students. These efforts reflect our dedication to driving meaningful change, not just in the economy, but in the lives of the people we serve, reinforcing our commitment of being a force for good. With that, I'll now hand over to Walt, who will unpack our financial performance.

Good morning, everyone. I'm honored to be with you today to present my first set of financial results as Sasel Group CFO. I've been with Sasel for more than 15 years, working across a number of our businesses. I understand our value chains and believe strongly in the potential of our portfolio and our people. Before diving into the numbers, I'd like to outline my key priorities as Group CFO. As we strengthen our foundation business, a key priority for me is improving our free cash flow generation to deleverage our balance sheet and create financial resilience. We have several levers to achieve this, including the initiatives outlined by Simon, but beyond that, I am strongly focused on driving operating and capital cost discipline. We are already seeing early progress, which I will discuss today. With a stronger financial base, we can shift our focus towards growth and transform, which will be informed by a strict capital allocation framework. This will create healthy competition for capital driven by economic returns while driving excellence in execution. By taking this approach, I'm confident we can build a more resilient business, which together with robust risk management creates a clear path to sustainable value for all of our stakeholders. Turning to our results for this first half of 2025, the macroeconomic environment remains volatile, difficult to predict and impacting us in different ways. The lower rand oil price and refining margin negatively impacted the results of our fuel segment, while a higher chemicals basket price and US ethylene margins supported the results of our chemical segments. In Europe, natural gas prices remain above pre-war levels and continue to put pressure on the profitability of our European chemical business. requiring us to continually review our asset portfolio in the region. Looking ahead, we expect the volatility to continue, driven by uncertain global market sentiment and ongoing geopolitical tensions. How we respond to this volatility is key to our success, and we need to be agile and proactive in our response by continually looking for opportunities to optimize margins while maintaining stringent cost and capital management practices. Our overall financial performance in the first half reflects the impact of the volatile macroeconomic environment, with gross margin declining by 11%. This was driven by a 10% reduction in turnover as a result of the lower rand oil price and a 5% decrease in sales volumes associated with lower production and weaker market demand. Lower variable costs helped to keep the gross margin percentage stable at 45%. Cash fix costs decreased by 1%, supported by our ongoing transformation initiatives. Our adjusted EBITDA for the period was 15% lower as a result of the lower gross margin. Earnings before interest and tax was further impacted by non-cash adjustments, most notably a net loss of approximately $6 billion from re-measurement items. This was mainly due to further impairments in the Secunda and Sasselburg liquid fuels refinery cash generating units, which remained fully impaired. These impairments were despite the significant improvement in the recoverable amount of these and other cash generating units within South Africa as a result of the optimization of the South African EOR that Simon mentioned and largely due to the negative impact of lower forecast macroeconomic price assumptions. On the positive side, free cash flow increased by 84% compared to the prior period, despite lower EBITDA and mainly due to reduced capital expenditure, taxation paid and a positive movement in working capital. Net working capital as a percentage of turnover increased due to higher inventory to manage the current supply variability and improve the customer experience. While the improvement in free cash flow is an important proof point, free cash flow remained negative for the first half of the year. Further improvements are expected in the second half of the financial year, consistent with previous years, with the first half of the year traditionally impacted by seasonal shutdowns and high associated capital expenditure. Our portfolio continues to benefit from both business and geographical diversification, which is helpful in navigating the current market volatility. In the first half, we saw the adjusted EBITDA from international chemicals increase by more than 80%, helping to lift their contribution to the group-adjusted EBITDA from 6% to 13%. This was supported by a combination of targeted management interventions and improved margins in especially the US market. Continued delivery of our action plan should further increase the contribution going forward. While our Southern Africa business remains the primary driver of Group EBITDA at almost 90%, the relative contribution was impacted by lower RAND oil prices and production volumes. As mentioned by Simon, we are progressing our self-help levers to strengthen this business. Now, shifting our focus to the variance in adjusted EBITDA across our business segments compared to the prior period. Starting with Southern Africa Energy and Chemicals, the mining segment delivered improved earnings, primarily driven by a revision to pricing in the coal supply agreement with Secunda Operations. This, however, resulted in higher feedstock costs for both the fuels and chemicals Africa segments. The gas business saw a 71% increase in earnings driven by a combination of higher gas prices and volumes. Increased production from the PSA is helping to sustain volumes as gas from the PPA naturally declines. In fuels, earnings declined by 61% driven by lower product prices, lower production volumes and higher feedstock costs. On the positive side, sales volumes in the higher margin mobility channel increased by 4%. In Chemicals Africa, earnings declined by 14%, largely due to lower secunda production and higher feedstock costs. This was partially offset by a higher average basket sales price. In addition, differentiated chemical sales volumes were 4% higher due to improved production in Sasselburg. Turning to international chemicals, we saw a strong improvement in the first half across both segments with increased focus on value over volume. Chemicals America reported a 77% increase in earnings supported by improved U.S. ethylene margins and cost reduction initiatives. The East Cracker, which came online in November after an extended outage, is expected to support further margin improvement in the second half of the year. Chemicals Eurasia delivered more than a 100% increase in earnings, but margins remained structurally low given the current high feedstock and energy costs. As I said earlier, improving our capital structure and maintaining capital allocation discipline is critical to improving our resilience. With that in mind, there are a few key points to highlight. Our first order capital allocation includes maintaining and transforming our existing operations while pushing for more efficient and effective capital spend. We have managed to achieve this in the first half of the year with a 6% reduction in spend. We will continue to progress our transformation plan at the appropriate pace and reduced capital spend that Simon outlined earlier, but it must generate economic returns to support its investment. From a financial stability perspective, the company's dividend policy is based on 30% of free cash flow generated, provided that net debt, excluding leases, is sustainably below US$4 billion. Free cash flow for the first half of the year is a deficit of $1.1 billion, and the net debt at 31 December 2024 is $4.3 billion, and as such exceeds the net debt dividend trigger. Therefore, the SASL Limited Board of Directors has made the decision to pass the interim dividend. While the second order capital allocation allows for a choice between debt reduction, growth capital and or shareholder returns, the clear priority at this stage is gross debt reduction as evidenced by the US$300 million payment into the revolving credit facility during the first half of the year. Looking at the outlook for the remainder of the financial year 25, this slide outlines the key drivers and metrics that we are prioritizing. Our first priority is delivery of our volume recovery plans to ensure we meet our volume guidance. Secondly, is to maintain cost and capital discipline by keeping our cash fix cost increase below inflation and meeting our previously guided targets for both working capital and capital expenditure. From a financing perspective, we are planning to bring net debt below US$4 billion by the end of the year. Robust risk management remains critical in these volatile times. To further protect the balance sheet while managing costs, we have temporarily extended our hedging program horizon for both oil and RAND dollar exchange rate from 12 to 18 months. We have also increased our hedge cover ratio to 25 to 40% in financial year 26. In terms of progress, we have completed 100% of our hedging program for financial year 25 and more than 85% for financial year 26. We will continue to monitor and adjust the hedging program as required. In summary, we are committed to driving continued business improvement with the goal of enhanced cash generation, deleveraging and creation of sustainable shareholder value. We understand that we need to deliver on these objectives and in so doing, build our credibility and earn your trust. I will now hand over to Simon for his closing remarks and look forward to responding to your questions in the Q&A session later.