SOL: Sasol Limited - Trading Statement for the Financial Year Ended 30 June 2018
JOHANNESBURG, July 20, 2018 /PRNewswire/ --
Sasol is expected to deliver a resilient set of results, underpinned by higher sales and production volumes and much higher crude oil and product margins in the second half of the financial year. Our financial results were however negatively impacted by several unplanned Eskom electricity supply interruptions and two internal outages at our Secunda Synfuels Operations (SSO) that resulted in lower production volumes.
Our underlying cash flow performance is expected to be strong. Earnings before interest, tax, depreciation and amortisation (EBITDA[*]) are expected to increase by between 6% and 16%. Core[**] headline earnings per share (HEPS) are however expected to decrease by between 1% and 11% (approximating R0,46 to R4,30 per share) compared to the 2017 financial year (prior year) Core HEPS of R38,47. The difference between Core HEPS and EBITDA in the current year is largely due to depreciation of approximately R16 billion and employee share-based payment expenses of R1,5 billion due to the marked improvement of the Sasol share price at the end of the financial year. The share-based payment relating to our Khanyisa Broad-Based Black Economic Empowerment (B-BBEE) transaction of R3 billion is excluded from Core HEPS and EBITDA as it is considered to be a once-off and non-cash item.
HEPS for the financial year ended 30 June 2018 are expected to decrease by between 16% and 26% (approximating R5,64 to R9,16 per share) compared to the prior year HEPS of R35,15. Earnings per share (EPS) for the same period are also expected to decrease by between 52% and 62% (approximating R17,46 to R20,80 per share) from the prior year EPS of R33,36.
Key macro-economic summary
Financial Financial
year 2018 year 2017 % change
Rand/US dollar average exchange rate 12,85 13,61 (6)
Rand/US dollar closing exchange rate 13,73 13,06 5
Average dated Brent crude oil price (US dollar /
barrel) 63,62 49,77 28
Refining margins (US dollar / barrel) 9,32 10,09 (8)
Average Henry Hub gas price (US dollar / million
British thermal unit) 2,95 3,00 (2)
From a macro-economic perspective, the stronger average rand/US dollar exchange rate and the negative impact of remeasurement items, largely driven by the stronger longer-term rand exchange rate, resulted in a much lower operating profit and earnings per share for the financial year. However, the closing exchange rate weakened by 5% which negatively impacted gearing and the valuation of our derivatives and foreign debtors and loans. Our hedging programme for the 2018 and 2019 financial years is complete and positions Sasol well to steer through these periods of volatility. The average Brent crude oil price moved 28% higher compared to the prior year, and, since December 2017, spot prices have moved closer to the US$75 per barrel mark which positively impacted our results. The rand per barrel oil price increased by approximately 20% to R818 per barrel compared to 2017, (refer to table above), and has subsequently increased by approximately 15% - 25% since the end of June 2018. The spot rand per barrel oil price is now ranging between R950 and R1 050 per barrel.
Financial Financial
Significant hedging activities year 2018 year 2019
Brent oil - put options
Number of barrels hedged mm bbl 50,25 48,00
Average Brent crude oil price floor, net of
costs US$/bbl 47,82 53,36
Premiums paid US$ mm 125 131
Rand/US dollar currency - zero-cost collar
instruments
US$ exposure hedged US$bn 4,00 4,00
Annual average floor R/US$ 13,46 13,14
Annual average cap R/US$ 15,51 15,14
Export coal - swaps
Number of tons hedged mm tons 2,80 1,40
Average coal swap price US$/ton 76,11 81,82
Ethane gas - Swaps
Number of barrels hedged mm bbl 2,30 3,50
Average ethane gas swap price US$ c/gal 27,54 27,30
Sasol experienced some challenges with regards to its operational and cost performance during the year, largely due to planned and unplanned production interruptions at Natref and a safety related stoppage at Mining in the first half of the year, which adversely impacted sales and cost across the value chain. Despite two additional safety related stoppages at Mining and unplanned electricity outages in Secunda, we managed to claw back and deliver a stronger operational performance in the second half of the year through focused interventions and management actions. Our Eurasian operations increased production volumes by 3% due to stronger product demand and increased plant availability. In the last quarter, we have seen considerably higher yields and production volumes across the value chain which are more closely aligned to our internal targets. We are well positioned to continue with this improved operational performance into the 2019 financial year.
Sales volumes increased by 1% for our Performance Chemicals business spurred by robust market demand despite Eskom electricity supply interruptions. Base Chemicals reported a 1% decrease in sales volumes mainly due to production interruptions at SSO and an initial stock build for our high density polyethylene joint venture in the US. Excluding the impact of Eskom electricity supply interruptions, sales volumes increased by 1%. Liquid fuels sales volumes were down 2% due to lower volumes from SSO and Natref and a challenging South African retail liquid fuels market.
A detailed production summary and key business performance metrics for the financial year for all our businesses is available on our website, http://www.sasol.com
Sasol´s earnings for the financial year ended 30 June 2018 have been impacted by the following notable once-off and period close items:
HEPS Rand EPS Rand
per share per share
Mark-to-market valuation of commodity and foreign
exchange hedges using a forward rate at 30 June 2018 3,81 3,81
Net remeasurement and once-off items - 13,52
Khanyisa B-BBEE transaction share-based payment 4,82 4,82
Remeasurement and once-off items include:
1. Items recorded in the second half of the financial year:
- As highlighted in our 2018 Interim Results Announcement, we expressed some caution with regards to the impact of a stronger long-term rand on the valuation of our Southern African value chain's assets. A partial impairment of R3,7 billion (net of tax) on our South African Chlor Vinyls cash generating unit has been recorded as a result of the continued and sustained strengthening of the exchange rate outlook and the resulting impact on Base Chemicals margins.
- Due to the weaker long-term macro-economic assumptions, as well as a result of lower than expected oil volumes from the Production Sharing Agreement (PSA) in Mozambique, a partial impairment of R1,2 billion (US$89 million) was recorded.
- The implementation of Sasol Khanyisa, our B-BBEE ownership transactions, resulted in the recognition of a share-based payment expense (IFRS2 cost) of R3 billion.
2. Items recorded during the first half of the financial year and communicated previously:
- A partial impairment of our Canadian shale gas assets of R2,8 billion (CAD281 million) largely due to a further decline in gas prices.
- The scrapping of our US gas-to-liquids project amounting to R1,1 billion (US$83 million).
The increase/(decrease) from HEPS to Core HEPS is as follows:
Financial Financial
year 2018 year 2017
Rand per Rand per
share share
Translation impact of closing exchange rate (0,35) 1,39
Mark-to-market valuation of oil and foreign
exchange hedges 3,81 (0,42)
Implementation of Khanyisa B-BBEE transaction 4,82 -
Once-off Uzbekistan license fee - (0,58)
Strike action at Mining and related costs - 1,45
Provision for tax litigation matters - 1,49
The tax litigation matter in respect of our crude oil procurement process is ongoing and we expect that the court hearing will take place on 21 August 2018. No further provisions have been recognised in the current year in respect of this matter.
Our results for the financial year may be further affected by adjustments resulting from our year-end closure process. This may result in a change in the estimated earnings noted above. All references to years refer to the financial year ended 30 June.
The financial information on which this trading statement is based has not been reviewed and reported on by the Company's external auditors. Sasol's financial results for the financial year ended 30 June 2018 will be announced on Monday, 20 August 2018.
* EBITDA is calculated by adjusting operating profit for depreciation, amortisation, remeasurement items, share-based payments and unrealised gains and losses on our hedging activities.
** Core HEPS are calculated by adjusting headline earnings with once-off items, period close adjustments and depreciation and amortisation of capital projects, exceeding R4 billion which have reached beneficial operation and are still ramping up and share-based payments on implementation of B-BBEE transactions. Period close adjustments in relation to the valuation of our derivatives at period end are to remove volatility from earnings as these instruments are valued using forward curves and other market factors at the reporting date and could vary from period to period. We believe core headline earnings are a useful measure of the group's sustainable operating performance. However, this is not a defined term under IFRS and may not be comparable with similarly titled measures reported by other companies. The aforementioned adjustments are the responsibility of the directors of Sasol. The adjustments have been prepared for illustrative purposes only and due to their nature, may not fairly present Sasol's financial position, changes in equity, results of operations or cash flows.
20 July 2018
Sandton
Sponsor: Deutsche Securities (SA) Proprietary Limited
Disclaimer - Forward-looking statements: Sasol may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, statements regarding exchange rate fluctuations, volume growth, increases in market share, total shareholder return, executing our growth projects, (including LCCP), oil and gas reserves and cost reductions, including in connection with our BPEP, RP and our business performance outlook. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "endeavour", "target", "forecast" and "project" and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors are discussed more fully in our most recent annual report on Form 20-F filed on 28 August 2017 and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
Contacts:
Investor Relations:
Moveshen Moodley, Chief Investor Relations Officer
Telephone: +27(0)10-344-8052
Alex Anderson, Head of Group Media Relations
Direct telephone: +27(0)10-344 6509; Mobile: +27(0)71-600 9605;
[email protected]
Matebello Motloung, Senior Specialist: Media Relations
Direct telephone: +27(0)10-344+9256, Mobile: +27(0)82-773-9457
[email protected]
SOURCE Sasol Limited
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