Sasol(US:SSL)2022-02-21 19:02Financial Data and Key Metrics Changes - Sasol reported a 71% increase in adjusted EBITDA compared to the prior financial year [18] - Core headline earnings per share increased by more than 100% to ZAR22.52 per share, driven by favorable macroeconomic conditions [20] - Gearing decreased to 59.1% from 61.5% as of June 30, 2021, with net debt-to-EBITDA down to 1.3x [22] Business Line Data and Key Metrics Changes - Energy business external sales revenue increased by 47% in rand terms due to higher crude oil prices and refining margins [7] - Chemicals portfolio external sales revenue rose by 21% in rand terms, although Chemicals Africa sales volumes were 15% lower due to operational challenges [9] - Specialty Chemicals sales volumes increased by approximately 60% compared to the prior period [9] Market Data and Key Metrics Changes - Mozambique gas production was 1% higher than planned [9] - The company is experiencing challenges in coal quality and supply, impacting production volumes at Secunda operations [8] Company Strategy and Development Direction - Sasol is focused on four key priorities: safety, operational excellence, ESG, and shareholder value [4] - The Sasol 2.0 transformation program aims to enhance competitiveness and cash generation, with a commitment to restore cost competitiveness to a cash breakeven level of $30 to $35 per barrel [5][10] - The company is progressing with its climate change strategy and plans for decarbonization, including partnerships for renewable energy projects [6][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged operational challenges in South Africa but emphasized a commitment to recovery and restoring production volumes [5][26] - The outlook for financial year 2022 includes a focus on business recovery and deleveraging the balance sheet [26] - Management expressed confidence in achieving a sustainable oil price environment and maintaining operational resilience [38] Other Important Information - Capital expenditure is expected to remain within the range of ZAR20 billion to ZAR25 billion for the year [12] - The company is on track to achieve cash fixed cost savings of ZAR3 billion for 2022 [11] Q&A Session Summary Question: What is the issue with the absolute level of debt and the reluctance to pay an interim dividend? - Management clarified that both the absolute debt level and gearing are critical, with a target to reduce net debt below $5 billion before considering dividends [31][33] Question: Can you explain the hedging strategy and its impact? - Management explained that while some hedging was out of the money, it was designed to protect against downside risks, and they plan to adjust hedging ratios as the balance sheet improves [35][36] Question: What is the status of coal quality issues and stock levels? - Management reported that coal stockpile levels were at 1.1 million tons, with plans to reach 1.5 million tons by June [50][52] Question: How is the company addressing the LNG import strategy? - Management indicated that negotiations for LNG contracts are ongoing, with a focus on competitive pricing linked to crude oil [80][82] Question: What is the outlook for the U.S. chemicals business? - Management noted that lower volumes were guided due to planned outages, but specialty volumes are ramping up as expected [69]