Annual Financial Statements for the year ended 30 June 2021 0 - Book - Page 136
1
2
3
4
SASOL LIMITED GROUP
Other disclosures continued
40 Financial risk management and financial instruments continued
40.1 Financial risk management continued
Our exposure to and assessment of the risk
The group's transactions are predominantly entered into in the respective functional currency of the individual operations. The
construction of the LCCP has largely been financed through funds obtained in US dollar, with a small portion of funds obtained from
Rand sources. A large portion of our turnover and capital investments are significantly impacted by the rand/US$ and rand/EUR
exchange rates. Some of our fuel products are governed by the BFP, of which a significant variable is the rand/US$ exchange rate.
Our export chemical products are mostly commodity products whose prices are largely based on global commodity and benchmark
prices quoted in US dollars and consequently are exposed to exchange rate fluctuations that have an impact on cash flows. These
operations are exposed to foreign currency risk in connection with contracted payments in currencies not in their individual
functional currency. The most significant exposure for the group exists in relation to the US dollar and the Euro. The translation of
foreign operations to the presentation currency of the group is not taken into account when considering foreign currency risk.
Zero-cost collars
In line with the risk mitigation strategy, the group hedges a significant portion of its estimated foreign currency exposure in respect
of forecast sales and purchases over the following 12 months. The group uses zero-cost collars to hedge its currency risk, most with a
maturity of less than one year from the reporting date.
Foreign exchange contracts
Foreign exchange contracts (FECs) are utilised throughout the group to hedge the risk of currency depreciation on committed and
highly probable forecast transactions. Transactions hedged with FECs include capital and goods purchases (imports) and sales
(exports).
Refer to the summary of our derivatives below.
The following significant exchange rates were applied during the year:
Average rate
Rand/Euro
Rand/US dollar
Closing rate
2021
Rand
2020
Rand
2021
Rand
2020
Rand
18,38
15,40
17,34
15,69
16,93
14,28
19,46
17,33
The table below shows the significant currency exposure where entities within the group have monetary assets or liabilities that
are not in their functional currency, have exposure to the US dollar or the Euro. The amounts have been presented in rand by
converting the foreign currency amount at the closing rate at the reporting date.
2021
2020
Euro
Rm
US dollar
Rm
Euro
Rm
US dollar
Rm
Long-term receivables
Trade and other receivables
Cash and cash equivalents
–
831
1 895
323
2 265
1 121
–
394
1 476
427
3 218
964
Net exposure on assets
2 726
3 709
1 870
4 609
Long-term debt (including lease liabilities)
Trade and other payables
–
(296)
–
(1 523)
(119)
(268)
(718)
(1 674)
Net exposure on liabilities
(296)
(1 523)
(387)
(2 392)
2 430
(2 559)
2 186
(8 064)
1 483
(2 046)
2 217
(31 894)
(129)
(5 878)
(563)
(29 677)
Exposure on external balances
Net exposure on balances between group companies*
Total net exposure
* The US$ decrease results from the repayment of the loan provided by Sasol Investment Company to Sasol Financing International for the partial
funding of the LCCP.
Sensitivity analysis
The following sensitivity analysis is provided to show the foreign currency exposure of the individual entities at the end of the
reporting period. This analysis is prepared based on the statement of financial position balances that exist at year-end, for which
there is currency risk, before consideration of currency derivatives, which exist at that point in time. The effect on equity is calculated
as the effect on profit and loss. The effect of translation of results into presentation currency of the group is excluded from the
information provided.
A 10% weakening in the group's significant exposure to the foreign currency at 30 June would have increased either the equity or
the profit by the amounts below, before the effect of tax. This analysis assumes that all other variables, in particular, interest rates,
remain constant, and has been performed on the same basis for 2020.
134
Sasol Annual Financial Statements 2021