Sasol Integrated Report 2022 - Book - Page 23
INTRODUCTION | ABOUT SASOL
CREATING VALUE
STRATEGIC OVERVIEW
DELIVERING
GOVERNANCE AND REWARDS
ADMINISTRATION
OPERATING CONTEXT (CONTINUED)
PROFIT
DRIVERS
Economic growth
and exchange rate
Russia/Ukraine
conflict
Oil
price
THE PAST YEAR
Gas
price
HOW WE WERE IMPACTED/RESPONDED
OUTLOOK
• Global growth rebounded to about 6% in calendar year 2021.
The Russia/Ukraine conflict added to inflationary pressures.
• Higher prices for refined products and chemicals enabled
a healthy topline performance.
• Global growth is decelerating fast, with the chances of a US/global
recession over the next two years. To stem inflation, major central
banks are likely to continue increasing interest rates.
• South Africa’s economy grew by 4,9% but continued to
grapple with high levels of poverty, unreliable electricity
supply, infrastructure damage from floods, high
unemployment and rising living and input costs.
• Continued transforming Sasol to be a nimble, competitive
and top performing enterprise, delivering on triple bottom
line of People, Planet and Profit.
• The Russia/Ukraine conflict will continue to contribute to volatility
in financial markets, commodity prices and global growth.
• Protected energy security in South Africa, while embracing
the Just Transition and creating new and innovative solutions
for stakeholders.
• The rand averaged R15,21/US$, about 1,2% stronger than
in 2021.
• Focused on becoming sustainably profitable at US$45/bbl
oil price by 2025.
• Amid high geopolitical risk, the Russia/Ukraine conflict
and resulting supply challenge, supported commodity
prices, notably crude oil, natural gas, coal as well as refining
margins. Liquefied natural gas (LNG) prices surged.
• Maintained our financial risk management efforts to protect
our balance sheet: hedged rand-dollar, crude oil, coal and
ethane exposure 12 months ahead.
• Brent crude averaged US$92,1/bbl in 2022, from
US$54,2/bbl in 2021.
• Hedged 42 mm bbl of oil for 2022 and 29 mm bbl for 2023.
• The price of thermal coal (~2% of Sasol’s external revenue)
rose on Russian-supply disruptions and higher gas prices.
• Concluded divestment transactions.
• Accelerated pursuit of Mozambique gas supply, diversifying
LNG sources and related costs to achieve a lower weighted
average cost of gas.
• Progressed with Lake Charles Chemicals Complex ramp-up
and continued value upliftment.
22
Q1
15
16
17
18
19
Year
20
21
22
0
15
16
17
18
19
20
21
22
0
3,0
6,1
4,9
0,3
3,6
2,9
1,5
3,7
1,2
0,7
3,3
3,4
1,3
5
6,3
-5
-10
15
16
17
18
19
20
Year
Year
World
South Africa
SASOL INTEGRATED REPORT 2022
22
• Limited OPEC spare capacity; the European Union (EU) ban on Russian
oil; the impact of a potential US/global recession and the impact of
China’s ‘zero-COVID’ policies could keep oil prices elevated in the near
term, before easing somewhat in 2023 financial year.
• High energy and food prices could lead to higher wage demands
and cost pressures.
• South Africa’s demand for natural gas is expected to increase
materially in the second half of this decade and even more so beyond
2030. Aside from the current latent demand that is not satisfied,
increased demand is also anticipated from emission reduction
efforts as well as contribution to energy security in South Africa and
the region. There are multiple LNG terminal import options being
considered for imports into South Africa, which is advantageous as
it offers greater competitive tension to the benefit of consumers,
which is important as affordability for LNG is a challenge. Among
others, import options include the Matola terminal in Mozambique
as well as Richards Bay in KwaZulu-Natal, where first imports are
expected between 2025 and 2026.
• Supply chain uncertainties could provide opportunities to prove itself
as a new source of renewable energy (such as hydrogen or ammonia
into the EU). Demand for coal exports may increase, and ammonia
prices and refinery margins could rise.
• Ongoing disruptions and inflation pressure could mean higher energy
and feedstock costs, particularly for European operations, with the
potential to squeeze margins.
3,1
40
20
10
10
% year-over-year
51,2
54,2
68,6
63,6
49,8
73,5
60
43,4
US$
15,4
15,2
15,7
14,2
80
12,9
14,5
15
13,6
100
11,5
R/US$
20
World and South African GDP growth (%)
92,1
Average Brent crude oil price (US$/bbl)
Average exchange rate (R/US$)
• Structural constraints (unreliable electricity being key among them)
will continue to affect the South African economy. The Reserve
Bank is expected to continue hiking interest rates to tame inflation.
The South African economy is expected to grow by 1,7 – 2% per annum
over the next two calendar years.
21
22
• Continue with ramp-up activities of the Lake Charles Chemicals Complex.
^
Source: EY
