Sasol(US:SSL)2021-08-16 20:36Financial Data and Key Metrics Changes - The company's EBITDA increased by 38% year-on-year to R48.4 billion, with free cash flow improving by 75% [18] - Net debt-to-EBITDA at the end of the reporting period was 1.5 times, significantly below the covenant of 3 times, and gearing decreased from 117% in FY 2020 to around 61% [20] - Normalized cash fixed costs were 4.2% lower in real terms, reflecting continued discipline in cost management [21] Business Line Data and Key Metrics Changes - Secunda operation volumes were up 3%, while Mozambique production increased by 2% [9] - The chemicals business achieved strong cash flows, with normalized sales volumes in the U.S. being 2% higher despite adverse weather events [10] - The LCCP project is now 100% complete and ramping up, contributing significantly to profitability [27] Market Data and Key Metrics Changes - The energy business benefited from high export sales volumes and a strong recovery in liquid fuels demand following the easing of lockdown restrictions in South Africa [25] - Higher sales volumes in Africa and Eurasia, along with increased average prices across most markets, resulted in strong cash flow contributions from the chemicals business [26] Company Strategy and Development Direction - The company is focused on its Sasol 2.0 transformation program, aiming for sustainable improvements and competitive profitability even in low oil price environments [23] - A commitment to sustainability and decarbonization is evident, with plans to share improved climate change targets at the upcoming Capital Markets Day [6][15] - The company is pursuing a focused portfolio through successful asset divestments, totaling US$3.8 billion since March 2020 [12] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of maintaining a deleveraged balance sheet and the need for continued focus on cost management amid economic uncertainties [24] - Future guidance indicates a cautious approach to capital expenditure, with a focus on maintaining net debt levels below US$5 billion by the end of FY 2022 [27] - Management expressed confidence in the company's ability to restore investment-grade credit metrics and competitive returns for shareholders [28] Other Important Information - The company has suspended dividends until debt levels are reduced, indicating a prudent approach to capital allocation [24] - The upcoming Capital Markets Day will provide further clarity on the company's long-term strategy and capital allocation framework [4][15] Q&A Session Summary Question: What caused the mining costs to exceed guidance? - The increase in mining costs was attributed to the implementation of the Fulco system and some deterioration in coal quality, which affected productivity [30][31][33] Question: How does the impairment of the fuels facility reconcile with long-term oil price assumptions? - The impairment was influenced by a combination of higher initial oil price assumptions and a significant strengthening of the rand against the dollar, impacting net present value calculations [38][40][42] Question: What is the impact of the Canadian asset disposal on OpEx and CapEx? - The Canadian asset divestment resulted in a sales price of just over $50 million, and the company has modeled no future capital or operational expenditure related to these assets in its forecasts [57][59] Question: What are the expectations around chemical commodity prices? - Chemical commodity prices are expected to moderate as supply normalizes, with current prices reflecting a spike due to supply constraints from weather events [85][89] Question: Can the company provide more details on its sustainability targets? - The company is focusing on optimizing Fischer Tropsch technology for sustainable fuels and has included ESG-related CapEx in its guidance, with significant increases in greenhouse gas reduction ambitions expected by 2030 [107][109][111]