Sasol Limited Interim financial results 2016
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Despite the challenging macroeconomic environment, we continued to deliver a strong operational
performance, with increased production volumes and cost increases contained to well below inflation.
The highlights of our operational performance can be summarised as follows:
▪
Secunda Synfuels Operations (SSO) production volumes increased by 3% (1 million barrels) compared to
the prior period;
▪
Total liquid fuels production for the Energy Business increased by 4% (1,1 million barrels) compared to the
prior period, as a result of a higher portion of SSO’s volumes being utilised by the Energy Business;
▪
The ORYX GTL facility continued to deliver a solid performance, with an average utilisation rate of 90% for
the period;
▪
Secunda Chemicals and Sasolburg Operations’ production volumes remained in line with the prior period.
The increase in volumes from our Fischer-Tropsch Wax Expansion Project (FTWEP) was offset by lower
polypropylene (C3) volumes, due to planned commissioning activities associated with the C3 Expansion
Project;
▪
Sales volumes for the Base Chemicals Business decreased by 13%, given lower C3 volumes available as
a result of the commissioning of the C3 Expansion Project and softer demand for certain commodity
chemical products; and
▪
Sales volumes from our Performance Chemicals Business, normalised for the planned shutdown at our
ethylene plant in North America, remained consistent with the prior period.
In addition, Sasol’s profitability was further impacted by the following notable once-off and significant items:
▪
net remeasurement items expense of R7,6 billion compared to a R0,2 billion expense in the prior
period. These items relate mainly to a partial impairment of our share in the Montney shale gas asset
of R7,4 billion (CAD665 million), due to a further deterioration of conditions in the North American gas
market resulting in a 16% decline in forecasted natural gas prices. The impairment reduces the carrying
value of the asset to approximately CAD559 million. This asset remains highly sensitive to changes in
the gas price and accordingly, we estimate that a 5% change in the gas price may result in a change of
CAD255 million (approximately R2,9 billion) in the recoverable amount of the asset;
▪
a cash-settled share-based payment charge to the income statement of R0,4 billion compared to a credit
of R2,9 billion in the prior period; and
▪
the reversal of a provision of R2,3 billion (US$166 million) based on a favourable ruling received from the
Tax Appeal Tribunal in Nigeria relating to the Escravos Gas-to-Liquids (EGTL) investment. The Nigerian
Federal Inland Revenue Service has appealed the decision. The outcome of the appeal process is uncertain,
and a possible obligation may arise as a result of any future proceedings. At this time, the value of any
potential future obligation cannot be reasonably estimated.
We continued to drive our cost containment programme and reduced our cash fixed costs by 4,5% in nominal
terms compared to the prior period. Excluding the impact of inflation, exchange rates and once-off costs, our
cash fixed costs reduced by an exceptional 8,4%. This was achieved by an accelerated sustainable delivery of
our BPEP and RP programmes.
Our company-wide BPEP, which is aimed at delivering sustainable cost savings of R4,3 billion by the end of
the 2016 financial year, is nearing its completion. We delivered actual cost savings up to 31 December 2015 of
R3,1 billion, which are on track to meet our savings target forecast of R4,0 billion, at an annual exit run rate of
R4,3 billion by the end of financial year 2016. Implementation costs amounted to R132 million for the period
compared to R1,9 billion for the 2015 financial year. Given an ongoing low oil price environment, we have
revised our BPEP savings target to achieve sustainable savings at an exit run rate of R5 billion by the end of
the 2017 financial year. Cost trends are still forecast to track SA PPI from the 2017 financial year.
Our comprehensive RP, focusing on cash conservation to counter the lower-for-longer oil price environment,
has continued to yield positive cash savings in line with our 2016 financial year targets, despite margin
contraction and difficulties in placing product in the market. The RP realised R10,8 billion in cash savings for