Sasol Limited Integrated Report 2021 - Book - Page 17
Chief Financial Officer’s statement
Team Sasol delivered an excellent performance
in 2021, leading to a strong balance sheet and
solid cash flow generation. As we continue with
our business transformation programme, we are
excited about Future Sasol’s prospects as a greener,
more sustainable business that protects and grows
shareholder value in a lower-carbon world.
Chief Financial Officer
FY21 reflects the significant turnaround of our business since the collapse of the oil price in early 2020 coupled with the
unprecedented COVID-19 pandemic. The comprehensive Response Plan that we designed to mitigate the impact of these
developments has been extremely effective. The balance sheet was substantially deleveraged through a combination of cash
conservation, capital and operating discipline and strategic asset divestments. More recently there has been support from an
improving macro environment and, despite a negative impact from adverse weather events, the business has continued to
show good momentum.
The Response Plan has achieved much more than deleveraging the balance sheet. The asset divestment programme has
focused the portfolio in areas where we can drive attractive long-term returns; the new operating model takes our business
closer to the customer on a more agile basis; and the Sasol 2.0 transformation programme is already demonstrating
progress in making the business more efficient and effective. There is more to come over the next few years.
From these strong foundations Sasol is now laying out a pathway to achieve a new climate change approach with a
significant step-up in our goals. The intention is to reduce scope 1 and 2 emissions by 30% by 2030 and then reach
Net Zero by 2050. This will make Future Sasol a truly sustainable business. There are now numerous initiatives underway
across the Company to deliver this. Sasol’s differentiated capabilities, technologies, team and market positions provide the
firm platform required. Capital and operating discipline enhanced by the Sasol 2.0 transformation programme create the
prospect of highly attractive long-term returns. We have an exciting future ahead of us.
Five-year accelerated balance sheet deleveraging
2021 represents an important year of delivery for Sasol.
Deleveraging the balance sheet was a particular priority in
the face of the substantial macro headwinds faced from early
2020. Our ambitious plan has been delivered in full without
funding from our shareholders. Gearing has decreased from
117% in the 2020 financial year to around 61% at 30 June 2021,
and net debt to EBITDA is now down to around 1,5 times with
net debt of US$5,9 billion.
All of this was achieved through successful execution of
our comprehensive US$6 billion Response Plan. This had
a combination of self-help measures and asset divestments
to reduce our net debt to an acceptable level. In FY21 we
again significantly exceeded our savings target, by delivering
over US$1 billion of savings. Asset divestments were a
further significant component and by 30 June 2021 we had
announced divestments of around US$3,8 billion, with around
US$3,1 billion of proceeds already banked.
The strengthening of the balance sheet also went beyond
the reduction of net debt levels with US$1,5 billion of
new bonds issued at very competitive rates. This provided
cost effective funding and balanced our maturity profile,
ensuring that we maintained the robust liquidity position that
was so important in allowing us to trade securely through
As a result of these efforts we believe that our balance sheet
can provide firm support to execute our Future Sasol strategy
without being distracted by further short-term deleveraging
A more resilient business
The Response Plan was intended to go beyond near-term
balance sheet deleveraging and deliver a business that
was more efficient and effective. The past financial year
demonstrated significant progress towards this objective
with a remarkable turnaround of our financial position, despite
the headwinds we faced.
Our adjusted EBITDA increased by 38% year-on-year to
R48,4 billion compared with a 4% increase in the rand per barrel
oil price. Free cash flow before growth capital improved by 75%
to R19,4 billion, building on the free cash flow inflection point
that we reached earlier this year.
There are a number of important elements to building a more
resilient business including delivery against the operating and
capital cost discipline targets. This has progressed well and
in FY21 we achieved R2,4 billion in cash fixed cost savings or
a normalised real improvement of 4,2% year-on-year.
Besides cost savings we have now introduced a new operating
model. This has placed decision-making closer to our customers
and should enable more agile and customer-focused decisions
▪ Successful execution of
Response Plan to deliver
accelerated balance sheet
▪ More resilient business
through strategic divestments
and Sasol 2.0 transformation
▪ Clear framework to meet
ambitious new climate
change targets and generate
going forward. This change has already been implemented
as have the early stages of the Sasol 2.0 transformation
programme. This is a ground-up reassessment of how the
business functions with systems in place to identify and
leverage best practice right across the Company.
Some of the most challenging elements of the programme
have already been implemented with the workforce transition
completed and the benefits of that leaner cost structure will
flow through in the 2022 financial year. Given the Sasol 2.0
work we also have confidence that we will be able to keep
sustenance capital expenditure within a R20 – R25 billion
per annum range through to the 2025 financial year without
compromising asset integrity.
The implementation of the asset divestment programme
has also been designed around our strategy, increasing
focus on the areas where Sasol has differentiated ability
to add value over time and releasing value from other areas
of the portfolio.
These elements all come together to enable us to deliver
competitive returns going forward even in volatile markets.
Difficult decisions are, however, still required. The Board sees
the restoration of dividends as a priority, but at the moment
the dividend remains suspended while we go through the final
As we work towards resuming the dividend as soon as
possible, we hope that we will get support from normalising
demand levels as the impact of COVID-19 eases. This should
see improved volumes in the South African Energy Business
as well as the Eurasian Chemicals Business. Alongside this
we anticipate the benefits from the Fulco transition in mining
and the ramp-up of the derivatives units at the Lake Charles
Chemicals Project (LCCP). There are, however, also some factors
that will slow some of this expected recovery, notably coal
quality and lower gas supply, which will impact Secunda and
maintenance across the Chemicals Business.
Delivering ambitious climate change targets
and attractive shareholder returns
use of renewable energy as well as additional gas
feedstock by 2030. By that stage we also intend to
reduce our scope 3 emissions by 20% through a reduction
of commercialisation of fossil fuels.
Our clear objective is to deliver a more sustainable business,
but also a business that generates attractive and resilient
shareholder returns. In order to do that we will maintain
a disciplined and shareholder-focused capital allocation
framework alongside our financial targets.
The next phase of our strategic and financial plan runs
to FY25, by which time Sasol 2.0 should be fully in place.
During this period the most immediate priority remains
to finish our journey of deleveraging the balance sheet and
resume dividends as we increase free cash flow and fund
our sustainability initiatives.
By FY25 the intention is to have an ROIC of 12 – 15% (assuming
a US$55/bbl oil price), with net debt to EBITDA of 1,0 – 1,5 times.
Restoring dividends is a key priority and we intend to restore
the dividend and step-up payout level.
Business resilience remains critical through this phase and we
are confident that we can operate our assets optimally and
effectively within the planned capital allowance and maintain
Secunda’s breakeven level at US$30 – 35/bbl.
The transform capital required to deliver the GHG reduction
targets will only step-up at the latter part of the next phase
and will likely be in the order of R15 – R22 billion in aggregate for
the period up to 2030 and will form part of the R20 – R25 billion
per annum capital guidance.
In the following phase through to financial year 2030 we will
look to offer enhanced shareholder returns, while implementing
the changes across the business to deliver GHG reduction and
generating incremental cash flow to support high returning
growth initiatives across the portfolio. We are confident that the
ROIC for the portfolio will be competitive compared to our peers.
During this period the intention will be to keep net debt/EBITDA
levels at 1,0 – 1,5 times levels but bring absolute net debt levels
below US$4 billion.
As free cash flow increases through the period we will maintain
discipline for the allocation of discretionary capital according to
the best risk-adjusted return, including the potential for special
dividends and share buy-backs.
Our disciplined approach will limit exposure to any single
project for adequate risk diversification; optimise funding
sources including partnering options where appropriate;
and regularly review the portfolio to ensure we keep our
capital focused in the assets that offer our shareholders the
risk-adjusted, long-term returns.
After a critical period of delivery we are confident that
Sasol has a very bright future. We have set clear goals across
our People, Planet and Profit priorities and we have a strategy
to deliver them. There remains much uncertainty in the world
around us and we may need to adjust course as circumstances
evolve, but over the past few years we have proved that Sasol
can adapt quickly and we have the resilient team and portfolio
we need to head into the future with confidence.
Building on the firm platform that we have created, Sasol
has set ambitious new climate change targets. We have set
a target to reduce scope 1 and 2 emissions by 30% by 2030
and an ambition to move to Net Zero by 2050.
In order to achieve this, we will look to build on our unique
chemistry and core energy segments and shift to increasing
Chief Financial Officer
20 September 2021
Sasol Integrated Report 2021