Sasol(SSL) - 2024 Q3 - Earnings Call Transcript

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]