Sasol Integrated Report 2023 - Book - Page 29
INTRODUCTION
ABOUT SASOL
STRATEGIC OVERVIEW
CREATING VALUE
PERFORMANCE
GOVERNANCE AND REWARDS
ADMINISTRATION
CHIEF FINANCIAL OFFICER’S STATEMENT CONTINUED
Sasol 2.0 transformation programme
and Reset
The Sasol 2.0 transformation programme’s
objectives are to enable the business to be more
competitive, cash generative and able to deliver
attractive and sustainable returns even in a low oil
price environment. The EBITDA contribution of our
Sasol 2.0 transformation programme to date is
R13,5 billion versus a target of R8,5 billion by FY23.
This has given us some headroom to withstand the
impact of the volatile economic landscape and higher
inflation and was mainly achieved through the
implementation and continuous assessment and
refinement of the operating model as well as
embedding market-driven strategies to improve
customer experience and increase the profitability
of our products.
Given the impact of the external operating
environment, we acknowledge the need to intensify
our efforts to remain resilient and profitable.
We therefore revise our Reset targets
Gross margin
R8 billion – R10 billion
(previously R6 billion – R8 billion)
Cash fixed cost
R10 billion – R12 billion
to be delivered by financial year 2025
(previously R8 billion – R10 billion)
This amounts to an additional R4 billion in
EBITDA contribution by financial year 2025
as Sasol 2.0 Reset
The increased targets will require innovation and
focused delivery. Our focus for Sasol 2.0 remains to
bolster the strength and maturity of initiatives and
we are confident that we will maintain momentum in
achieving the targets for the coming financial years.
Continued refinement of emission
reduction roadmap
We remain committed to the decarbonisation of our
current assets and have made good progress in the
further development of our 2030 greenhouse gas
emission (GHG) reduction roadmap. For our Energy
Business, we have selected a fine coal solution –
briquetting – as a potential key enabler for the
main reduction lever of coal-fired boiler turndown
resulting in more efficient use of our feedstock.
We have progressed our ambition to integrate
1 200MW of renewable energy into our operations
by 2030 by signing more than 600MW of power
purchase agreements which will progressively come
online by 2026 or earlier. We have also narrowed
down the options to reduce our steam demand and
increase our waste heat recovery to produce more
steam to close the steam gap resulting from the
boiler turndown.
Remeasurement items increased significantly in
FY23 to a loss of R33,9 billion compared to a gain of
R9,9 billion in the prior year. This is mainly due to the
full impairment of the Secunda liquid fuels refinery
cash generating unit (CGU) at year end. The main
drivers resulting in the impairment were the higher
weighted average cost of capital rate on the back of
higher global interest rates and its associated
impact on the cost of debt, higher feedstock cost
assumptions and the revised production profile
based on the updated emission reduction roadmap.
Macroeconomic conditions have led to a sharp
increase in liquid natural gas (LNG) commodity prices,
and we therefore deem LNG unaffordable as a
substitute for coal in our process. As a result, we
have placed on hold the expenditure on additional
gas reforming capacity and are exploring a number
of technology and feedstock solutions to partially
recover volume post FY30, estimated at 6,7mt/a
(FY22: 7,5 mt/a). However, the maturity thereof needs
to be progressed before it can be incorporated in the
impairment evaluation of our Secunda liquid fuels
refinery CGU, thus a full impairment of the CGU
was recognised. Although the chemical CGUs in the
Secunda complex were also negatively impacted,
their respective recoverable amounts remained
above carrying values given the products‘ higher
derivative value.
DISCIPLINED CAPITAL MANAGEMENT
AND LAUNCH OF SASOL VENTURES
At our Capital Markets Day in 2021, we communicated an updated capital allocation framework and
governance structure to give clarity on our approach to optimising risk-weighted returns for the
long term.
We remain on track to keep the level of capital spending to maintain and transform the business
within a R26 billion – R32 billion per annum range (in FY23 real terms). At these levels, we continue to
safeguard capital investment to ensure safe and reliable operations and meet our self-funded 2030
GHG reduction targets.
The capital required for our 30% GHG emission reduction is a cumulative R15 billion – R25 billion
(in FY23 real terms) up to 2030 and is included in the R26 billion – R32 billion annual capital targets.
There was very limited capital spend in this category in FY23. ‘Transform’ capital spend of R0,5 billion
is planned for FY24, with peak transform capital spending forecast for FY26 to FY28. Discretionary cash
flow generation will start to build steadily over the next few years as we further de-lever the balance
sheet and realise the incremental benefits of Sasol 2.0.
In our second order of allocation, our approach to discretionary growth capital will revolve around
prioritising delivery of competitive and sustainable quality earnings through long-term growth
initiatives in collaboration with partners, such as through our proposed joint venture with Topsoe JV
(subject to approval by relevant authorities), and other smaller high yield growth projects. A further
capital efficient manner in which we will support the Transition and Reinvent horizons of our strategy
is through Sasol Ventures, which we launched in February 2023. Sasol Ventures is aimed at investment
in new and emerging technologies aligned to Sasol’s sustainability journey. The activities of Sasol
Ventures will complement and support the internal Research and Technology function, and we look
forward to strong synergistic and strategic benefits from this integration.
Continued capital returns to shareholders
We remain committed to delivering sustainable
shareholder returns and stepping up cash returns as
we reach our net debt targets. In FY22, we reinstated
dividends to shareholders and continued in FY23
with an interim dividend of R7,00 per ordinary share.
We are pleased to declare a final dividend of R10,00
per ordinary share for the year ended 30 June 2023.
We continue to look at further deleveraging the
balance sheet in support of a sustainable dividend
of between 2,8 to 2,5 times cover of core headline
earnings per share.
Environmental, social and governance (ESG) reporting
We are progressing with the evaluation of our ESG reporting framework in relation to the future
requirements of various standard-setting bodies including the International Sustainability
Standards Board and the European Corporate Sustainability Reporting Directive. In this way,
we continue to drive compliance and the integration of sustainability in our reporting. We are
required to commence reporting in this respect from the 2025 financial year end.
SASOL INTEGRATED REPORT 2023
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