Johannesburg, South Africa – Sasol Limited today released full year results for the year ended 30 June 2015, showing earnings increased to R29,7 billion from R29,6 billion in the prior year. Headline earnings per share decreased by 17% to R49,76 and earnings per share increased by 0,3% to R48,71 compared to the prior year.
Profit from operations of R46,5 billion increased by 2% compared to the prior year. This achievement was due to a strong overall operational performance with increased sales volumes, resilient margins and cost increases contained to below inflation. Conversely, the group’s profitability was adversely impacted by a 33% decline in average Brent crude oil prices (average dated Brent was US$73,46/barrel for the year ended 30 June 2015 compared with US$109,40/barrel in the prior year). This decrease was partly off-set by a 10% weaker average rand/US dollar exchange rate (R11,45/US$ for the year ended 30 June 2015 compared with R10,39/US$ in the prior year).
In addition, Sasol’s profitability for the 2015 financial year was also positively impacted by the following notable once-off and significant items:
- a cash-settled share-based payment credit to the income statement of R1,4 billion compared to an expense of R5,4 billion in the prior year, largely due to a 29% lower share price (closing share price of R450,00 compared to R632,36 in the prior year), partially negated by the increase in the number of share options exercised during the year;
- the extension of the useful life of our operating assets in South Africa resulting in a decrease in depreciation of R1,4 billion and environmental rehabilitation provisions of R1,8 billion; and
- net remeasurement items expense of R0,8 billion in the current year compared to a R7,6 billion expense in the prior year. These items relate mainly to the full reversal of the previous R2,0 billion impairment of the FT Wax Expansion Project, the partial impairment of our Canadian shale gas assets of R1,3 billion and the partial impairment of our Etame assets in Gabon of R1,3 billion.
Excluding the impact of these remeasurement items, net once-off charges and movements in our share-based payment expense, normalised earnings attributable to shareholders decreased by 30% from the prior year.
Notwithstanding a tough macroeconomic environment, we maintained a strong operational performance across our global integrated value chain over the year. Our Energy Business in Southern Africa increased its liquid fuels sales volumes by 5% to 61,5 million barrels compared to the prior year. Our Chemicals Business delivered an exceptional performance, having consistently reported increased sales volumes over the past two years. Normalising for the impact of the sale of our Solvents Germany and Sasol Polymer Middle East (SPME) businesses and through focused marketing and sales initiatives, sales volumes for Performance Chemicals and Base Chemicals both increased by 2% from the prior year.
Internationally, our ORYX GTL facility sustained a solid performance, with an average utilisation rate of 90% for the year, in line with market guidance provided, despite an earlier than planned shutdown during December 2014 to January 2015.
Cash fixed costs remained flat, in nominal terms, compared to the prior year. Our Business Performance Enhancement Programme (BPEP) and Response Plan reduced our cash fixed costs, net of the implementation of the BPEP, by 5%, which was offset by the South African producers’ price index (SA PPI). This was achieved despite a difficult South African cost environment in respect of labour and electricity charges.
Our company-wide BPEP made significant progress in sustainably reducing our cost base. We delivered actual cost savings of R2,5 billion, well ahead of our target of R1,5 billion for the 2015 financial year. Implementation costs for the programme were approximately R200 million below an expected R2,1 billion.
In turn, our Response Plan achieved a R8,9 billion cash conservation benefit, which is at the upper end of our R6 billion to R10 billion target range for the 2015 financial year.
“With a new operating model, underpinned by streamlined corporate and management structures, simplified governance and decision-making processes, and new ways of working, Sasol is a redefined, resilient, integrated chemicals and energy company,” said David Constable, President and Chief Executive Officer, Sasol Limited. “The launch of a significant change programme in 2012, at a time when we were delivering record profits, enabled us to place the company in the strongest position possible to respond to a turbulent macroeconomic environment.”
Constable added, “Ultimately, our ability to sustainably reduce costs and fundamentally reposition Sasol for long-term growth and longevity is testament to the tenacity of our people who rallied behind the company’s call to maintain momentum and remain focused on driving shareholder value for the benefit of all our stakeholders.”
As previously announced, our revised dividend policy is a dividend cover range based on headline earnings per share. The dividend cover was 2,7 times at 30 June 2015 (30 June 2014: 2,8 times). Taking into account the current volatile macroeconomic environment, capital investment plans, our cash conservation initiative, the current strength of our financial position, and the dividend cover range, the Sasol Limited board of directors has declared a final gross dividend of R11,50 per share (15% lower than the prior year). This brings the full year dividend to R18,50 per share.
“Our strong results for the 2015 financial year are testament to the resilience of our company, the diversity in our asset portfolio and our ability to decisively respond to the volatile and uncertain global economic environment,” said Bongani Nqwababa, Chief Financial Officer, Sasol Limited.
“Through our tailored business planning, we are making steady progress in mitigating the challenges of a low oil price environment. Our Business Performance Enhancement Programme is delivering sustainable cost savings ahead of expectations, while our Response Plan allows us to conserve cash in a volatile environment. Cash flow generation remains robust, which, together with our solid, ungeared balance sheet, enables us to execute our growth projects in Southern Africa and the United States. Our US$8,9 billion world-scale ethane cracker and downstream derivatives complex in Lake Charles, Louisiana remains on track to reach beneficial operation in 2018,” concluded Nqwababa.
The global economic environment remains very volatile and uncertain with global economic growth expected to continue at a moderate and uneven pace over the near-term. We expect oil prices to remain low until the end of the 2017 calendar year. The rand exchange rate is expected to be under pressure mainly as a result of the pace of interest rate increases in the US, as well as concerns regarding the South African economy and local growth rate. Foreign exchange and oil price movements are outside of our influence, hence our focus remains firmly on factors within our control, which include volume growth, margin improvement, cost optimisation and cash conservation. In addition, oil and other commodity price risk hedging are continuously evaluated.
We expect an overall strong production performance for the 2016 financial year, with:
- Liquid fuels product volumes for the Energy SBU in Southern Africa to be above 60 million barrels;
- The average utilisation rate at ORYX GTL in Qatar to be above 87% of nameplate capacity, taking a statutory shutdown into account;
- Chemicals sales volumes to be slightly higher than the prior year, with margins in Base Chemicals under pressure and in Performance Chemicals, varied margins expected for our different product streams;
- Average Brent crude oil prices to remain between US$50 and US$60 during the next financial year;
- Cash fixed costs to be below SA PPI, taking into account the R4,0 billion cash cost savings, as a result of the BPEP, with an exit run rate of at least R4,3 billion by the end of financial year 2016;
- Capital expenditure of R70 billion for 2016 and R65 billion in 2017, as we progress with the execution of our growth plan and strategy##;
- Our balance sheet gearing up to a level of between 15% and 30%; and
- The Response Plan cash flow contribution to range between R10 billion and R16 billion.
## These estimates may be impacted by further exchange rate volatility or the rate of progress of our LCCP project in the US.
Sasol's annual financial statements for the year ended 30 June 2015, prepared in accordance with International Financial Reporting Standards, have been issued and have been posted on the Sasol website at www.sasol.com.
A copy of the annual financial statements of the Company may be obtained by every person who holds or has a beneficial interest in any securities issued by the Company, without charge, as follows:
1. By downloading a copy of the annual financial statements from the company’s website, www.sasol.com; or
2. By requesting a copy of the annual financial statements from Sasol Investor Relations by means of either:
a. e-mail to investor.relations@sasol.com;
b. Post to PO Box 5486, Johannesburg, 2000, South Africa; or
c. Facsimile to + 27 (0) 11 522 1184.
