Core Viewpoint - Sasol Oil and TotalEnergies Marketing South Africa won a legal judgment against Transnet, resulting in a payment order of R3.9 billion plus interest from Transnet to Sasol Oil [1] Group 1: Legal Proceedings - On June 20, 2024, the High Court of South Africa ruled in favor of Sasol Oil and TotalEnergies against Transnet, ordering Transnet to pay R3.9 billion plus interest [1] - Transnet has filed for leave to appeal the judgment to the Supreme Court of Appeal, which is currently under reconsideration, thus suspending the High Court's payment order [2] - In August 2024, Transnet initiated a separate action against Sasol Oil to recover R855 million, with the judgment still pending [3] Group 2: Settlement Agreement - On May 18, 2025, Sasol Oil and Transnet reached a settlement agreement, effective from May 23, 2025, after fulfilling all suspensive conditions [4] - Under the settlement, Transnet will make a net payment of R4.3 billion (exclusive of VAT) to Sasol Oil by June 30, 2025, resolving all disputes between the two parties [4]

Company Overview - Sasol leverages South Africa's coal mines and Mozambique gas fields through a fully integrated business model [1] - The company transforms low-cost feedstocks into high-value fuels, gas, and chemicals [1] Investment Potential - There are many positive aspects regarding Sasol that could indicate a strong investment opportunity [1] - The investment idea is centered around acquiring great companies at attractive prices [1]

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Investors with an interest in Oil and Gas - Integrated - International stocks have likely encountered both Sasol (SSL) and Exxon Mobil (XOM) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings esti ...

Sasol Limited (NYSE:SSL) Q4 2024 Earnings Conference Call February 24, 2025 2:00 AM ET Company Participants Tiffany Sydow - Vice President and Investor Relations Simon Baloyi - President and Chief Executive Officer Walt Bruns - Chief Financial Officer Victor Bester - Executive Vice President, Operations and Projects Sarushen Pillay - Executive Vice President, Business Building Strategy and Technology Hermann Wenhold - Executive Vice President, Mining, Risk Antje Gerber - Executive Vice President, Internatio ...

Group 1 - Sasol Limited (NYSE: SSL) has seemingly resolved recent civil unrest in Mozambique, which may positively impact its operations [1] - The figures from the Fuels and Chemicals Africa division are expected to align with the reported figures for 2024 [1] Group 2 - The analyst has a beneficial long position in the shares of SSL, indicating confidence in the company's future performance [2]

Industry Overview - The energy sector has shown resilience post-2022 supply shock, with the Energy Select Sector SPDR (XLE) increasing by 7.3% year to date as of September [1] - Growth in oil refiners has been a significant driver, benefiting from favorable spreads between oil and distillates, while explorers, producers, and equipment/services sectors have also gained [1] Geopolitical Factors - Geopolitical tensions, particularly between Israel and Iran, have significantly impacted the energy sector, with escalating threats of broader conflict [2] - Iran, a top 10 global oil producer, reached production levels of over 3.3 million barrels per day (bpd) in August, exporting about 2% of global supply [3] Oil Price Dynamics - OPEC and OPEC+ have agreed to increase joint output by 180,000 bpd from December as part of a supply plan for 2025, which is expected to drive up oil demand and prices [4] - Oil prices have recently climbed, with Brent crude surpassing $80 per barrel for the first time since August, closing at $80.93 per barrel, and WTI crude at $77.14 per barrel [4] Investment Opportunities - The cyclical nature of the energy sector suggests a potentially strong year ahead, prompting a focus on stocks well-positioned for investment [5] - Companies with strong growth potential include: - Sasol Limited (SSL) with an expected earnings growth rate of 174.4% and a Zacks Rank of 2 [7] - Core Laboratories Inc. (CLB) with an expected earnings growth rate of 18.8% and a Zacks Rank of 2 [8] - Nine Energy Service, Inc. (NINE) with an expected earnings growth rate of 35.8% and a Zacks Rank of 2 [9]

Currency and Economic Factors - The principal functional currency for operations is the rand, but a significant portion of turnover is impacted by the US dollar, affecting pricing and financial results[49]. - Fluctuations in the rand/US dollar exchange rate can materially affect business operations, cash flows, and financial position, with a weaker rand negatively impacting gearing due to foreign currency-denominated long-term debt[50]. - Economic, political, and social factors in operating regions may adversely affect operations and profitability, with macroeconomic uncertainties contributing to currency volatility[53]. - Political and social instability in regions such as South Africa poses risks to business operations, including challenges related to public finances and state-owned enterprises[54]. - High inflation risks could adversely affect capital projects, leading to cost overruns and schedule delays[63]. - Economic downturns in operating countries could reduce demand for products, adversely affecting financial results[79]. Operational Risks and Challenges - The service provider market in Mozambique is immature, leading to increased costs and potential disruptions in operations due to reliance on international contractors[66]. - Compliance with local content requirements in Mozambique may increase costs and affect the ability to fulfill contracts at acceptable rates[66]. - The company faces risks related to significant investments in associates and joint arrangements, which may impact financial results and cash flows[67]. - Disruptive industrial action in the South African labor market remains a risk, particularly during wage negotiations[60]. - Operations are reliant on stable electricity and water supply, with significant infrastructure challenges in South Africa impacting operational efficiency[69]. - Increased utility costs and infrastructure challenges may adversely affect the company's operations and financial position[69]. - Community protests and social unrest in Southern Africa may lead to business interruptions, impacting operational continuity[74]. - The company faces potential costs and reputational harm from operational interruptions due to extreme weather events and supply chain disruptions[73]. Regulatory and Compliance Issues - The company is subject to regulatory approvals and compliance obligations, which may change and impact project viability[63]. - The company is subject to regulatory scrutiny and potential litigation due to material weaknesses and restatements, which could have a material adverse effect on its business and reputation[77]. - Non-compliance with anti-corruption and anti-bribery laws poses significant risks, including potential criminal or civil sanctions[82]. - Changes in competition and consumer protection laws could expose the company to administrative penalties and civil claims, impacting its financial position[84]. - The company operates in multiple tax jurisdictions globally, facing complex tax laws that may lead to unexpected tax uncertainties[86]. - Legal and regulatory uncertainties, particularly between developed and developing countries, may affect the company's operational costs and decision-making[86]. - Compliance costs associated with new regulations on environmental and climate issues could significantly impact the company's financial position[89]. - The company is subject to increased scrutiny and potential liabilities due to public opinion regarding health and safety associated with chemical manufacturing[89]. - South African regulations require employers to comply with stringent occupational exposure limits, necessitating significant retrofitting of mature plants[89]. - The company has applied for extended time frames for compliance with evolving regulatory requirements, with some extensions granted and others pending[89]. - Changes in mining legislation in South Africa may adversely affect the company's mineral rights and compliance costs[86]. - The company may face significant fines and penalties for non-compliance with tax and environmental regulations, impacting its reputation and financial standing[89]. Financial Performance and Reporting - The company's dividend policy considers various factors, including overall market conditions and financial position, which may affect future dividend payments[68]. - The company identified material weaknesses in internal controls over financial reporting for the financial year ended June 30, 2024, which could adversely affect share price and investor confidence[75]. - Ineffective IT general controls in the Chemicals Eurasia segment and inadequate execution of revenue recognition controls for consignment inventory were noted as specific weaknesses[75]. - The company's financial results are heavily dependent on commodity prices, including crude oil, natural gas, and coal, with significant declines in these prices potentially reducing asset values[75]. - The potential impact of future amendments to mining regulations may have a material adverse effect on the company's operations and financial results[86]. Environmental and Climate Change Factors - Environmental regulations and carbon cost regulations could lead to fines or penalties, negatively impacting the company's financial results and operational license[79]. - The carbon tax in South Africa has increased from R120/tCO2e in 2019 to R190/tCO2e in 2024, with projections to reach R308 by 2026 and R462 by 2030, significantly raising operational costs[93]. - The transition to low-carbon resources is critical, with access to such resources impacting future production and financial performance[93]. - The company faces risks related to intellectual property, including potential loss of competitive advantage due to patenting by competitors and the transfer of know-how[92]. - There is a risk of reputational damage and increased litigation related to climate change disclosures and compliance with evolving regulations[91]. - Stakeholder activism related to GHG emissions and coal usage could negatively impact Sasol's shareholder base and financing capabilities[105]. Human Capital and Organizational Structure - Sasol announced a streamlining program in April 2024 aimed at enhancing efficiencies and reducing complexity within the organization[110]. - The company is highly dependent on human capital to deliver on its strategic objectives and sustainably grow into the future[110]. - Challenges remain around attracting and retaining critical skills to support current and future business requirements[110]. - The quality and availability of skills in certain labor markets may be impacted by challenges within education and training systems[110]. - If the streamlining program is not successful, the anticipated benefits may not be realized, adversely affecting operating results and financial position[110]. - The ability to attract skilled resources may be influenced by slow hiring times and a general scarcity of specialist skills[110]. - Sasol's overall focus includes attracting, developing, and retaining diverse, skilled, and experienced employees[110]. Research, Development, and Innovation - Sasol's investment in research and development for 2024 is R1,516 million, maintaining the same level as in 2023, which was an increase from R1,280 million in 2022[123]. - The total number of worldwide patents held by Sasol decreased from 2,590 in 2022 to 2,282 in 2023, and further to 1,795 in 2024[123]. - Sasol's proprietary technologies and skilled workforce support its competitive advantage in the chemicals and energy sectors[122]. Production and Operations - The company operates globally, with no significant seasonal fluctuations in sales volumes, which are influenced by macro-economic factors[117]. - Sasol's Chemicals Business utilizes feedstocks such as kerosene, benzene, ethane, ethylene, oleochemicals, and aluminum, which are purchased externally[4]. - The Sasol Slurry Phase Distillate (SPD) process converts natural gas into environmentally friendly GTL diesel and kerosene, integrating proven technologies[125]. - Sasol has established a 50/50 joint venture with Haldor Topsøe to develop sustainable aviation fuel plants, focusing on non-fossil feedstock[125]. - The marketing agreement with Equistar Chemicals for polyethylene sales is set to expire on November 30, 2030[125]. - Sasol's Chemicals America segment produces polyethylene marketed by Equistar Chemicals, with ethylene either consumed internally or sold externally[120]. Legal and Litigation Matters - The company is currently engaged in various legal and regulatory proceedings, which may adversely affect its business and financial position[91]. - Sasol has launched two judicial review applications against SARS decisions regarding tax assessments[127]. - The Minister upheld Sasol's appeal regarding load-based emissions standards, allowing implementation from April 1, 2025, to March 31, 2030[127]. - Sasol Oil initiated a legal review to overturn the NERSA approval of the Transnet pipeline tariff for 2023/4, claiming non-compliance with the Petroleum Pipelines Act[136]. - Sasol is involved in a dispute with Murray & Roberts Power regarding additional costs amounting to approximately R322 million[146]. - Sasol's legal proceedings related to the NERSA tariff approval for 2024/5 are also planned, following the current litigation[136].

Appointment of Company Secretary - Sasol Limited appointed Ms. Elizna Viljoen as Group Company Secretary effective January 1, 2025[5] - Helaine Joubert will continue as Acting Group Company Secretary until December 31, 2024[8] Experience and Expertise - Ms. Viljoen has over 23 years of experience in the company secretarial field, previously leading teams at Anglo American[6] - The Board believes Ms. Viljoen's expertise will add significant value to its operations[8] Compliance and Governance - The appointment aligns with JSE Listing Requirements, ensuring compliance and governance standards[7]

Financial Data and Key Metrics Changes - Sasol experienced a significant decrease in cash generation and profitability compared to the prior year, with adjusted EBITDA and cash generated by operations decreasing by 9% and 19% respectively [21][22] - Free cash flow for the financial year decreased by 60% compared to the prior year, but improved from a negative ZAR6 billion in the first half to a positive ZAR8 billion at the end of the financial year [23] - Cash fixed costs increased by 1%, well below inflation, and cash fixed costs decreased by approximately 5% when excluding inflation and exchange rate movements [21] Business Line Data and Key Metrics Changes - The mining business saw a 4% decline versus the prior year, largely due to lower export coal prices and higher external coal purchase prices [26] - The gas business was down by 6%, mainly due to lower weighted average gas prices, although increased sales volumes partially offset this decline [27] - Chemicals Africa adjusted EBITDA decreased by 31% due to lower dollar-based sales prices, while Chemicals America adjusted EBITDA increased by more than 100% to approximately ZAR3.5 billion due to higher sales volumes and improved margins [27][28] Market Data and Key Metrics Changes - Oil prices softened in the second half of the financial year, decreasing by 3% compared to the prior financial year, partially offset by a 5% weaker rand [19] - Petrol differentials increased by 13%, while diesel differentials decreased by 22% compared to last year, negatively impacting the fuels business [20] - Sasol achieved polyethylene prices decreased by 8% due to persistent weak demand and global oversupply [20] Company Strategy and Development Direction - Sasol's strategy is centered around two pillars: strengthen and grow, and transform, focusing on enhancing delivery from core businesses and maximizing cash flow [36] - The company aims to optimize and transform its portfolio by leveraging existing assets and exploring new sustainable growth opportunities [36] - Sasol is committed to reducing greenhouse gas emissions and carbon intensity, with ongoing efforts to optimize its GHG roadmap [16][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by operational issues and the macro environment, emphasizing the need for agility and cost discipline [19][20] - The outlook for FY 2025 includes a focus on improving efficiency and driving targeted innovation, with expectations for increased production and sales volumes [33][34] - Management expressed confidence in the company's ability to step up performance and deliver sustainable shareholder returns over the long term [24][31] Other Important Information - Sasol's successful conclusion of the PR related to clause 12A of the minimum emission standards allows for the implementation of solutions to reduce sulfur dioxide emissions starting April 2025 [12] - The company has launched the Sasol 2.0 transformation program, which has delivered a cumulative total of ZAR16 billion of EBITDA enhancements by FY 2024 [28] - Sasol is exploring options for future LNG supply to address gas depletion in Mozambique, with ongoing engagement with customers to secure demand [41][54] Q&A Session Summary Question: What has caused the impairments leading to losses experienced by the group? - Management explained that impairments are an accounting aspect triggered by a significant decline in long-term pricing, particularly in the U.S. chemical assets, which led to a reassessment of asset values [48][49] Question: Are there plans to exit from Chemicals America? - Management clarified that the assessment of cash-generating units does not imply any ambition to sell or restructure the portfolio, but rather relates to the evaluation of asset performance [49] Question: What is the plan regarding the balance sheet and cash management? - Management indicated that maintaining sufficient liquidity is crucial for refinancing and that proactive management of the balance sheet will continue [64] Question: Can you provide clarity on the longer-term EBITDA generation from the Chemical America complexes? - Management acknowledged that the impairment has affected the previously guided EBITDA range, but specific figures were not provided during the session [66]