Sasol Climate Change Report 2022 - Book - Page 37
INTRODUCTION
OUR FUTURE SASOL STRATEGY
RISKS AND OPPORTUNITIES
GOVERNANCE
DATA AND ASSURANCE
CAPITAL ALLOCATION AND GREEN FUNDING
Since the lows of 2020 and a heavily geared balance sheet at the onset of the COVID-19
pandemic, Sasol’s financial position has significantly improved.
We are now in a position to restore and build attractive shareholder returns, as well
as fund our transition. Our Net Debt: EBITDA ratio is now 0,8x, which is well below
our debt covenant of 3,0x. A deleveraged balance sheet, further portfolio optimisation
and progressively achieving our financial targets communicated at our 2021 Capital Markets
Day, will increase our discretionary capital and enable us to also fund second order capital
opportunities (see below).
CAPITAL ALLOCATION PRIORITIES
A disciplined capital allocation approach
Sasol employs a disciplined capital allocation approach to optimise
our financial resources including cash, debt and taxes to maximise
shareholder value over the long-term. We aim to transform the
business while protecting and growing value. Last year, we
communicated our amended capital allocation priorities in line with
our emission-reduction roadmaps. When we set our target, we
carefully ensured that affordability, impacts on employment and
emission-reductions were all positively considered to ensure that we
continue to advance shared value.
MAINTAIN CAPITAL
1.
2.
3.
4.
per annum
TRANSFORMATION CAPITAL
Deliver GHG reduction targets
1ST ORDER
Allocation
SELECTIVE GROWTH/IMPROVE CAPITAL
Smaller, high return, short payback project and new sustainability initiatives
We disclosed an allocated R15 – 25 billion cumulative capital expenditure
to be spent by 2030 on our 30% reduction target. We plan to sequence
this expenditure over time and still remain within the Sasol 2.0
transformation programme R20 – 25 billion/a (in 2020, real terms)
capital expenditure target by 2025 for Maintain and Transform capital.
We aim to also leverage inherent synergies between Maintain and
Transform, which should lead to cost reductions.
Sasol continues to invest in new value pools to maintain a diversified
portfolio and strengthen our competitiveness in areas where we have
established a market leadership position. Expansionary growth and
establishment of new sustainable businesses and a Corporate Venture
Capital Fund, both part of second order allocation, are assigned on a
competitive basis. If these growth initiatives are unable to meet our
return requirements, which is above WACC1 returns, with near-term
payback, the available funds will be allocated to additional shareholder
returns. To reduce our own capital outlays and balance risk exposure,
we are partnering with like-minded organisations to establish new
sustainability businesses.
R20 – 25bn
Safe, effective and reliable operations and protect licence to operate
ROBUST BALANCE SHEET TARGET
DIVIDEND POLICY
2ND ORDER
Allocation
Net debt: EBITDA2
TARGET
< 1,5x
Dividend cover:
2,8
and Net debt3
to
< US$5bn
2,5x of CHEPS
4
EXPANSIONARY GROWTH AND ADDITIONAL SUSTAINABILITY INITIATIVES
and/or
ADDITIONAL SHAREHOLDER RETURNS
MANAGING
AND OPTIMISING
CAPITAL
INVESTMENT GUIDELINES
STRATEGIC PARTNERING
PORTFOLIO OPTIMISATION
APPROPRIATE FINANCING
Weighted Average Cost of Capital.
Earnings before interest, taxes, depreciation and amortisation.
Net debt excluding lease liabilities.
Core headline earnings per share.
SASOL CLIMATE CHANGE REPORT 2022 36
