Sasol Ltd Ord

Good morning and welcome to SASL Limited's Financial Year 2024 Interim Results Presentation. Thank you for dialing in and listening to our announcement. My name is Tiffany Sido from Investor Relations. With me is Fleetwood Grobler, President and CEO of SASL, and Henri Rousseau, Chief Financial Officer. Fleetwood will start today's presentation with an overview of the business performance in this period. The financials will be covered in more detail by Andre. Fleetwood will then conclude with a brief update on our social commitment and sustainability and strategy. We will commence with a Q&A session immediately thereafter, where you will have an opportunity to engage with management and ask a few questions via our webcast or teleconference facility. I'd like you to note 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 the presentation. Thank you, and now handing over to Sleetu to commence his presentation today.

Good day everyone and welcome to our interim financial results update for the 2024 financial year. The last six months have again seen an incredibly challenging external environment for us to navigate. with a high level of macro uncertainty, inflationary pressure, weak economic growth, and specific operating constraints in South Africa. These factors have had a material impact on our business, particularly with lower prices and demand across many of our chemical products, but they are not the sole determinants of our performance. As an organization, We have worked hard to mitigate the external pressures to the extent that we can through focus on the issues that we can control. As part of this, I am pleased that we continue to deliver against our SASL 2.0 improvement program targets and we deliver further operational improvement in South Africa. Unfortunately, though our efforts were hampered by persistent underperformance of the state-owned enterprises involved in Sussel's value chain and, in some instances, unplanned safety-related production stoppages. Moving forward, whilst we are well positioned to benefit from a turn in the chemical cycles at this stage, we need to keep absolutely focused on our priorities. to step up cash flow generation to make sure that we maintain the robust balance sheet needed to cope in these extremely uncertain times. As with previous results presentations, I will start by reviewing our half-year performance across our people, planet and profit pillars. From a safety standpoint, The period has been marred by four tragic fatalities. Mr. Zolani Dube, Mr. Dumisami Dumile, Mr. Mitswobisi Matlobo, and Mr. Sifsu Maduna lost their lives in work-related incidents and we again express our heartfelt condolences to their families, friends and colleagues. Safety is our priority and we must continue our work towards zero harm. Our recordable case rate of 0.024 for the half year is below the of the corresponding period last year. Our dedication to enhancing social welfare in our communities remains steadfast, exemplified by our investment of over R280 million in social impact programs. We continue to actively participate in initiatives aimed at uplifting communities yielding positive and impactful results for the most vulnerable members of society. Staying with the theme of people, in November last year, we announced the appointment of Simon Bolloy, our EVP for Energy Operations and Technology, as my successor, with effect from 1 April 2024. I'm also pleased to confirm that Gerrit Viljoen, our SVP Secunda Operations, will assume Simon's current role on our Group Executive Committee on the same date. I share the Board's confidence that the wealth of experience and leadership capabilities that both Simon and Gerrit possess will be a considerable asset to SASL in delivering sustainable performance improvements. On our planet pillar, we again recorded excellent progress in our renewable energy procurement program. Over 600 MW has now been procured for Secunda operations and a further 69 MW for Susselburg, of which approximately 498 MW has reached financial close and some of which is under construction. In Mozambique, our gas drilling campaign continues to yield positive results, with four additional wells coming online during the period under review. On profit, our continued focus on operational improvement is yielding results, with productivity improvements realized in mining and higher volumes delivered at Secunda operations. These and other notable areas of delivery helped partially offset the impacts of severe macro headwinds and challenges that we continue to face with South African state-owned entities involved in SUSL's value chain. Despite continued volatility over the period, the Board decided to declare an interim dividend of two rand per share. Turning to safety, earlier I acknowledged that we suffered four tragic fatalities over the past six months. Any workplace fatality is a deeply heart-wrenching experience for all of us, with a profound sense of loss felt not only by the loved ones and friends, but social colleagues too. Any loss of life or harm is simply unacceptable to us, and we are working incredibly hard to realize a zero-harm workplace because we want all our people, employees and contractors alike, to return home safely each day. While no further reason is needed to pursue our safety agenda It is also true that safety incidents often lead to unplanned work stoppages which impacts our production. Our commitment to excellence in safety is an embedded priority and we have bolstered existing safety initiatives through institutionalizing learnings, reinforcing our life-saving rules and focused leadership visibility and engagement to help prevent future incidents. Furthermore, our high severity injury prevention program remains the backbone for improving our sheep performance. As we mature the program, we can see that it is reaping results as we continue to see our fires, explosions and releases or FER severity rate decreasing. There were no major FER incidents during the first half of FY24. Through our humanizing safety initiative, we are driving a culture that looks beyond safety statistics. Here, our focus is on showing care through every layer of influence instead of only through a compliance-driven approach. We are striving to provide an enduringly safe work environment. This requires a dedicated leader-champion safety culture and, as important, employees who are fully engaged and comply with all safety rules and procedures who speak up, report and stop unsafe work immediately if that is required. As I referenced in my opening remarks, SASL faced a challenging macro backdrop during this period, and many of these factors continue to pose near-term challenges to our business. They include high inflation and weak economic growth, while our chemicals business also faces weak demand and margin pressure. We are taking measures to position chemicals for improved performance when the chemicals cycle turns. Across the organization, strict cost and capital management measures have been introduced to improve cash flow generation. We also continue to embed operational improvements with a relentless focus on safety, improving productivity rates at mining, which will lead to better performance of the South African value chain. I will unpack this in more detail in a later slide. This takes place against a backdrop of continued volatility and in South Africa specifically, an uncertain regulatory environment and other business challenges such as power supply and infrastructure constraints. 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 engagement with NRSA on gas prices. On 26 October 2023, NRSA dismissed our FY23 application and confirmed that SASL is entitled to submit a clawback application to recover the cost increase that occurred in FY23. At the same time, NRSA approved our FY24 application, including the quarterly adjustment. We also still await the decision from the Minister of Forestry, Fisheries and the Environment regarding SUSL's application for an alternative emissions load basis for sulphur dioxide from Secunda boilers. While all of these matters present challenge and hence uncertainty, it is important to keep them in perspective. We have constructive dialogue on these issues across a range of stakeholders, and we are executing on these plans to increase resilience, irrespective of the outcomes. In terms of operational improvement, although we have got much more to do, we made some real progress despite the challenges. Looking at our energy business, mining productivity for the half year was 6% higher than the corresponding period in FY23, with productivity for the Sakuta collieries up 5%. Although we have seen an improvement in productivity since the implementation of our full potential program, We experienced a challenging second quarter in FY24, where productivity declined by 8% compared to the first quarter, mainly due to safety-related incidents as well as other operational challenges. In Mozambique, gas production for the reporting period was 10% higher than the prior period, reflecting another strong production performance underpinned by the... four wells brought online in our PPA license. Secunda operations production volumes were 8% higher than the prior period mainly due to the phase shutdown relative to a total shutdown in the prior year and improved operational performance. Coal quality did, however, continue to negatively impact production. RXGTL achieved a utilization rate of 79% over the half year, 19% above the prior period. Owing to this performance, the energy business recorded a 1% decline in gross margin with higher sales volumes offset by lower rand oil prices and higher input costs. This stems from higher external coal purchases, increased maintenance expenditure, and higher gas feedstock costs due to a dollar exchange rate. In the chemicals business, Africa's sales volumes for the period were 3% higher than the corresponding period last year. Ongoing infrastructure challenges in South Africa. While close collaboration with Transnet continues, supply chain challenges persist and remains a risk to our business. Chemicals America sales volumes were 12% higher compared to the prior half year, mainly due to the higher ethylene and polyethylene sales volumes, albeit at continued low ethane-ethylene margins, while both essential care chemicals and advanced materials were higher. For our Eurasian operations, sales volumes for the first half of FY24 were 4% lower than the same period in FY23 due to continued low market demand that is significantly below historic levels with continued inventory destocking by customers and an overall weak economic environment in both Europe and China. Production rates at several of our units continue to be managed proactively in response to the lower demand and to avoid inventory build. The combination of these factors saw our chemicals business record a 10% decrease in gross margin, reflective of continued weak macroenvironment and margin pressure. Let me now delve deeper into our South African operations, where our focused planning and effective integration between mining and Secunda operations is ensuring value chain stability. Looking at our delivery over the past six months, safety is, of course, a major concern, and I have already shared details on the rigorous actions we are taking to improve our performance. Our Secunda operations coal stockpile was 1.9 million tons on 31 December 23, which is above the minimum safety threshold and productivity is within guidance. The external coal purchasing program to supplement our own production continues to assist us to meet Secunda operations coal demand and quality requirements. This, together with other interventions to unlock coal quality improvements, will help us to get to the historic levels of production of around 7.5 million tonnes per annum. Our integrated coal quality management centre implemented last year has assisted us in managing coal quality variations to the Secunda factory. Phase two of our full potential program started in quarter one and two of FY24 at Shondorny and Chubilisha Collieries respectively. We also had a successful phase shutdown of Secunda operations in September 2023. Given the challenges we experienced over the past six months, which impacted productivity at mining and volumes at Secunda, it is understandable to question whether these are ones-off in nature or indicate that progress is slowing down. Let me be clear that we are seeing improvements in productivity rates since the implementation of our full potential program. Challenges are to be expected, but it is how we mitigate and adapt to these that will ultimately yield results. We are fully committed to driving interventions to realize sustainable benefits. Additionally, our coal destoning project, which is nearing a final investment decision later in 2024, can improve coal quality and has the potential to reduce the percentage of rocks in the coal feed to secunda operations. which will enable improved gasifier yield and thus better value chain performance. A strong focus on optimization of our cash costs will be critical in the near term to improve our competitiveness. bolstered our operations experience at executive level through the appointment of leaders with deep operations and technical expertise in the form of both Simon and Gerrit. Their intimate knowledge of our South African value chain will stand us in good stead as they drive focus plans to improve our operations. In summary, in our efficiency of our South African operations, particularly in mining and at Secunda, we have had some setbacks during the reporting period. I remain confident of the progress and that we will continue to deliver and report further progress in this critical engine room of the business. In chemicals, we mitigated against volatile market conditions through active margin management. In the first half of FY24, production rates at several of our units were managed proactively in response to the lower demand and to avoid inventory build. While U.S. sales volumes are ahead of plan and our cost containment measures are unlocking savings. Turning to the focus areas. In 2024, we experienced a spike at our RXGTL plant in Qatar. During the inspection of Train 1 reactor coils, we observed coil erosion which will result in extended scope of repair work. This means that both Train 1 and 2 will be offline for longer than planned. The focus is on now the successful completion of the shutdown in the next months. André will expand on the performance impact of this maintenance shutdown. In the short term, We will also focus on proactively managing operating rates to meet demand, product optimization to maximize profitability, and exercising strict cost and capital management. To close on this slide, I want to emphasize that the fundamentals of our chemicals business remain strong. It is operationally sound and highly efficient, which is evident in how we are managing the business in a difficult operating climate. We have seen many cycles in the past and the proactive measures we are executing allow us to conserve cash flow and make sure that it will be very well positioned to take advantage of a recovery in the cycle. Turning attention now to Mozambique, I'm pleased to report that our projects are delivering gas to plan. Post-LCCP, our PSA project is the largest capital project and we continue to deliver within schedule and budget, with commissioning readiness expected towards the end of calendar year 24. Our focus here is to extend the natural gas plateau to FY30 and beyond, from an original estimated decline which was anticipated for 2024-25. We have already invested over $700 million in plateau extension projects with benefits of additional gas to sustain the plateau in this decade already realized. On PSA, the initial gas facility achieved beneficial operation in November 2023. This is a precursor to the integrated gas facility. Commissioning activities are expected to commence in quarter four of this financial year. We have completed approximately 75% of our surface facilities and 80% of the wells are drilled. We are exploring all options to allow early gas flow to South Africa. We continued our in-fill well drilling projects on our PPA license. Development remains on track, progressing within budget and schedule. As mentioned earlier, four new wells have been operationalized in the reporting period. Our exploration strategy has also resulted in a successful gas discovery in block PT5C, which is located in southern Mozambique. This could bolster our reserves and further extend our plateau. Our appraisal plan has been improved which allows us to progress work to determine commercial viability. What you are seeing in this picture on the right is a before and after view of the PSA integrated oil, gas and LPG processing facility in Mozambique, where significant progress has been achieved in a year. The control room building, the utility area, the substations and the equipment rooms have all been completed. Given the operating context and our operational performance, I will highlight a few financial metrics before I hand over to André. Our adjusted EBITDA was 12% lower around R28 billion. Earnings were significantly impacted this half year by non-cash adjustments relating to impairments coupled with translation impacts and financial instruments and derivatives. Our net debt, now standing at $4.6 billion, is up around 1%, with net debt to EBITDA of 1.6 times. Although we're well within our debt covenants, improving cash flow and increasing balance sheet strength are critical priorities for management. For this reason, we are driving several interventions to improve gas generated by our operations. Gas generated by operating activities declined by 31% to R15 billion compared to the prior period in line with the decrease in EBIT and the movement in working capital. Our immediate focus on cash unlock across the business will be prioritized in the coming months through a range of initiatives, including operation efficiencies, optimization of turnover, and stringent management of costs. Lastly, we declared an interim dividend of R2 per share. Looking ahead, our dividend policy is currently under review. Andre will provide more detail in this regard. On that note, I will now hand over to Andre. He will take us through the detailed financial results for the reporting period.

Thank you Fleetwood and good morning ladies and gentlemen. As Fleetwood already mentioned, whilst we saw some operational improvements, this was not enough to mitigate the external challenges and resulted in a weaker financial performance in this half. I'm confident that enhanced by the initiatives we are already implementing now, our business will however be better placed for the second half. Let me start with some detail around the macro environment and some of the key metrics we track. Oil prices softened during the first half of the financial year, decreasing by 10% to an average of $85 per barrel. This was offset by the rand weakening 8% to an average of R18.69 to the dollar. As such, a 3% decrease in the rand oil price was realized compared to the prior period. the weaker closing exchange rate negatively impacted the translation of our US dollar denominated debt. Although we have seen a significant decrease in ethane and energy input costs in the first half of the financial year, they remain elevated compared to historic levels. As such, chemical margins remained under pressure due to weak market conditions. Polyethylene prices continue to decrease on the back of weaker demand, as seen in the 19% decrease compared to the previous period. Looking ahead, we expect pricing and demand volatility to continue in the short term, given the uncertain global market sentiment and ongoing geopolitical events. Locally, the South African economy continues to face multiple challenges relating to the underperformance of state-owned enterprises, which needs to be factored into our business planning. These headwinds require us to adapt quickly to the prevailing situation and optimize our integrated cash cost and margins across our portfolio. Turning then to the financial results, with operational improvements unable to mitigate external headwinds, we experienced a significant decrease in our cash generation and profitability. Cash fixed costs increased by 5%, mainly due to inflationary increases and the weaker exchange rate. However, excluding inflation, exchange rate and want-off costs, cash fixed costs decreased by approximately 1%, reflecting continued cash fixed cost savings from our SASL 2.0 program. Adjusted EBITDA and cash generated by operations decreased by 12% and 31%, respectively. Following the same trend from last year, with ongoing cyclical pressures in global chemicals, Group EBITDA continues to be heavily reliant on the contribution from our South African region. Earnings before interest and tax for the period was negatively impacted by non-cash adjustments, most notably impairments in the fuel segment relating to the Secunda Liquid Fuels Refinery cash generating unit, as well as in two of our Chemicals Africa CGU's. This was partly offset by the translation of monetary assets and liabilities and valuation of financial instruments and derivative contracts. Core headline earnings of R18.39 per share decreased by 25% compared to the previous period. An interim dividend of R2 per share was declared. Let me now turn to the business segments, starting with the energy business. Our mining business saw a 39% decline in adjusted EBITDA. This was largely due to lower export coal prices, higher external coal purchases, and higher cash fix costs, coupled with safety incidents and related operational challenges experienced in the second quarter of our 2024 financial year. Despite these challenges, we achieved a 6% increase in productivity since the prior period. Our productivity guidance remains between 975 to 1,100 tonnes per continuous miner per shift. However, due to our recent challenging performance, we expect to achieve this in the lower end of this guidance range. Adjusted EBITDA of our gas business was down by 19%. Our gross margin percentage decreased mainly due to the high cost of gas, driven by the weaker RAND dollar exchange rate. while our selling prices in South Africa remained flat. This was partially offset by higher external sales in South Africa and higher gas production in Mozambique from the additional wells coming online. For this segment, we expect the volume guidance to remain between 113 to 119 billion standard cubic feet for 2024, in line with previous market guidance. In our fuel segment, adjusted EBITDA decreased by 1%. Liquid fuel sales volumes were 1% lower, whilst refining margins increased mainly due to higher production, improved product yield and lower cost of crude. This was negated by higher operational costs. Secunda Operations is expected to meet guidance of between 7 to 7.3 million tonnes for the year, and our South African liquid fuel sales volume is expected to range between 51 to 54 million barrels. As mentioned by Fleetwood earlier, RX GTL Trains 1 and 2 are offline. Our second half of 2024 performance will thus be further impacted and we expect the utilization rate for the year to be between 50 to 60%, slightly below the previous market guidance of 65 to 75%. Turning then to the chemicals business. Chemicals Africa saw a 44% decline in adjusted EBITDA compared to the previous period, mainly due to lower sales prices and a constrained supply chain. This was partially offset by higher sales volumes, which are mainly attributable to the Secunda phase shutdown in 2024 relative to a total shutdown in the previous year. In Chemicals America, Adjusted EBITDA increased by more than 100% compared to the previous period due to higher sales volumes and improvements seen in ethylene and derivatives margins as feedstock and energy costs reduced. Cash fixed cost was lower despite inflationary pressures. and the weaker RAND dollar exchange rate. Strict cost management measures and lower spend on maintenance and repairs in Lake Charles contributed to this decrease, noting though that maintenance spend was higher in the previous period, partly due to the fire that occurred in our Ziegler alcohols unit. Chemicals erasure adjusted EBITDA decreased by 84% compared to the previous period. Margins were largely impacted by continued low market demand and higher pre-war energy prices. Against the backdrop of challenging macroeconomic environment and weaker chemicals demand globally, we maintain our guidance ranges across all the chemical segments, with a recovery of demand expected in the second half of 2024. Delivery of our SASL 2.0 transformation program continues to reset our business in a volatile economic landscape with further initiatives currently being confirmed, which we will announce in due course. Looking at our performance for the first six months of the financial year, we realized R4.1 billion in net sustainable cash fixed cost savings towards a full-year target of over R8 billion. We also saw a R3.2 billion gross margin improvement, progressing well towards our revised target of more than R7 billion. It should be noted that the benefit trend of some of these initiatives are not linear, where the gross margin benefits in particular are often stepped up in the second half of the financial year. The progress on both cash fixed costs and gross margin are also measured against our increased 2025 targets. These targets were increased in August 2023 as we intensified our business reset and will amount to an additional R4 billion in annual EBITDA enhancements by FY25. We continue to also successfully track on our capital expenditure and working capital targets. During the remainder of this year, we will continue to mature our pipeline of initiatives. These initiatives include but are not limited to the optimization of our portfolio, continued improvement of maintenance processes, and optimization of third-party spend. Given the half-year-end progress shared today, we are confident that we will achieve these SASL 2.0 targets. We continue with our efforts to apply disciplined capital management in the prudent capital expenditure to maintain, transform and grow our business. Our maintain and transform capital expenditure for the half-year of R16 billion mainly includes fee capital spend on the PSA project, which remains within budget and on schedule, and the Secunda operations phase shutdown. We see increasing capital spend consistent with 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 Sasselberg Green Hydrogen Pilot Project. The total capital spend of R16 billion tracks within our market guidance of capital forecasted between R33 to R34 billion for the financial year. Although this is aligned to our SASL 2.0 target range, we continue to apply further focus to optimize capital expenditure. In conclusion, let me walk you through some of our key capital allocation priorities in the near term. Our capital allocation framework is underpinned by two pillars. First order allocation enables us to prioritize, maintain, and transform capital, which ensures that we run sustainable operations and deliver on our 30% greenhouse gas reduction target by 2030. Within the first order allocation, we prioritize debt reduction And under our current policy, the current dividend policy rather, the payment of dividends is linked to core headline earnings per share. Second order allocation focuses on expensory growth, additional sustainable initiatives, and or then additional shareholder returns. This framework remains relative for SASL during our reset phase of the strategy. There are a few key focus areas which are prioritized to strengthen the balance sheet, namely, firstly, the step up of free cash flow generation. We will prioritize initiatives that will increase cash generation by our operations, reduce operational costs, and deliver SASL 2.0 savings, which includes strict working capital management. The delivery of SASL 2.0 is critical for further cash unlock. Without the success achieved through the SASL 2.0 program to date, our free cash flow generation would have been in a far more unfavorable position. Secondly, the deleveraging pathway is a critical priority for us. A liquidity headroom of nearly $5 billion is still above our target to maintain liquidity in excess of $1 billion. We have also optimized our debt maturity profile through the successful refinancing of our near-term debt maturities, which is important given the current macro volatility and market uncertainty. Lastly, prudent capital allocation. Intensifying our disciplined approach to capital allocation and further refinement of the emissions reduction roadmap are key levers for this area. Now, regarding our dividend policy, we are conscious of the considerable recent disparity between core headline earnings and cash flow. To address this disparity, the Board is considering a revised dividend policy to better align shareholder returns with the cash flow generation of the business, and we undertake to announce an updated dividend policy at the full year 2024 results. In consideration then of an interim dividend for the period, The two rand per share interim dividend reflects a balanced consideration of our continued confidence in the cash flow generation of the business, whilst recognising other factors such as the continued external and internal pressures and risks on SASL. Thank you for listening, and as I hand back to Fleetwood, perhaps just a quick word of thanks and farewell. John F. Kennedy noted that efforts and courage are not enough without purpose and direction. And Fleetwood, you have certainly embodied this. Thank you for your incredible commitment and leadership to SASL over the last 40 years, especially in bringing stability and purpose when the company most needed it. We wish you well and back to you to conclude.

Thank you, Andre. In the last few slides, I will cover the highlights of our societal contributions, progress made on our 2030 greenhouse gas reduction pathway, and our key focus areas for the coming months. The value generated by our Secunda facility alongside our Susselburg site contributes materially to South Africa's economy and society, from making everyday products to critical value chains such as agriculture, chemicals and mining, while also delivering substantial socio-economic contributions. A recent SASL commissioned study confirmed that our direct, indirect and induced employment contribution is in the order of 500,000 people. We contribute around 5% to the country's gross domestic product or GDP and also remain one of the largest corporate taxpayers. During the half year, We invested over a quarter of a billion rand globally in our communities through social impact programs spanning education, skills and employability, health and infrastructure, environment, sports development, local content and volunteerism. Our focus preferential procurement has grown 17%, achieving R21.5 billion spent with black-owned businesses compared to R18.4 billion the previous period, thereby allowing us to surpass the South African government's target by a good margin. At SUSL, we pride ourselves in being pathfinders, continuously seeking out novel ways to realize sustainable socio-economic benefits for our communities and broader society. Our diligent efforts ensure that the program we develop and execute continue to deliver meaningful outcomes to mitigate the scourge of youth unemployment, improve access to quality education, and reduce poverty, among other pressing societal needs. Some examples include Bridge to Work, a skills development and employability program which will see over 110 beneficiaries graduating from various technical programs in the next six months. Through this program, we are partnering on projects that could potentially provide biomass feedstock required as part of the pilot to replace coal in the boilers in Susselburg aligned to our emission reduction roadmap. This includes a pilot for farmers from the IFEPE program being coached and mentored on growing Solaris and employing 200 beneficiaries to harvest and process invasive and alien plants as biomass feedstock. Improving access to quality education remains a core focus area of our social impact program. We invested over R88 million during the half year, supporting some 800 educational institutions across our host communities in South Africa, Mozambique and North America. As part of our focus on community health and service infrastructure, we are reducing the impact of load shedding and have already installed solar power at nine clinics in Metsimaholo local municipality in the Free State. We remain committed to a sustainable energy transition for SASL and are working hard to refine our roadmaps to 2030 and beyond. We share a mutual interest in South Africa's energy transition to a low-carbon future and acknowledge our responsibility in enabling this transition while remaining a key pillar of the economy. The desire for urgency is understandable, but this sometimes ignores the imperatives of balancing all stakeholders' needs. Environmental protection, sustaining our socio-economic contributions and remaining profitable. Our environmental, social and governance focus is premised on striking a balance between people, planet and profit. Our greenhouse gas reduction journey is progressing well, and we are forging ahead on a number of fronts. The levers to achieve our 2030 target are unchanged. Integration of renewable energy, transitioning away from coal as a feedstock, and greater energy efficiency across our operations. In addition, we are also moving ahead with other initiatives and projects for our longer-term pathways to get to net zero by 2050. There are a few milestones I wish to highlight. Last year, we announced the conclusion of a significant tranche of our renewable power purchase agreements, representing more than 50% of our commitment of 1,200 MW for Secunda. Approximately 498 MW of this first tranche has reached financial close, with a portion already under construction. Together with our IPP partners, this is a major achievement in light of the recent regulatory changes for renewable energy grid allocation in South Africa. The 69-megawatt Missenga wind farm is far advanced in their construction phase and expected to come online before the end of this financial year, delivering 69-megawatt of renewables to Susselburg. Our 3 MW Susselburg solar PV plant is also contributing renewable power to the Susselburg grid. We are exploring options to progress the second tranche of our renewable power to meet our target of 1,200 MW by 2030, leveraging lessons learned from execution of the first tranche. In Europe, we continue to leverage renewable energy at most of our facilities. Our boiler turndown strategy is dependent on the outcome of the Air Quality Compliance Clause 12A appeal relating to our sulfur dioxide emissions in Secunda. This decision is with the Minister of Forestry, Fisheries and the Environment and the final decision expected next month. The implementation of the Integrated Air Quality and Greenhouse Gas Reduction Roadmap results in a 30% reduction in sulfur dioxide emissions on a load base, further reductions in particular matter and nitrogen oxide emissions, and significantly more health benefits to the surrounding communities. Execution of energy efficiency projects on our various sites are progressing well and we are investing innovative solutions to incorporate lower carbon steam options such as green steam into our facilities. Feedstock transition remains the most controversial lever of the plan as this could potentially result in lower production from the Secunda facility if we are unable to secure additional carbon feedstock to replace the coal step-down by 2030. In August 2023, we indicated that this could be as low as 6.7 million tonnes as a worst case, without mitigation measures, which triggered an impairment write-down of the Secunda liquid fuels refinery at that time. Let me reiterate, this is not our base case. I will unpack more detail on the next slide. Alternative feedstocks means that we will continue to use transition gas and gradually progress to sustainable sources of carbon once they become available such as biomass. My earlier update on our Mozambique project confirms that we have sufficient gas for the greater part of the decade to be able to maximize production from Secunda in the near term and will continue to develop options for further extensions to our gas supply beyond 2020-30. The 25% reduction in coal will be achieved through a combination of boiler turndown and gasifier turndown, with the majority of the reduction attributed to boiler turndown. This means that the alternative source of carbon required to supplement production is not equivalent to the full 25% coal reduction. More broadly, we have recently commenced a study in partnership with the South African Council of Geoscience on carbon capture and sequestration to explore viability of this technical solution in South Africa. In line with the need for alternative carbon feedstock sources, we are planning to test biomass as a co-feedstock to coal later this calendar year to understand the technical viability and scalability of biomass in our facility. If successful, this opens up a range of opportunities for the integrated value chain, which can be further explored. The journey is complex and we are committed to prioritizing an affordable and sustainable energy transition for our business. We have also to consider our commitments to today's energy needs as well as the collective interest in South Africa's just energy transition. We need to strike a reasonable balance on environmental protection, socio-economic contributions and remaining profitable. The recent write-down of the Secunda liquid fuels refinery has sparked a fair number of questions and criticism from a broad range of stakeholders, which is premised on a potential low road outcome of a lower production output by 2030 to meet our 30% reduction target. I want to spend some time taking you through the key drivers of this low road outcome and why we firmly believe that this is not our reality. Last August, we evaluated our emission reduction roadmap reference case against the backdrop of no further investment in LNG and other changes in assumptions, which then resulted in a lower production output from Secunda post-2030 in order to meet our 30% greenhouse gas target. It is important to note that this reference case did not account for some of the medium-term levers we are currently progressing, like destoning, and assumed no benefit from these levers between now and 2030. We have done extensive modeling to confirm that volume restoration is underpinned by coal quality and that destoning is the enabler. The reality is that we will be implementing a destoning solution to address coal quality together with additional coal supply options to maximize our production rates from Secunda between now and 2030. With these medium-term levers in place, the potential step-down in production is less significant at approximately 7 million tons to achieve a 30% GHG reduction. It goes without saying that the Secunda value chain must be profitable and optimized for costs and capex commensurate to a production volume output at this level. However, there are several value unlock levers to be progressed beyond 2030 which could uplift production to higher levels. Sourcing transition gas and sustainable sources of carbon is a key lever to restore production volumes, but it is not needed to achieve a 30% greenhouse gas reduction. Coal quality remains important, as well as the sourcing of alternative affordable feedstock such as biomass and green hydrogen. More renewables integration, energy efficiency and green steam are all additional levers which can unlock more volume depending on the market demand for fuels in later years. Understandably, our emission reduction roadmap is not without risk. There are some factors which are outside of SASL's control which rely on regulatory processes and decisions and global supply chains to progress. We are partnering and working on mechanisms and alternative plans to mitigate uncertainties as we continue to work to transition towards a stable and sustainable business. In closing, since these are the last set of results I will present as Chief Executive, I thought it might be useful to share a few brief reflections on the past few years. The initial priority was completing the Lake Charles project and bringing all the units online. While our ramp-up of the remaining specialty units is currently hampered by the weak chemical market conditions, I am confident that this facility will be profitable again when the cycle returns. Since then, macro factors have featured very prominently. First, the unique disruption of COVID. Then the fallout from the Russian-Ukrainian war for global energy markets and the impact thereon. And all the while, in South Africa, the deterioration in some crucial national infrastructure services, notably electricity and transport. Of course, these challenges were not uniquely faced by SASL, though it is fair to say that few businesses were as exposed and impacted as we have been. Clearly, these macro challenges have affected performance, as today's figures show, but as you reflect on these figures, I would leave you with three thoughts. First, there is no attempting by me or SUSL to pretend that we are simply the victims of challenging macro factors. Clearly, there have been issues within SUSL's own control where we should have done better. These would include our safety performance and some of the operational challenges we have faced across the business. Second, the macro challenges have forced us to improve the overall efficiency of SUSL. SUSL 2.0 still has some way to go and to run, but I'm confident in saying that SUSL is a stronger and a more resilient business today than it was in 2019. Last, but certainly not the least, SUSL has continued to make progress in its goal of transitioning towards a less carbon-intensive business model. This is the central strategic challenge we face and our success in meeting this challenge has enormous implications for all of our many stakeholders. Our reset, transform and reinvent strategy was developed and now in execution. We are doing a huge amount of good work across a number of fronts and I'm confident that we will see the dividends of this work in the years ahead. I introduced a nantra at the start of my term of realism, focus and delivery. This has underpinned all my plans, targets and engagements both internally and externally. I have used this to course correct in the face of challenges and unforeseen events, and I hope that this continues to serve Team Sussel long after I depart. In closing, I would like to thank Team Sussel for the privilege I had to work with you for 40 years. Your hard work, grit, and dedication are reflected in our achievements and in navigating all the obstacles that we have encountered. I know that many challenges remain for SASL, but I'm confident that we have the capabilities, the resilience, and the will to find solutions and will continue to do so under Simon's leadership. This concludes our results presentation for today. Thank you for watching and listening. We will commence with a question and answer session shortly. Thank you.

Good morning and welcome to this question and answer session for SASL's 2024 Interim Results Announcement. With us today in the room are other members of SASL's Group Executive Committee, in addition to Fleetwood and Handre who presented earlier this morning. To my left we have Simon Beloy who is the EVP of Energy Operations and Technology as well as the incoming CEO. Hermann Venelt, EVP of Mining, She and Risk, and Procurement. On my right, Vujo Kajla, EVP of Strategy, Sustainability, and Integrated Services. And to my far right, Brad Griffith, EVP of the Chemicals Business. Also participating online, we have Charlotte McQuenna, EVP of HR and Stakeholder Relations, as well as Priscilla Mabalane, EVP of the Energy Business. Your questions can be posted online via our online streaming platform. On the right-hand side of the screen, you should see a dialogue box which allows you to type in your questions. Alternatively, you can also dial into our Chorus Call link where you can voice over your questions once prompted. I will be switching between the two platforms to give everyone a fair chance to ask their questions. Thank you. We'll now commence with a few of the online questions which are coming through the platform. The first question or theming of questions relates to the dividend announcement. I'll start with those, Henry, if that's okay. We have a question from Adam in Kambuli from Allocated Capital. Can you take us through how you reached a dividend of two rand per share? This seems to be out of bounds with the indicated dividend cover in the capital allocation strategy. Similarly, also from Izak Vaneka from Mergence, why not link the dividend policy to free cash flow rather than earnings?

Thanks. Thanks, Tiffany. So I think important to note that the current dividend policy, as rightly pointed out, links our dividend payment to dividend cover based on core headline earnings per share. And I think the feedback that we've seen and comment passed by analysts is, of course, that there's a significant disparity between core headline earnings and the underlying cash flow generation of the business. And I think to that extent, which links to Isak's question as well, why not link dividend the dividend policy then to free cash flow. I think then what we've noted is that we are currently reviewing the dividend policy, so we will announce an updated dividend policy at the full year, and I think that will then be very clear on a link, and kind of in most probability to cash flow, and I think we've got to be very specific which element of cash flow, and I think to that extent, important that we link this clearly to our capital allocation framework as well, which looks at cash flow before growth and dividends, and then also the ultimate cash flow generation of the business. So the question then, how do we get to two million, sorry, two grand per share in Interim dividend, given that we're currently reviewing our policy, to that extent, if one applies the old policy, and if we look at the policy looking at a 2.5 to 2.8 times cover for the full year, we, of course, don't do that in the interim. So, historically, we've had a cover around 3.5 times of core HEFs, imply around a 5 rand dividend, and I think to that extent, then, the question is why 2 rand? On the other hand, if one says that it should be cash flow length, given that we didn't generate any cash, we had a negative free cash flow of 6 billion rand, then we shouldn't pay a dividend. So in consideration then of what is a reasonable interim dividend, the board looked at kind of these two as bookends. And I think effectively to give that signal of confidence in free cash generation for the full year, we deemed a 2 rand per share interim dividend to as a vote of confidence in the free cash regeneration then of the business for the full year, with the promise then also of kind of paying out a full year dividend on the back of a revised policy. So the full detail of that will be shared in due course, but I think in the meantime we believe that a two rand per share interim dividend is the appropriate level to distribute cash in the interim.

Thank you, Andre. A few more questions around dividend and perhaps some more color on the new dividend policy from Faisal al-Azmi from Goldman Sachs as well as Benny Schrader from Momentum. Will you expand on the current dividend policy? Where are you going? And if you can please provide more details on the new dividend policy and how to think about the link to free cash flow generation.

So I think, Tiffany, it really links back to the comment I made that we are looking to link this specifically then to free cash flow. I think the feedback we've gathered from shareholders, analysts, and we'll continue to do that on the roadshow, is to effectively get clarity on what level of free cash flow. I think what we've seen in other examples that we've looked at, that sometimes it's not clearly communicated to shareholders, so the intention would be to clearly link it to a specific metric on the free cash flow statement that we can be tracked. To that extent, if I look at our current capital allocation framework, which I've outlined in the presentation, where we talk about first order capital allocation, we look then at free cash flow after sustaining and maintaining capital. That is a key aspect that includes, of course, tax payments and interest payments. So that would be, in my mind, an appropriate level to look at then to gain insight into what is the appropriate level of cash to allocate to debt reduction versus payment to dividends, but then also allowing sufficient capital to allocate to a second order capital allocation And that is where we look at the growth of the business, the reinvention of the business, the successful of tomorrow, but also additional cash returns to shareholders, whether it's buybacks or special dividends, as well as other organic and inorganic growth. And I think the intention then is to link it clearly to the capital allocation framework. But as I've noted, we'll share the full details at the full year.

Thank you, Andre. I'm going to shift here to the operational update. Two questions in this regard. Good day. Kindly elaborate on the expected impact of RX trains 1 and 2 being offline for longer than planned. That comes from Yamin Hussain at Laurium. And then also around the theme of the underperforming SOEs, there are multiple challenges, against the backdrop of it being 17 years since load shedding started, with 2023 being the worst year ever, and other SOEs like Transnet performing abysmally. Can you please provide advice on how you factor this into the performance going forward? This was from Chris Logan from Opportunity Investment.

Thank you, Tiffany, and thank you, Yamin and Chris. So the guidance we've given with respect to Oryx strain 1 and 2 was in the outlook that Andre provided, and the operating rate that we guided is now between 55% and 65% for the year. We are currently looking at the full scope of the work. have gone into the reactor system. We started to repair coils. That is ongoing. We believe that we will fully scope that out in the next weeks, but we believe that the whole program can be concluded in the next months before this half year ahead of us. So the work is ongoing, but it is factored in the guidance that we've given. So when I look at the load shedding and how we factor that in our performance, We are continuously engaging with Transnet with respect to the rail trajectories between Secunda, Richards Bay, Susselburg, Durban, and we have seen positive engagement there. Later today, we will announce the first collaboration between business and Transnet where we would be supporting rolling stock maintenance in the area. in the ammonia value chain, in the Sasselberg-Sekunda trajectory, and I hope this is testimony of the collaboration that we do bring to the table so that we can really mitigate the impact of rail woes that we've been experiencing over the last year. So that is one data point. With respect to the load shedding, if you follow closely the Business for South Africa, we have been indicating clearly and over the weekend again it was indicated by Business for South Africa that we believe we see the turning point and that we hopefully will get to a stage one or two by the end of this year and in the calendar year of 2025. that we will put load shedding behind us. And the main drivers is basically the energy availability factor of the ESCOM fleet of power generation, which we see as stabilizing and the plans starting to tick up. But moreover, the most important impact is the new renewable energy that is now connected to the grid and the impact of that will be really making us turn the corner as we also see further connections to the grid in this financial, in this calendar year and that's why that statement and outlook has been positioned as I've mentioned.

Thank you Fleetwood. I'm going to switch to Coruscall to check if there are any callers online. Operator, do you have anybody queued?

There are a few questions now. The first question comes from Chris Nicholson of RMB Morgan Stanley. Please go ahead.

Hi, good morning, Tiffany, Fleetwood, Honra, and team. Yeah, I've got a couple of questions about the balance sheet. So I think you've explained the dividend now, but just the questions are as follows. I think the first one is obviously the $1.5 billion bond maturity that you have said you would pre-finance last year. Just looking at this increase in net debt and where the cash positions are at December, it looks unlikely you're going to be able to pay that out of cash. Could you confirm what you're actually physically going to be paying that bond maturity out of? Will you be drawing down on the revolver? That's the first question. Second question is around working capital. Clearly, obviously, the working capital has normalized to some degree over this half, and it's obviously built, and that weighed on cash generation. What is the outlook from here over the next six months? It looks like it's at a bit of a more normalized range, but is there anything specific to think about? And then the final one is, I mean, if I look at SASL's balance sheet, quite clearly the international businesses are not making any money and the interest payments are all in dollars or predominantly in dollars. Are there any issues experiencing having to expatriate rands to pay down dollar debt and and also I guess to some extent maybe to subsidize or plug up some of the losses in the international chemicals business. Thank you.

Thank you, Chris.

Thanks, Chris. I guess I'll grab that one. I think in terms of your first question around liquidity and managing the $1.5 billion bond maturity coming up in March, as I've noted in the presentation, we've got over or close to $5 billion bond. dollars of liquidity, kind of predominantly cash and then the RCF. So we've got about 36 billion Rand facility or cash on hand. So in terms of the ability then to redeem that bond, we can constantly do that from the RCF. The RCF at the year end was undrawn. So we've got comfort to effectively then extinguish that bond through a drawdown of the RCF and cash, and of course further cash generation then as well, as we expect this in the second half. I think you touched on an important point on your second question. Can the working capital movement, if one looks at our free cash flow, generation, or certainly then lack of free cash flow generation in the first half, a big aspect of that has been a significant increase in the working capital that was built up from the low that we saw at the year end. And the question then rightly, what's a reasonable level of working capital? So we got to that 15.5% to 16.5% on an average basis throughout the year. But I've got to note that there's, of course, seasonality in the way that we can manage working capital. So not only do we look to manage that at a sustainable level throughout the year, but we do see the ability of the business to generate and release cash at the year ends as we're able to manage debtors, creditors, inventory that is more comfortable at the June year end. So to the extent that we've seen a significant drawdown on cash from working capital, There remains, of course, then the opportunity for the full year to release that, and that is a cash release lever that we do see coming through every year. I've got to also perhaps note, and I think to add in another aspect of it, is that one has to look, if we talk cash flow, that there is significant seasonality in our business. We saw a similar step up in net debt kind of last year from the full year to the half year. So, actually, very similarly, we are about $3.8 billion at the previous full year, also stepping up to around $4.5, $4.6 billion net debt at the previous half year. So, our net debt this year, as I've mentioned, is about 1% year-on-year, but it has similarly increased also from a year-end level of $3.8 billion. In terms of international business, I think kind of what is, of course, evident is that our – The predominant kind of debt currency that we carry is dollars. So about 95% of our gross debt is U.S. dollars denominated. So effectively then means that our interest charge is effectively then in U.S. dollars. I've got a note, and I did say that in the presentation, that about 95% of our cash generation today is up to the last period was from the South African business. But, of course, a big part of that is denominated in U.S. dollars to the extent that we've got significant exports, especially from our chemicals Africa business. So we do generate dollars also from our South African assets. And to the extent that there's a mismatch between rand and dollars, we've got the ability through the Reserve Bank allowances to export and manage our dollar exports. or RAND repatriation and move of dollars to pay those finance charges. So we don't expect to experience any issues in managing that. A further aspect in terms of just managing that apparent mismatch then between RAND and dollar of course is also in our hedging policy where we use cap and collars just to make sure that we don't get caught out on extreme moves. of the Rand dollar exchange rate in managing this apparent discrepancy. Thanks, Stephanie.

Thanks, Chris. Thanks for your set of questions. Chris, can we move to the next caller?

The next question we have comes from Gerard Enkelbrecht of Apsa CIB. Please go ahead.

Thank you. Good morning. I've got three topics that I just maybe would like to ask you about. Firstly, on the gas reserves. You're talking about four new wells in the PPA operating. I guess my question is I'm trying to reconcile this with your reported reserve numbers in your 20F. Are you going to increase those reserve numbers or is this a faster depletion of the PPA? I'm just trying to understand. how four wells is going to affect the longer term in terms of the PPA reserves. Secondly, very quickly, you spoke in the BPM of difficult geological conditions in mining. I wonder if you can just maybe elaborate on that. Is this a long-term feature that we're talking about, or is this just some difficult ground that you're mining through? And then maybe if you can talk a little bit about costs. You talk about a 15% increase in SynFuel's cash-fix cost. Well, not SynFuel's, the fuels business cash-fix cost. And I presume it would be not too different on the chemical side of SynFuel's as well then. Maintenance and electricity you mentioned. I'm trying to reconcile that with your SATL 2.0 report. that you say you've achieved. So maybe you can talk around the cost increases in some fields. And then also you talk about mining, talk about increased security costs. So maybe if you can just elaborate on that. I'm just trying to figure out if this is a fleeting thing or is this also going to be an issue in the future. Thank you.

Thank you, Tiffany. I will thank you for those questions. I will start off with the wells that you mentioned, and I'm going to ask Priscilla to weigh in. Also on that, then the question on mining will give a high-level overview. Herman will help us to provide that. And then the cost question, I will ask André to elaborate on. Now, Gerrit, as you know, we have announced the decline of our gas reserve on the PPA field. And part of the, if you wish, the flow or the improved flow out of that reservoir, we had to do the in-full well drilling campaign and remediation. So that means to get the flow again to the potential of the existing PPA reserve, we had to do in-full well drilling. Now, this is a result of three wells we've drilled and one we've remediated that started to flow out of the PPA reservoir, and that restored the volumes that we've seen historically in terms of a volume flow output from the PPA field over the last year, and that's also the reason why we could flow 10% more that was driven out. by our own internal needs as well as market growth. So with that, I'm going to ask Priscilla to weigh in on further context.

Morning, colleagues. Gerrit, thanks for that question. Just a few comments before I answer you specifically. You'll recall that we've articulated that reserves are accounted for on a P90 and also are only limited to social share and not the total volume that includes apartments. So when you look at our reserves at the end of the financial year on the P90, the three worlds were already accounted for because they considered the fact that most of the conditions were already met at a P90 level. If you then look at the year ahead, as in the financial year and FY2024, we expect that we will probably be revising our reserves higher, and the increase in the reserves will be expected will come from the PSA. During the year, I articulated that there are certain conditions that are still outstanding with regards to the PSA, and part of that is to ensure that we have the commercial contract signed between us and Mozambique. That is now in the process of being finalized, and that will be followed by ability to flow the volumes to South Africa. With that commercialization in place, we just see the reserves going up. Again, to reaffirm, we report on the plateau based on the P50, which then implies that what you see in that, there's a huge discrepancy that you can't reconcile as such. So in a nutshell, we should focus more on the resources because reserves are more stringent in terms of the SEC rules, as you've highlighted. And I hope that answers your question.

Thank you, Priscilla. We move then to Herman on the mining question.

Good morning colleagues. Good morning. Thank you for the question. From a mining perspective, our challenge is that due to a limitation of available pit room, we're finding it very difficult to currently mine at balance in our reserves between good reserves, reserves of medium quality, and then very difficult reserves to mine due to many lava intrusions into that reserves. So, what we need to do is we need to open up additional areas that have better quality coal. We are busy with an accelerated plan that entails blasting through some of these lava rock walls. It also entails establishing additional ventilation shafts so that you can get that balance between good reserves, reserves of medium quality and poor quality at a much more acceptable level than what we have at currently. At this point in time, some months we mine with only 10% to 15% of our sections actually in good quality of coal, and we need to address that. We're busy with that program. To address that, that entails improved drilling so that we've got better information of the geology underground so that we can have less surprises, and it also is including a an increase of the skills and of our teams actually mining stone work, the teams that do the drilling and the blasting to open up the areas and we're also accelerating the establishment of our ventilation shafts so that when you have these reserve areas open that you actually have ventilation to conclude or to continue with that mining. It's not a short-term solution in the next three to six months. It's a solution that we're working hard on, and the benefits you will only see in the period 12 to 24 months from now. Maybe just from a cost perspective, some of the costs that we've seen are a specific increase at mining related to security costs. We do experience from time to time a community unrest, not specifically aimed at SASSL or SASSL mining. But we are targeted from a sassel mining perspective to act as a facilitator between the parties. And then to get our attention, many of our infrastructure is targeted. And we have appointed additional security to help us to look after that. And we have also, from time to time, we have security teams underground to address challenges that we experience with cable theft. Thanks, Chair.

Thanks. I think let me pick up also just the question around the broader cash fixed cost, also referencing the cash fixed cost increase in the fuels business. So Gerhard mentioned the 15% increase in our fuels cash fixed cost. I think important to note that in terms of our integrated value chain, there's an allocation of cash fixed cost between fuels and chemicals Africa. So a big part of the 15% increase has just been To the extent that we produced more fuels volumes relative to chemicals volumes, that there was a reallocation of cash fixed costs there. So a big aspect of that came through just that. And, of course, that will vary according to the slate mix in those segments. Other aspects have been kind of above inflationary increases in aspects such as energy costs. and other aspects that relates to maintenance. And I think perhaps just more broadly then, the SASL 2.0 recon that we do, so as you track, The performance of SASL 2.0, not only in the segments, we do the same, but also on the group as a whole. And I think to that extent, and I mentioned that in the presentation, although we've recognized a 5% increase in cash fixed costs year on year, just the absolute numbers in the income statement, if one splits out, and we've, of course, seen an increase, a significant depreciation in the RAND, which on top of high inflation in the non-RAND environment, we've seen then a translation impact. If we split out that, we split out inflation and one sort of aspects, we've actually reduced cash fixed costs by 1%. And I think if we go into the individual components... There are kind of proof points to that. For example, in our headcount, we've reduced headcount by about 500 period-on-period aspects, such as third-party spend. Kind of there we also can show examples of to make sure that it's not just slides and promises, but that it comes through in the cash fixed cost and in the P&L and in the cash flow statement. I think importantly, and to the extent that the question is can we do more, We have seen sort of the pressure in our business at the back end of last year. So we have increased our cash fixed cost savings targets by a further 2 billion rand. So you would see the 4.1 billion run rate that we've generated, savings we've generated for the half year. So that's another, but another, so 4.2 is a half year. 4.1 rather, 8.2 if you analyze that, that is above the 7 billion that we've shown at the full year. So we've generated another billion rand of cash fixed costs savings, and we will continue that focus and announce further initiatives and successes as we deliver those. Thanks, Gerhard.

Thanks for your questions, Gerard. Moving back to the online questions, I know there are a few more callers queued on Coruscall. I'll get to you in a few minutes. A theme of questions from Irina Schulenberg from Old Mutual Investment Group, tagging on to cash flow and cash optimization. One half free cash flow is an absorption of $6.5 billion. Can you comment on what levers exist for half to generate cash or step up cash flow? You also speak of optimization of the portfolio. Is this the cash and cost management or does it include a wider review of ops which may be deemed non-core? And is this all part of the group's agenda to pay down debt? I think that's a similar theme of questions, Andre, so perhaps we can address that.

Thanks. Thanks, Irina, for that question. So I think it's important to note in terms of the first half versus second half that, as I said, that there is some seasonality. So to the extent that we have at the phase shutdown in the first half in Secunda, we do typically see a stronger second half. And I think both Fleetwood and I agree. have signaled that we've got confidence in the ability of Team SASL to really take on that task again to generate stronger cash flow in the second half. So I think in terms of operational performance itself, it typically sees a better second half. The other aspect, as you note, is that working capital, and I think to Chris's question earlier, kind of the 6.5 billion negative cash flow, that we've seen in the first half, 7.7 billion rand of that has been absorption of cash from working capital. So if we exclude that, certainly still a reasonable or some generation of cash flow. I certainly wouldn't claim we'd be happy with just around a 2 or 3 billion rand free cash for generation from the business. There are also other aspects that is seasonal. So to the extent that we typically see higher cash payments of tax in the first half, so that to an extent the expectation is in the second half that we'll see lower payment of cash tax as well. So there are some factors, but I think more importantly is just kind of the step up that we are pushing in terms of just operational performance. As Fleetwood said, there are certainly areas that we are not happy with. in the performance of the first half, and you've got the commitment from Team Sassl, really, to really pull this together for the second half.

Thanks, Andre. Another theme of questions coming around, portfolio optimization.

I did miss that also from Irene. I did ask about portfolio optimisation, so I didn't purposely dodge that. I think I did note other aspects that we are looking towards in terms of kind of further ways that we can manage cost. I think optimisation of the portfolio, of course, to the extent that there is a benefit in cost or cash release. That is a part benefit that we could see from the optimization of the portfolio. But we do, in terms of our capital allocation framework and the rigor that we've got in our process, To evaluate the whole of the portfolio, we do go through continuous asset reviews of underperforming assets. So to the extent that that will unlock value, that's the primary driver of value and risk, that is the way that we look at our portfolio and specific assets. Does that still fit within the portfolio? Is it worth more if we sell it? Can we maintain it? Do we drive further cash optimization if we decide to keep it in the portfolio? So those are all aspects that come into it. There's certainly no need to sell assets to generate cash. I think where there's the ability, for example, of selling an asset and it releases cash, that could be a way to address it as well, but that would not be the primary goal here. In terms of an asset portfolio, it is more to optimize the cash generation of assets to realize value.

Thank you, Andre. I think you've covered quite a few questions on asset sales and the possibility of further deleveraging through asset sales, both from Peter Kromberg at Merger Market, Ray Stain, as well as Sasha Nklanka from Bank of America. So thanks for that. I'm going to shift gear a little bit back to operations. There have been a few questions around the coal destoning project and when this is expected to receive or achieve FID. That comes from Thabo Maloy from the fund. Also questioning if there are other measures aimed at improving coal quality, and if so, how far along in development are they? I think, again, from Sashank Lanka from Bank of America, update on the FID CAPEX for destoning as well. Flitord, if I could direct those to you.

Yes, thank you. Thank you for those questions, Thabo and Sachang. So the de-stoning project is maturing through its stage gate decision process. We have indicated that we will focus on a final investment decision. in Q4 of this calendar year, so that's towards the end of 2024. The critical path here is our licenses in terms of environmental procedures, et cetera, and that's why that is driving the schedule. Back at the ranch, we are developing the project at the best balance between schedule and cost, and we believe that we will only be in a position, Shashank, also to indicate to you what the capex for that is once we take the FID decision, as is customary when SUSL invests in large projects. We will then make that capex magnitude available. With respect to the other items that we are focusing on in terms of how do we address coal quality, we are, and I've indicated this integrated center of coal management in terms of blending that we have established in Secunda operations and mining in a close collaboration so that we, in time, get the right blending stream from the purchased and the five collieries that bring the coal into the facility, and that remains a key way of addressing coal quality and the right mix of coal into secundary operations.

Thank you for that. I'm going to switch to a question on the Regulatory challenges from David Fraser at Peregrine. His question is, is it not time to have an honest conversation with the Cabinet of South Africa to articulate the full economic and social implication of full compliance with the current climate change trajectory so that all parties can either accept and sign off on these implications or look to revise the policy to potentially mitigate some of those impacts? Yes.

I'll start off and I'm going to ask Simon also to weigh in on our collaboration and engagement. So, suffice to say, and I've mentioned it very clearly in my presentation today, that we are engaging with all stakeholders that is part and parcel of this landscape in terms of the issues we need to progress and to provide context and understanding of the issues in much more detail to what the implications are of doing nothing, doing something, or maybe doing the right thing for the South African economy as you alluded to. So all of these factors will continue to play out, but maybe, Simon, you've got other additional impact perspectives?

Thank you, David. I mean, that's a very valid question. We We see the South African government as a partner, as our country also has, I mean, 80% of its energy as coal as we stand. We both have to embark on this, what you call a just transition. So I... I wholeheartedly agree with you that we will continue with the discussions so that we can both have an outcome that will ensure that we can transition both SASOL and the South African economy, not just to mention. So thank you for that, and we'll continue with those engagements.

Thank you for that, Simon. I'm going to switch back to chorus calls. There are two more questions queued. Over to you, Operator.

We have a question from Adrian Hammond of SVG. Please go ahead, Sam.

Good morning, everyone. Yes, I have three questions. Firstly, it's pleasing to note that you have upped the post-2030 sinfields production to 7 million tonnes from 6.7. This obviously hinges on the destoning, and when that FRD comes through, Will you reverse the impairments you have done so far? If you can just give us some color on that and how you think about that. And then secondly, I assume also the profile also hinges on the carbon tax you've assumed. And that is, of course, still somewhat up in the air. If you could just remind us what you've assumed and how you're progressing potential discussions with government on that front. And then lastly, just want to understand your gas plateau. It's also pleasing to note there that you've extended the potential plateau to 2030 and beyond. Could you reconcile that with your ability to continue supplying your customers, which you've earmarked to end in 2026? Thank you. Thanks, Adrian.

Thanks, Adrian.

I think the two questions with respect to the impairment and the tax, I'm going to ask Honora to weigh in on that. And then the one on the gas extension, Priscilla, if you can take that one.

Thanks, Adrian. So effectively, I think glad you noticed the update of and kind of just the indication that we've given that the 6.7 million tons beyond 2030 for sin fuels is, of course, kind of just the outcome of the blunt instrument of impairment. and that the focus for us is to get back to a reasonable production of 7 million tons. Effectively, as we've outlined in the presentation, kind of destoning is a key aspect of that, as well as coal quality. Otherwise, just to enhance our coal and other feedstock into sin fuels. So it's not just those levers. but as well as other aspects such as cost control, optimization of capital structure that will inform just the economics of that business, not only to 2030 and beyond. So to the extent that those are then an IFRS IAS 36 allows us to only include these enhancements in the assessment of an impairment, kind of yes to the extent that when these are in implementation, Adrian, kind of yes, they'll factor into the impairment calculation. But, of course, this is also impacted by aspects such as carbon tax, kind of market rates, exchange rates, around oil price. All those kind of will factor into it. So I can't categorically say kind of when we implement and successfully implement these projects, will they address the impairment, but certainly to the extent that they will benefit, it gives us confidence that we could kind of reverse the impairment. Just in terms of carbon tax then, we've not seen any change in our assumptions, given that there's not been any updates from government around carbon tax, other than the commitment then for allowances to stay in place until 2030. So to the extent that we've got clarity on kind of allowances remaining in place for hard to abate industries, we welcome that and we factor that into our model, but of course As we get further clarity on the level of allowances, that will then also impact the assessment of not only the impairment, but the viability of our business going forward.

Priscilla, can you come through on the gas, please?

Thank you. Just in terms of gas, what Peter highlighted is that currently our plateau remains at FY28. We are confident with some of the initiatives, including the TT5C discovery that we'll be able to extend the gas to FY30. That's going to take some time as we continue with the required investments to be able to justify and validate some of the underlying assumptions. Having said that, in our FY28-2030 that we're feeling confident with, We've also assumed that we will be exiting the gas market, including the MRG, as part of the assumptions. What I want to highlight as well is that we've been very clear, and we've engaged with customers before, that when we went out to the market to source gas and we came back with the LNG, which was not affordable for our operations, we engaged with customers and highlighted the need for them to commit the commercial contracting to enable an offtake. And at this stage, we're encouraged by the process that the Department of Trade and Industry is actually undertaking to be able to ensure that security of supply for the country is actually provided for. At SASR, together with the IDC, we are... providing support. We are also engaging with customers. But at the same time, we are looking at different supply options to extend that plan for customers, but also for our future needs for the country with new customers that might require that gas. Our encouragement to the customers is to ensure that they do their own economic modelling and then they confirm as well the viability of their businesses with that future gas aspiration and so that we can accelerate the security of that LNG. It is in the best interest of the country and that of SASOL that we find an amicable and a balanced security of supply for all in terms of all the options. But as we stand today, the opportunities in Mozambique are very limited and will be focused more from ensuring that we can preserve SASOL's operations as well in the process.

Thank you, Priscilla. A similar question received from Chepo Mongkawai from SABC News in terms of the rationale to just discontinue supply of natural gas. So thank you for addressing that. A few more questions on the operational front, one from Tabela. Bitsa at Nedbank, your business is currently facing challenges from all fronts. How does management prioritize what to focus on to steady the ship? And also, where would you say you see the easy wins over the next six to 12 months? Similarly, a question from Chris Logan at Opportun Investment. The maintenance program that you mentioned to assist Transnet, does this mean SASL will be burdened with a new category of costs? And if so, can you please provide some color on the quantum of the cost in assisting Transnet? Thank you.

Thank you, Tiffany, and thank you for those questions. I'm going to ask Simon to weigh in on the first one, and then with respect to the Transnet question and the rolling stock maintenance, I'm going to ask Brad to reflect on that.

Thank you, Fleetwood. Thank you, Thabo. For the next six months, I mean, of course, the first priority has to be business performance, focused on, I mean, our operational stability across all fronts, our performance in the sales and marketing to optimize on the gross margin, and most importantly, to make sure that you can manage the cost, because we have to make sure that we re-baseline the cost for where we perform. So that's going to be key in all aspects of our business to contain and make sure the business will continue to generate free cash flows. So the second half, like Andrew already alluded to, we've got most of the maintenance programs behind us, so we will focus on cash generation as well.

Thanks, Chris, for the question on the agreement with Transnet. We'll make more details of that clear during the course of this week. But maintenance costs have always been covered in our contract rates, and this new agreement that Fleetwood shared that is an emerging partnership allows us to have clear views of those costs and also for SASL to participate in the maintenance of the rolling stock. We're very excited about it.

Thank you, Brad. Thanks for those questions, Adrian. Moving on to the next caller. Cue down chorus call.

The next question we have comes from Alex Comer of J.P. Morgan. Please go ahead.

Hello, can you hear me?

Yes, we can hear you. Go ahead, Alex.

Yeah, so just a couple of questions from me. Okay. Since the year started, we've had this situation in the Red Sea, which has pushed up chemical prices in Europe. Gas prices have come down. So just if we could look at where you are, kind of run rate in terms of profitability in Europe, maybe give me an indication on that. And then secondly, also similar in the US, obviously the natural gas price and ethane price has fallen there. So just wondering what that's done on a kind of month-on-month basis. If you give me some indication of where we are, that'd be helpful. And then also... Look, you know, when I look at this slide 24 with the tail down from 7.5 or the recovery to 7.5 and then down to 7 or down to 6.7 or whatever, you've got a great big question mark there after 2030. And that question mark, you know, aspirationally seems to show volumes going up. You know, to meet your 2050 target for net zero, that would obviously imply a fairly significant level of decarbonization progress, which is likely to cause, you know, a large amount of capex to be required, particularly, you know, and that capex spend is going to have to be put in in the not too distant future. So given that you've just delinked your dividend payment from earnings and put it onto cash flow, I mean, do you think you'll be paying any dividend at all post-2030, given the aspirations on the decarbonisation and the likely cost that that is going to put on your cash flows?

Thank you, Alex. Thank you, Alex. I'm going to ask Brad to weigh in on the current changes we see in Europe and in the US in terms of just directionally where we see feedstock is developing towards. And then post-2030, I'm going to ask Andre and Simon to weigh in on those questions and plans.

Thanks, Alex, for your question. Yeah, you're right. In Europe, with the disruptions in the Red Sea, we have seen some material prices stabilizing or firming up. I think the big issue that we've seen in Europe that we've commented on is the weak demand. We've seen some slight improvements as we go into this first calendar quarter. I think many of our customers are waiting to see how March turns out before they really start to see or say whether they see the recovery continuing on this basis or whether it's going to be later in the year. But you're right, energy prices have moderated quite a bit, and so that's allowing us to at least stabilize our margins. And as we've guided, we continue to work to manage our operating rates during this time of demand recovering. The U.S., we still see low energy prices, so that is allowing us to – to have competitive costs. And, again, we still see the U.S. consumer resilient, so we still see a lot of improvement in demand. I think, you know, as we go through the year towards the elections, I think it will be important to see how the narratives evolve and whether that changes any movements on interest rates and what that does for overall demand. But we do guide a second half that we do believe we're going to see the fruits of that recovery starting to come through. It's not going to be rapid. But we expect that we'll see it quarter over quarter starting to improve. And we stick with our volume guidance.

Thanks. So, Alex, just to get to your question around the 2030 ERR and the emissions roadmap to 2030, I think just a reminder that 2030 is a commitment for us in terms of the 30% reduction to 2030. But beyond 2030, 2050, we're still talking about a net zero ambition. And I think we've got to be clear that the path beyond 2030 is uncertain. We don't know what the techno-economics would be of those various levers, and we've listed on those share a number of aspects that we will consider towards that journey. And to the extent that we've got a clear capital allocation framework that will look at the benefits, the techno-economic benefits of each of these levers, we will advance and then pull them at the appropriate time. So in all times then, kind of manage our 2030 capital allocation as we've done now up to 2030, that we will look at what is the returns to our shareholders in kind of pulling these levers. So, for example, if it's biomass, do we get a green premium in kind of more expensive biomass to the business? If it's carbon capture, what is the cost of carbon capture relative to the production cost? And the penalties in terms of carbon tax. So all of those levers will be considered through a disciplined approach to capital allocation to value. And as I've outlined, we expect that the dividend then would form part of that capital allocation, first order capital allocation, transform the business first. pay the based dividend, and then in the second order, considering further cash returns to shareholders. And maybe Simon, you can just comment on some of these levers that we are investing some money in, in advancing the consideration of these levers as well.

Thank you, Alex. First to say that post-2030, we will not chase volumes at all cost. What we will first do is that we will first re-baseline our business to make sure that when you're running around 7 million tons, it's very profitable. We will have to baseline the cost across the entire business. We will do that. And that should allow us to generate cash. And that cash, we still have to follow our capital allocation framework. The key to growing volumes will be the introduction of sustainable feedstocks in whatever form into our business, whether it be electrons or biomass or whatever. We're busy with those studies, and we will engage you when the time comes. I think where we are, our mindset is not to try and decarbonize Okunda at all costs, but what we do believe is that the facilities that we have gives us a massive advantage to build something from, and that will continue engaging with you.

Thank you, Simon. Moving back to financials, a couple of questions on our debt trajectory. I'm going to direct them to you, Andre, from Munira Kava at Exchequer Fund Management. Can we get an update of the maturing debt and what is the plan for refinancing? Also on the debt theme, do you have any plans to transition more RAND-denominated debt in the structure from Anna Kuchina at T. Rowe Price? And then I think just a little bit of color around the major reasons for the discrepancy between core headline earnings and free cash flow generation. What are the primary reasons for this? Is the company highly capital intensive relative to the amount it depreciates on the income statement? And that comes from Thabo Malloy at the fund.

Thanks, Stephanie. Let me deal with the debt questions first. I think effectively we've touched upon that earlier in the refinancing question. The only debt maturity that we've got in the near term is a $1.5 billion U.S. dollar denominated bond. And to the extent that I've highlighted the comfort that we've got in our existing liquidity to refinance that, we will address that. Kind of longer term, we will continuously look then to ensure that we've got the right balance between short-term and long-term kind of debt in our balance sheet, but also then to the question around the RAND denominated debt structure. I think it's reasonably obvious that a more balanced between debt that is US dollar denominated and RAND denominated is needed. At the moment, as I've highlighted earlier, about 95% of our debt is dollar denominated where 95% of our EBITDA is generated from South Africa. So to the extent that we are slowly and as we see debt maturities coming up, we've got the ability to then move dollar denominated debt to RAND denominated debt. We of course also have our domestic medium term note program that we've issued RAND debt. So to the extent that we find the appropriate optimization of the funding of capital through tapping the RAND debt pool as well. We will certainly do that. But perhaps just to note that historically we've not seen the depth of the bond market in South Africa deep enough to fund the extent of our balance sheet, so we will always balance the cost of the refinancing and the risk related to dollar versus rand in the refinancing of that debt structure. In terms of core headline earnings and in free cash flow generation, the big gap there, of course, is depreciation relative to sustaining capital. So we've seen that in terms of our annualized, if you look at our depreciation charge rate, around 16 billion rand when I shared our sustaining capital guidance of 33 to 34 billion. So there's a significant gap then that effectively the earnings kind of does not take into account the full extent of the cash that we are spending at the moment to maintain and sustain our business. Noting that there is an element, of course, of our PSA capital that's in there and, of course, also some of our environmental capital that is kind of pushing that sustaining capital higher than the normalized rate that we expect. Thanks, Stephanie.

Thank you, Andre. There is a question on safety. Fleetwood, can you perhaps elaborate on the safety challenges you experienced in Q2 leading to the 8% drop in mining productivity? What have you seen in Q3 so far, and how do you expect this to pan out in the second half? From Yandre Peterson from Fisio Fund Management.

Thank you so much, Yandre. So as I've mentioned, we have had impacts in the months of November, December, mostly safety related in the incidents that we experienced in the mining environment. And that did set us back. And I'm going to ask Herman also to weigh in on some of those challenges and also what we've seen now in Q3 so far in terms of the focus that we brought to bear.

Thank you Fleetwood, thank you Yandre. We've had two tragic fatalities at Sasfo Mining in quarter two, the one in October and the other one in December. The one was equipment related and the other one was related to a sidewall failure, so geology related. What happens when we have a fatality when we experience such a tragic incident, we actually stop our operations. and in many times you stop the operations of all sections that mine in that specific area, or if you find that it's a cultural element that contributed to the tragic fatality, you will stop an entire colliery to retrain and re-engage with your people. So the consequence of that is that once you experience a fatality, you have a significant impact on your production, which is significant. which is okay, because something is wrong and we need to fix it. What we also do is, from a caring perspective, we make sure that we look after the families, but we then have a memorial with the family, with that entire colliery, which also brings about, which all our employees are allowed to then attend, and that also has an impact on on productivity. What we also see from time to time is that you have incidents that has potential serious implications although it didn't lead to injury or harm but you will then also stop a colliery or a section and we also which we welcome have regular engagements and inspections from the DMRE that we see as a third and a fourth party auditing entity that helps us with the total objective view And they also from time to time decide that they see things that they're not comfortable with. We engage with them, we stop the sections, and we then go back to the DMRE before we start up these sections to give them an indication of what we've done. For the third quarter so far, we are seeing an improvement in our productivity from the low levels that we experienced in quarter two. And for February, we are seeing a return to the levels that we've seen in quarter one of this financial year.

Thank you very much for that, Kala Harman. I think I'm going to take one last question online, and then there is one more caller queued on the Coruscall system. The last online question comes from Nantla Nkuta at NetBank Private Wealth. We've seen peers lower some of the ESG targets in recent months. Is management open to the idea of scaling back some of the GHG targets with 2030 fast approaching? Sleeted, I'll direct that one to you.

Thank you for that question. I've a number of times emphasized that our targets are quite clearly published and they comprise areas that we're working hard on to achieve. And it is also a balance between people, planets, and profit, and that is an assessment that will be taking place continuously across going forward. And so if there is an area that we need to assess having regard to those factors, we will do that. If we can execute and those factors remains in balance, we will do that. So I think at this point in time, the plans are to assess and to make sure that with the targets and with our means, that remains in balance.

Thank you very much. Coris Cole, could we please have the last question?

The last question comes from Shashank Lanka of Bank of America. Please go ahead.

Yes, thank you very much for the questions, taking the questions out. Just one quick follow-up on my side with regards to the dividend. Andre, I'm just wondering how should we look at dividends for the second half of this year? I mean, it seems like the first half you based it both on what core HEPS would be and the fact that free cash flows were negative. So just wondering if we should use a similar mechanism while forecasting our dividends for the second half. That's the first part of the question. The second part is just, you know, when you spoke about your previous dividend policy, you gave us a net debt to EBITDA target of less than 1.5 times. Will that still be there when you link your dividend policy to free cash flows? Thank you.

Thanks, Sashank. I'm going to unfortunately keep you in suspense. I don't want to kind of run ahead of the board in terms of our assessment. I think to the extent, though, that I've noted that free cash flow would be and is considered to be a reasonable element to guide our performance, guide the debt, the dividend payout, So expectation for a full year dividend then should be based on our ability and our generation of free cash flow. So I think to the extent that I've committed that we will share this at the full year, kind of what percentage and at what level we allocate that, I think that unfortunately we'll have to wait and see. But I think likewise you make an important point that to the extent that the existing dividend policy talks about a comfortable net debt rate, to EBITDA level of around, we want it less than $3 billion, but we're aiming for $1.5 or lower, and that we want in absolute debt terms, we want net debt to be below $5 billion to pay a dividend. Those are also aspects that we will reconsider in terms of clearly then articulating an updated dividend policy. So at the moment, unfortunately, the only thing I can say is watch this space, and we'll provide a detailed update at the full year. Thanks, Ashank.

Thank you for your question, Sashank. With that, I'm going to wrap up the session. Unfortunately, we are out of time. Thank you once again for your participation in this interim results Q&A session. I do see a few more questions coming through. I will follow up with you after the session via email or call. Thank you very much. We wish you a safe and wonderful day.