Annual Financial Statements for the year ended 30 June 2021 0 - Book - Page 75
Long-term average crude oil price (Brent) (nominal)*
Long-term average ethane price (nominal)*
Long-term average ammonia price*
Long-term average Southern African gas purchase price (real)*
Long-term average refining margin (nominal)*
Long-term average exchange rate*
US$/bbl
US$c/gal
Rand/ton
US$c/Gj
US$/bbl
Rand/US$
2021
2020
2019
70,09
37,18
5 297,00
8,41
9,67
14,57
59,69
32,79
4 664,32
7,10
9,43
15,20
71,17
39,04
4 258,54
4,86
10,16
14,29
SASOL LIMITED GROUP
CONSOLIDATED FINANCIAL STATEMENTS
Main assumptions used for impairment calculations
South
Africa
%
United
States of
America
%
Europe
%
Growth rate – long-term Producer Price Index
Weighted average cost of capital*
2021
2021
5,50
14,03
2,00
7,70
2,00
7,70 – 9,05
Growth rate – long-term Producer Price Index
Weighted average cost of capital*
2020
2020
5,50
14,22
2,00
7,66
2,00
7,66 – 9,79
Growth rate – long-term Producer Price Index
Weighted average cost of capital*
2019
2019
5,50
13,12
2,00
7,18
2,00
7,18 – 9,48
* Calculated using spot market factors on 30 June.
Areas of judgement:
NOTES TO THE FINANCIAL STATEMENTS
* Assumptions are provided on a long-term average basis. Oil and ammonia prices and exchange rate assumptions are calculated based on a five year
period, while the ethane price is based on a ten year period. The refining margin is calculated until 2034, linked to the Sasolburg refinery's useful life.
The Southern African gas purchase price is calculated until 2050, linked to the South African integrated value chain's useful life.
The weighted average growth rates used are consistent with the increase in the geographic segment long-term Producer Price
Index. Estimations are based on a number of key assumptions such as volume, price and product mix which will create a basis for
future growth and gross margin. These assumptions are set in relation to historic figures and external reports. The continued
impact of the COVID-19 pandemic is incorporated in our pricing assumptions through the use of the average June 2021 views
obtained from two independent consultancies that reflect their current views on market development. If necessary, these cash
flows are then adjusted to take into account any changes in assumptions or operating conditions that have been identified
subsequent to the preparation of the budgets.
Climate related risks such as carbon tax and the cost of energy have been incorporated in the cash flow projections where
reasonable and supportable.
The weighted average cost of capital rate (WACC) is derived from a pricing model. The variables used in the model are established
on the basis of management judgement and current market conditions. Management judgement is also applied in estimating
future cash flows and defining of cash-generating units. These values are sensitive to the cash flows projected for the periods
for which detailed forecasts are not available and to the assumptions regarding the long-term sustainability of the cash flows
thereafter.
SASOL LIMITED COMPANY
Management determines the expected performance of the assets based on past performance and its expectations of market
developments. By their very nature, cash flow projections involve inherent risks and uncertainties which have been further
aggravated by the effect of COVID-19. The group adjusted cash flow projections and budgets accordingly. These adjustments took
into account the impact of the pandemic on revenue and margins as well as the expected periods of recovery from the pandemic
for each individual cash generating unit.
OTHER
Determining as to whether, and by how much, cost incurred on a project is abnormal and needs to be scrapped involves
judgement. The factors considered by management include the scale and complexity of the project, the technology being applied
and guidance from experts in terms of what constitute abnormal wastage on the project.
73
Sasol Annual Financial Statements 2021