Sasol Climate Change Report 2023 - Book - Page 29
INTRODUCTION
TRANSFORMING FOR RESILIENCE
GOVERNANCE
CLIMATE ADVOCACY AND POLICY
DATA AND ASSURANCE
ALLOCATING CAPITAL
We are committed to transforming
our business while protecting and
growing shared value for stakeholders,
including shareholders. In 2023,
faced with a number of significant
production and macroeconomic
challenges, we continued to allocate
capital in a disciplined manner. This
was in line with our capital allocation
framework, to further deleverage
our balance sheet while pursuing
our decarbonisation objectives.
Maximising shareholder value remains
a strategic imperative.
In 2021, we shared with stakeholders our amended
capital allocation priorities in support of our
emission-reduction roadmaps. At the time of setting
those priorities, we did our utmost to ensure that
the impacts of our decarbonisation journey did not
detract from our ability to deliver sustainable shared
value. In light of the volatile global and local operating
context, we subsequently reviewed our capital
allocation framework and principles and re-affirmed
that these remain valid as we weather
challenging circumstances. We do see emerging
affordability and timeline challenges and potential
impacts on our ability to deleverage the balance
sheet. However, we have proactively implemented
interventions in the Reset phase of our Future Sasol
strategy to address these potential challenges
(see page 25).
In line with our capital allocation principles, our
first priority remains ensuring safe and reliable
operations and protecting our licences to operate.
To optimally sustain our assets, we have been
resolute in consistently allocating Maintain capital1,
with increases in such expenditure being the result
of compliance and feedstock replacement
requirements, as well as a response to the current
extraordinary inflation cycle.
1.
2.
3.
4.
To ensure safe and reliable operations and protect our licence to operate.
Weighted Average Cost of Capital.
Net debt excluding lease liabilities.
Core headline earnings per share.
As a next priority, our allocated R15 – 25 billion (in
real 2023 terms) cumulative Transform capital
expenditure remains valid. We intend sequencing
this expenditure over time while remaining within
the Sasol 2.0 transformation programme’s Maintain
and Transform capital expenditure target of
R26 –32 billion/a (in real 2023 terms) for 2024 and
2025. Total sustainability capital expenditure is
projected at 10-15% of total capital up to 2030, with
~R9 billion in capital expended to date on lowercarbon feedstocks. Over the past year, we extended
our Mozambique gas plateau from 2026 to 2028.
We also continue to leverage inherent synergies
between Maintain and Transform, both part of first
order capital allocation, which should lead to cost
reductions. Higher inflationary pressures are,
however, impacting our capital spend profile.
Sasol’s strategy focuses on driving investments in
new value pools to maintain a diversified portfolio
(and grow that diversity) while strengthening our
competitiveness in areas where we have a market
leadership position, subject to affordability. We
allocated capital for expansionary growth studies
and new sustainable businesses for the future, as
well as a corporate venture capital fund and parts of
second order allocation, on a competitive basis.
Should these growth initiatives be unable to meet
our return expectations of above-WACC2 returns
with near-term payback, available funds will be
returned to shareholders. To reduce our own capital
outlays and balance risk exposure, we continue
entering partnerships with like-minded
organisations to establish new sustainability
businesses (see pages 33 – 35).
and Transform capital expenditure, addressing
operational concerns and progressively achieving
the financial targets set in 2021, will increase our
discretionary capital in the short to medium term.
This would enable us to fund additional attractive
second-order capital opportunities.
We also continue to focus on deleveraging our balance
sheet, positioning the business to restore and build
attractive shareholder returns as well as fund our
transition. Our net debt: EBITDA ratio is now 1,3x.
A deleveraged balance sheet, further portfolio
optimisation, optimal management of Maintain
Our first priority, however, remains concluding the
imperative to reset our business with a focus on
first order capital allocation, including further
deleveraging our balance sheet. Concurrently, we
will maintain our existing asset integrity and utilise
capital as required to meet our GHG reduction targets
by 2030, while respecting our dividend commitments
and limiting our discretionary growth capital exposure
to R1 billion in 2024. For further information on our
2021.
capital allocation framework see IR
CAPITAL ALLOCATION PRIORITIES
~R26–32bn/a
1ST ORDER ALLOCATION
(real 2023 terms)
MAINTAIN CAPITAL
TRANSFORM CAPITAL
SELECTIVE GROWTH/IMPROVE CAPITAL
Safe, effective and reliable operations and
protecting our licences to operate
Deliver GHG reduction targets
Smaller, high-return, short-payback project and
new sustainability initiatives
DIVIDEND POLICY
2,8 - 2,5x cover of CHEPS4
ROBUST BALANCE SHEET
Net debt: EBITDA