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Sasol Limited - Chairmans Review; Year-end Results

Release Date: 16/09/1998 16:40:34      Code(s): SOL SOLD
CHAIRMAN'S REVIEW
(COMPANY REGISTRATION NUMBER 79/03231/06)
SALIENT POINTS
- PROFITS ATTRIBUTABLE TO SHAREHOLDERS DECREASED BY 18,6% TO R2075 MILLION.
- TOTAL DIVIDEND MAINTAINED AT 147 CENTS PER SHARE.
- FOREIGN SALES AND EXPORTS INCREASED BY 17,7% TO R4454 MILLION.
- COMMISSIONING OF NEW-GENERATION SYNTHOL REACTORS WILL RESULT IN COST
REDUCTIONS.
- GLOBALISATION AND ALLIANCING STRATEGY IN SUPPORT OF SUSTAINABLE GROWTH
CONTINUES TO GATHER IMPETUS.
- INCREASE IN PROFITS FOR 1999 FINANCIAL YEAR ANTICIPATED.
FINANCIAL RESULTS
THE AUDITED CONSOLIDATED RESULTS OF THE GROUP FOR THE YEAR ENDED 25 JUNE 1998
WERE AS FOLLOWS:
                                            YEAR         YEAR
                                            ENDED        ENDED
                                            25/06/98     25/06/97
CONSOLIDATED INCOME STATEMENT               R MILLION    R MILLION
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TURNOVER                                    16 666       15 810
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OPERATING PROFIT                            3 121        3 900
DIVIDENDS RECEIVED                          4            9
NET INTEREST RECEIVED                       161          322
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INCOME BEFORE TAXATION                      3 286        4 231
TAXATION                                    (1 225)      (1 592)
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INCOME AFTER TAXATION                       2 061        2 639
OUTSIDE SHAREHOLDERS' INTEREST              (28)         (33)
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                                            2 033        2 606
TAXATION EQUALISATION RESERVE TRANSFER      100          -
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EARNINGS ATTRIBUTABLE TO PERMANENT
CAPITAL HOLDERS                             2 133        2 606
NET DEBENTURE INTEREST                      (58)         (58)
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EARNINGS ATTRIBUTABLE TO SHAREHOLDERS       2 075        2 548
DIVIDENDS                                   (890)        (889)
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EARNINGS PER SHARE (CENTS)                  343          422
% INCREASE/(DECREASE)                       (18,7)       20,6
DIVIDEND PER SHARE (CENTS)
- INTERIM                                   65           65
- FINAL                                     82           82
- TOTAL                                     147          147
DIVIDEND COVER (TIMES)                      2,3          2,9
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THE ANNUAL REPORT IS AVAILABLE AT THE REGISTERED OFFICE OF THE COMPANY.
RESULTS
NOTABLY DIFFICULT TRADING CONDITIONS PREVAILED IN MOST FUELS AND PETROCHEMICAL
MARKETS DURING THE FINANCIAL YEAR THAT SIGNIFICANTLY REDUCED THE ATTRIBUTABLE
EARNINGS OF THE SASOL GROUP RELATIVE TO THE PREVIOUS YEAR.
THESE TRADING CONDITIONS AROSE FROM A VARIETY OF ECONOMIC FACTORS. IN
PARTICULAR, THE FINANCIAL CRISES IN SOUTH-EAST ASIA AND THE UNCERTAINTIES
ATTENDING THE JAPANESE ECONOMY IMPACTED DRAMATICALLY ON INTERNATIONAL COMMODITY
MARKETS. THE SUBSTANTIAL REDUCTION IN ASIAN CRUDE OIL DEMAND, COUPLED WITH AN
ABNORMALLY MILD WINTER IN THE NORTHERN HEMISPHERE, RESULTED IN A GLOBAL SURPLUS
OF CRUDE OIL AND A SLIDE IN CRUDE PRICES TO THEIR LOWEST LEVELS FOR SEVERAL
YEARS.
COMPARED WITH THE 1997 FINANCIAL YEAR AVERAGE OF US$19,33, THE AVERAGE PRICE
FOR DUBAI CRUDE OIL DROPPED BY 22% TO US$15,08 PER BARREL, ITS LOWEST AVERAGE
LEVEL IN FOUR YEARS. CHEMICAL COMMODITY PRICES WERE ALSO SUPPRESSED; SALES
VOLUMES, HOWEVER, COULD BE INCREASED. REDUCED PRICES WERE PARTIALLY COUNTERED
BY THE SLIGHT WEAKENING OF THE RAND AGAINST THE US DOLLAR. THE AVERAGE
RAND/DOLLAR EXCHANGE RATE DEVALUED BY 6,6% FROM R4,52 FOR THE 1997 FINANCIAL
YEAR TO R4,82 FOR THE 1998 FINANCIAL YEAR.
PROFITS ATTRIBUTABLE TO SHAREHOLDERS DECREASED BY 18,6% TO R2075-MILLION, WHILE
EARNINGS PER SHARE WERE REDUCED BY 18,7% FROM 422 CENTS TO 343 CENTS. THE
DIVIDEND PER SHARE, HOWEVER, WAS MAINTAINED AT 147 CENTS.
BUSINESS AND OPERATIONAL HIGHLIGHTS
DURING THE YEAR FOREIGN SALES INCREASED BY 17,7% TO R4 454-MILLION TO
CONTRIBUTE 26,7% OF GROUP TURNOVER. FOREIGN SALES IN THE 1997 FINANCIAL YEAR
AMOUNTED TO 23,9% OF GROUP TURNOVER. OVER THE PAST THREE FINANCIAL YEARS,
FOREIGN SALES HAVE REGISTERED AN AVERAGE ANNUAL GROWTH OF 36,7%.
SASOL SYNTHETIC FUELS (SSF), DRIVEN BY ITS FAR-REACHING BUSINESS TRANSFORMATION
PROGRAMME, CONTINUED TO ACHIEVE SIGNIFICANT OPERATIONAL IMPROVEMENTS AND HAS
OVER THE LAST TWO FINANCIAL YEARS REDUCED ITS CASH PRODUCTION COSTS PER UNIT.
SSF'S TURNOVER SLIPPED BY 2,1% FROM R7026-MILLION TO R6877-MILLION PRIMARILY AS
A RESULT OF THE LOWER PRICES REALISED FOR ITS LIQUID FUELS AND CHEMICAL
FEEDSTOCKS. DESPITE OPERATIONAL ADVANCES, THE IMPACT OF LOWER CRUDE OIL PRICES
AND THE REDUCTION OF THE PROTECTION FLOOR PRICE BY $1 TO $17 PER BARREL SAW
OPERATING PROFIT DECLINE BY 32% FROM R1914-MILLION TO R1302-MILLION. SSF WAS
AGAIN ABLE TO EXTEND ITS PRODUCTION SHIFT FROM FUELS TOWARDS GREATER VOLUMES OF
FEEDSTOCKS FOR HIGHER-VALUE CHEMICALS, A TREND THAT AUGURS WELL FOR THE
DIVISION'S LONG-TERM GROWTH AND PROFITABILITY.
SSF MAINTAINED STABLE PLANT OPERATIONS AND ACHIEVED FURTHER IMPROVEMENTS IN
ECONOMIES OF SCALE, PLANT MAINTENANCE AND SAFETY. THE DIVISION WAS COMMITTED TO
A CAPITAL INVESTMENT PROGRAMME OF MORE THAN R2 200-MILLION, THE BULK OF WHICH
WAS CONCENTRATED IN MAJOR INITIATIVES TO IMPROVE ITS COAL GASIFICATION, OIL
SYNTHESIS AND REFINERY OPERATIONS. PRODUCTION IS BEING INCREASED BY ABOUT 6%
DURING 1999 AND A FURTHER 15% IS LIKELY IN THE NEAR FUTURE THROUGH THE PLANNED
SKY HIGH PROJECT AT SECUNDA - A TOTAL POSSIBLE 25% ABOVE CURRENT PRODUCTION
LEVELS.
SASOL MINING FACED SOME CHALLENGING OPERATIONAL CONDITIONS, INCLUDING UNUSUALLY
HIGH RAINFALL AND RESULTANT DELAYS IN THE COMMISSIONING OF SOME OF ITS NEW
PRODUCTION FACILITIES. THE DIVISION DISPLAYED SIGNS OF APPRECIABLE RECOVERY
FOLLOWING ITS COMMITMENT DURING THE YEAR TO A COMPREHENSIVE, FOUR-YEAR BUSINESS
RENEWAL PROCESS.
TURNOVER INCREASED BY 13,3% FROM R2442-MILLION TO R2768-MILLION PRIMARILY AS A
RESULT OF INCREASED PRODUCTION. MORE SIGNIFICANT WAS THE 22,4% INCREASE IN
SASOL MINING'S OPERATING PROFIT, UP FROM R219-MILLION TO R268-MILLION.
SASOL CHEMICAL INDUSTRIES (SCI) PERFORMED SATISFACTORILY GIVEN THE PREVAILING
MARKET CONDITIONS. THE OPERATING PROFIT WAS ONLY MARGINALLY LOWER THAN THE
PREVIOUS YEAR AT R1 085-MILLION, A FALL OF R54-MILLION. THE IMPACT OF LOWER
SELLING PRICES WAS OFFSET BY SALES VOLUME INCREASES.
IN RECENT YEARS SCI HAS GROWN FROM AN INITIAL BASE WHERE IT DEALT WITH THE
ASSOCIATED PRODUCTS OF SYNFUEL PRODUCTION, TO A FULLY FLEDGED CHEMICAL BUSINESS
THAT ADDS INCREASING VALUE TO A DIVERSE RANGE OF PRODUCTS THROUGH PROCESS UNITS
AND MARKETING STRATEGIES IN WHOLLY OWNED BUSINESS UNITS AND JOINT VENTURES. IN
THE NEAR FUTURE SCI IS EXPECTED TO CONTRIBUTE 50% OF SASOL'S OPERATING PROFIT.
SASOL OIL HAD A CHALLENGING YEAR GIVEN THE IMPACT OF THE LOW INTERNATIONAL
CRUDE OIL PRICES AND THE LACK OF REAL ECONOMIC GROWTH IN SOUTHERN AFRICA. IN
THE WAKE OF THE EXCELLENT 1997 FINANCIAL YEAR, TURNOVER INCREASED BY ONLY 1,5%
FROM R3488-MILLION TO R3542-MILLION WHILE ITS CONTRIBUTION TO GROUP OPERATING
PROFIT FELL BY 22,6% TO R517-MILLION.
THE RELATIONSHIP BETWEEN SASOL AND THE OIL COMPANIES HAS FOR MANY YEARS BEEN
GOVERNED BY A SUPPLY AGREEMENT. BUSINESS CIRCUMSTANCES IN RECENT YEARS,
HOWEVER, HAVE BEEN CHANGING AND SASOL NOW BELIEVES IT IS TIME TO REVIEW THE
STRUCTURE AND NATURE OF THIS AGREEMENT. DURING THE PAST YEARS SOME DISPUTES
OVER THE INTERPRETATION OF THE AGREEMENT RESULTED IN ARBITRATION PROCEEDINGS.
IT IS HOPED THAT THESE DISPUTES WILL BE RESOLVED CONSTRUCTIVELY TO THE MUTUAL
SATISFACTION OF SASOL AND THE OIL COMPANIES.
CAPITAL INVESTMENTS
IN LINE WITH ITS FAR-REACHING GROWTH AND DIVERSIFICATION STRATEGY, SASOL
EXPECTS TO SUSTAIN CAPITAL INVESTMENT OF R3000-MILLION PER YEAR TO THE END OF
THIS CENTURY. THE VALUE OF APPROVED CAPITAL PROJECTS CURRENTLY AMOUNTS TO
R7153-MILLION. THIS INCLUDES AN AMOUNT OF R4672-MILLION FOR THE ACQUISITION OF
AECI.
PROFIT OUTLOOK
THE FINANCIAL IMPLICATIONS OF RECENT ECONOMIC EVENTS IN ASIA, LATELY FOLLOWED
BY RUSSIA, HAVE NOT YET BEEN FULLY REALISED. THE OUTLOOK FOR THE STAGNANT
JAPANESE ECONOMY IS UNCERTAIN AND A DEVALUATION OF THE CHINESE RENMINBI REMAINS
A DISTINCT POSSIBILITY. THESE FACTORS HAVE A MATERIAL IMPACT ON PROSPECTS FOR
WORLD ECONOMIC GROWTH AND, CONSEQUENTLY, ON THE PERFORMANCE OF SASOL AS A
GROWING PARTICIPANT IN THE GLOBAL PETROCHEMICALS AND ALLIED MARKETS.
THE RESULTS FOR 1999 WILL, HOWEVER, BE DOMINATED BY THE EFFECT OF THE RECENT
DRAMATIC FALL IN THE VALUE OF THE RAND TO THE US$ SHOULD THERE BE NO MATERIAL
STRENGTHENING OF THE RAND. THE AVERAGE RAND/DOLLAR EXCHANGE RATE IN 1998 WAS
R4,82 COMPARED WITH AN EXPECTED AVERAGE IN THE ORDER OF R6,20 FOR 1999. AS
SASOL'S PROFITS ARE HIGHLY GEARED TO CHANGES IN THE EXCHANGE RATE, THE RECENT
WEAKENING IN THE VALUE OF THE RAND COULD HAVE THE EFFECT OF MATERIALLY
INCREASING PROFITS.
AT SSF THE 6% GAS EXPANSION PROJECT IS NEARING COMPLETION. THE IMMINENT
COMMISSIONING OF THE NEW-GENERATION SYNTHOL REACTORS IS EXPECTED TO RESULT IN
COST REDUCTIONS. THE TRANSFORMATION PROCESS WILL CONTINUE TO HAVE A FAVOURABLE
IMPACT AND UNIT COST INCREASES ARE EXPECTED TO BE CONTAINED TO BELOW THE
INFLATION RATE.
AT SASOL MINING PRODUCTION IS EXPECTED TO REMAIN AT ABOUT THE 1998 LEVELS WHILE
THE RENEWAL PROCESS WILL CONTINUE TO CONTRIBUTE TO KEEPING COST INCREASES PER
TON TO BELOW THE INFLATION RATE. THE BENEFITS ACCRUING FROM THE RENEWAL PROCESS
WILL, HOWEVER, BE REDUCED BY NON-RECURRING COSTS INCURRED IN CONJUNCTION WITH,
AND AS A RESULT OF, THE RENEWAL PROCESS.
CHEMICAL PRODUCT PRICES ARE EXPECTED TO REMAIN WEAK AND IN CERTAIN INSTANCES TO
FALL EVEN FURTHER. VOLUME SALES TO ASIA MAY DROP FURTHER, BUT VOLUME GROWTH IS
EXPECTED FOR SOLVENTS, ALPHA OLEFINS, EXPLOSIVES AND FERTILIZERS THROUGH SALES
TO OTHER PARTS OF THE WORLD.
SUBJECT TO TIMEOUS COMPETITION BOARD APPROVAL, SASOL WILL ACQUIRE AECI LIMITED
WITH EFFECT FROM 1 JULY 1998. IT IS EXPECTED THAT THE IMPACT OF THE AECI
ACQUISITION ON PROFITS WILL INITIALLY BE NEGATIVE; HOWEVER, AS THE BENEFITS OF
THE ACQUISITION BEGIN TO MATERIALISE, SIGNIFICANT GROWTH IS EXPECTED. THE AECI
ACQUISITION WILL RESULT IN A MATERIAL INCREASE IN OPERATING PROFIT.
REFINING MARGINS ARE EXPECTED TO IMPROVE, RESULTING IN AN IMPROVED PERFORMANCE
AT SASOL OIL.
TAKING ALL THESE FACTORS INTO ACCOUNT AND IN PARTICULAR THE EXPECTED WEAKER
RAND/DOLLAR EXCHANGE RATE, SHAREHOLDERS CAN, BARRING UNFORESEEN CIRCUMSTANCES,
ANTICIPATE A REASONABLE INCREASE IN PROFITS.
THIS REPORT CONTAINS CERTAIN STATEMENTS ABOUT THE FUTURE THAT MAY NOT
MATERIALISE.
GROWTH INITIATIVES
DESPITE THE UNFAVOURABLE IMPACT OF RECENT ECONOMIC TRENDS, THE SASOL
GLOBALISATION AND ALLIANCING STRATEGY IN SUPPORT OF SUSTAINABLE GROWTH
CONTINUED TO GATHER IMPETUS.
SASOL SYNFUELS INTERNATIONAL (PTY) LIMITED (SSI) WAS INCORPORATED DURING THE
1998 FINANCIAL YEAR TO SPECIFICALLY DEVELOP AND IMPLEMENT INTERNATIONAL
BUSINESS VENTURES BASED ON THE APPLICATION OF SASOL'S FISCHER-TROPSCH SYNTHESIS
TECHNOLOGY. THIS TECHNOLOGY FOR CONVERTING NATURAL GAS INTO LIQUID FUELS IS
RAPIDLY GAINING INTERNATIONAL RECOGNITION AS AN ATTRACTIVE ROUTE FOR GENERATING
INCOME FROM THOSE NATURAL GAS RESERVES THAT WOULD OTHERWISE NOT FIND USEFUL
COMMERCIAL APPLICATION.
DURING THE YEAR SSI FOCUSED PRIMARILY ON ITS PLANNED GAS-TO-FUELS VENTURES IN
QATAR AND NIGERIA, AS WELL AS JOINT STUDIES FOR OFFSHORE APPLICATIONS OF ITS
TECHNOLOGY IN THE NORTH SEA. THROUGH THE QATARI VENTURE, WITH THE QATAR GENERAL
PETROLEUM CORPORATION AND PHILLIPS PETROLEUM CORPORATION AS VENTURE PARTNERS,
SASOL ENVISAGES A 20 000 BARRELS PER DAY PLANT BEING COMMISSIONED IN 2002. ON
THE STRENGTH OF A PRELIMINARY FEASIBILITY STUDY COMPLETED DURING THE YEAR UNDER
REVIEW, SASOL AND CHEVRON NIGERIA LIMITED HAVE COMMITTED THEMSELVES TO PROCEED
WITH THE DETAILED FEASIBILITY INVESTIGATION OF A PLANT IN NIGERIA.
AECI, A DIVERSIFIED SOUTH AFRICAN CHEMICALS GROUP WITH AN ANNUAL TURNOVER OF
MORE THAN R8 000-MILLION, PRESENTS SASOL WITH A MAJOR NEW GROWTH AND
DIVERSIFICATION OPPORTUNITY IN SUPPORT OF ITS GLOBALISATION PROGRAMME. THE
PROPOSED ACQUISITION IS IN LINE WITH SASOL'S DECLARED INTENT TO INCREASE THE
PROPORTION OF ITS EARNINGS FROM CHEMICAL PRODUCTS. THERE IS AN EXCELLENT FIT OF
A SUBSTANTIAL PART OF AECI WITH CORE BUSINESSES WITHIN SCI. THIS APPLIES
PARTICULARLY TO AECI EXPLOSIVES LIMITED (AEL), KYNOCH (PTY) LIMITED AND POLIFIN
LIMITED. THE ACQUISITION WILL CREATE THE OPPORTUNITY FOR RELATED SASOL CHEMICAL
BUSINESSES TO MORE RAPIDLY ACHIEVE ECONOMIES OF SCALE APPROACHING THOSE OF
COMPETING INTERNATIONAL COMPANIES.
THE TURNOVER OF THE SASOL GROUP WILL INCREASE BY APPROXIMATELY 50% WITH
IMMEDIATE EFFECT. SIGNIFICANT POTENTIAL FOR THE REDUCTION OF OVERHEAD COSTS AND
THE REALISATION OF SYNERGY EXISTS. NOTABLY, A POOL OF HIGHLY SKILLED COMPETENT
PERSONNEL WILL SUPPLEMENT THAT OF SASOL TO PROPEL THE GROUP SUCCESSFULLY
TOWARDS ITS DECLARED GOAL OF GLOBALISATION SUPPORTED BY COMPETITIVE BUSINESSES.
THE PORTFOLIO OF BUSINESSES OF THE COMBINED SASOL AND AECI GROUPS WILL BE
REVIEWED TO ESTABLISH WHICH ARE THE CORE AND LONG-TERM INTERNATIONALLY
COMPETITIVE ACTIVITIES AND BUSINESS GROUPINGS. THOSE BUSINESSES THAT DO NOT FIT
OR CONTRIBUTE TO THE SASOL OBJECTIVES WILL, AT THE APPROPRIATE TIME, BE
DISPOSED OF. THESE DISPOSALS COULD PRESENT OPPORTUNITIES FOR BLACK ECONOMIC
EMPOWERMENT AND HENCE ALSO CONTRIBUTE TO THE DEVELOPMENT OF SOUTH AFRICA.
SCI, THROUGH SASOL MINING EXPLOSIVES (SMX), HAS INCREASED ITS 49% STAKE IN
SASOL DHB HOLDINGS INC IN THE UNITED STATES TO 60%. THIS COMMITMENT WILL
PROVIDE THE ADDITIONAL IMPETUS TO ENABLE SMX TO REALISE ITS DYNAMIC GROWTH
PLANS FOR ITS EXPLOSIVES INTERESTS AND UNIQUE TECHNOLOGIES IN THE BURGEONING
NORTH AMERICAN MINING SECTOR.
DURING THE YEAR THE GROUP'S NEWEST INTERNATIONAL JOINT VENTURE, MERICHEM-SASOL
LP (TRADING AS MERISOL), PROGRESSED TOWARDS INTEGRATING THE SOUTH AFRICAN
OPERATIONS OF SASOL PHENOLICS WITH THOSE OF THE MERICHEM COMPANY OF THE UNITED
STATES.
EXPLORATION ACTIVITIES
SASOL PETROLEUM INTERNATIONAL (PTY) LIMITED (SPI) - WITH ITS CONSORTIUM
PARTNERS OF ARCO AND ZARARA - IS COMMITTED TO PROMISING NATURAL GAS EXPLORATION
PROJECTS IN MOZAMBIQUE. IN WEST AFRICA, SPI AND ITS EXPLORATION PARTNERS
PROGRESSED WITH JOINT-VENTURE OIL EXPLORATION ACTIVITIES IN THE PEOPLE'S
REPUBLIC OF THE CONGO WHERE THREE OFFSHORE DISCOVERIES HAVE BEEN MADE. SPI'S
FIRST OIL DISCOVERY, IN THE MARINE-VI BLOCK, IS BEING DEVELOPED AND ITS FIRST
OIL IS SCHEDULED FOR PRODUCTION DURING NOVEMBER 1998. THE OTHER TWO CONGOLESE
DISCOVERIES, DJAMBALA SOUTH AND FOUKANDA, WERE MADE DURING THE YEAR. A
PROMISING DISCOVERY WAS ALSO MADE IN THE ETAME BLOCK OF GABON. ALTHOUGH THESE
DISCOVERIES ARE SMALL, THEY WILL CONTRIBUTE SIGNIFICANTLY TOWARDS MAKING THIS
FLEDGLING COMPANY SELF-RELIANT IN ITS CASH FLOW REQUIREMENTS FOR GROWTH.
YEAR 2000 COMPLIANCE
THE GROUP IS ON TARGET TO HAVE ALL KNOWN NON-COMPLIANT SYSTEMS EITHER REPLACED
OR UPGRADED TO BE FULLY YEAR 2000 COMPLIANT BEFORE THE END OF THE 1999
FINANCIAL YEAR.
ENVIRONMENTAL ASPECTS
SASOL BELIEVES THAT THE PROTECTION OF THE ENVIRONMENT IS AN OBLIGATION AND NOT
A CHOICE. CONSEQUENTLY, ENVIRONMENTAL IMPACT ASSESSMENTS (EIAS) ARE
COMMISSIONED FOR ALL NEW PROJECTS IN TERMS OF THE INTERNATIONALLY RECOGNISED
ISO 14001 ENVIRONMENTAL MANAGEMENT SYSTEM. THE GROUP ALSO STRIVES CONTINUOUSLY
TO REDUCE EMISSIONS, WASTE AND EFFLUENT INTO THE ENVIRONMENT.
CORPORATE SOCIAL INVESTMENT
IN KEEPING WITH ITS SOCIAL INVESTMENT LEGACY, SASOL REMAINS SENSITIVE TO THE
NEEDS OF SOCIETY, ESPECIALLY IN THE GROUP'S PRINCIPAL OPERATING AREAS OF
SASOLBURG AND SECUNDA. THE GROUP CONTINUED ITS SUBSTANTIAL COMMITMENT TO A
WIDE-RANGING SOCIAL INVESTMENT PROGRAMME.
IN ADDITION TO THE NORMAL CORPORATE SOCIAL INVESTMENT PROGRAMME (R23-MILLION),
DIRECTED MOSTLY TOWARDS EDUCATION, TRAINING AND JOB CREATION, THE GROUP ALSO
SPEARHEADED THE ESTABLISHMENT OF CHEMCITY AT SASOLBURG AND PROVIDED FREE
TRAINING TO UNEMPLOYED PEOPLE AT SECUNDA AND SASOLBURG.
THE OBJECTIVE OF CHEMCITY INTERNATIONAL CHEMICAL PARK (PTY) LIMITED IS TO
PROMOTE SMALL, MEDIUM AND MICRO ENTERPRISES (SMMES) THAT WILL ADD VALUE TO
CHEMICAL FEEDSTOCKS. A TOTAL OF R36-MILLION WAS INVESTED IN LAND AND START-UP
COSTS AND A FURTHER R15-MILLION HAS BEEN COMMITTED TO PROVIDE INFRASTRUCTURAL
SERVICES.
FREE TRAINING AT A COST OF R7,8-MILLION WAS PROVIDED TO UNEMPLOYED PEOPLE IN
SASOL'S ARTISAN TRAINING FACILITIES AT SASOLBURG AND SECUNDA. THESE WERE OVER
AND ABOVE SASOL'S NORMAL ARTISAN REQUIREMENTS.
ENERGY POLICY
GOVERNMENT'S LONG-AWAITED DRAFT ENERGY WHITE PAPER, RELEASED IN JUNE 1998, GOES
A LONG WAY TO PROVIDING THE BASIS FOR A POLICY FRAMEWORK. SASOL COMMENDS
GOVERNMENT AND, IN PARTICULAR, THE MINISTRY OF MINERALS AND ENERGY FOR ITS
EFFORTS IN THIS REGARD.
TO REITERATE ITS RESPONSE TO ONE OF THE ENERGY WHITE PAPER'S KEY ELEMENTS,
SASOL SUPPORTS THE PRINCIPLE OF DEREGULATING THE SOUTH AFRICAN LIQUID FUELS
INDUSTRY PROVIDED DEREGULATION IS CONDUCTED IN A PHASED AND RESPONSIBLE MANNER,
AS SUGGESTED IN THE WHITE PAPER, WITH DUE REGARD FOR THE NEEDS OF ALL KEY
STAKEHOLDERS INVOLVED.
RESPONSIBLY PHASED DEREGULATION WOULD AFFORD ALL INDUSTRY PARTICIPANTS,
ESPECIALLY THE SMALLER PLAYERS AND PREVIOUSLY DISADVANTAGED GROUPS, THE
OPPORTUNITY TO GROW AND TRANSFORM IN ORDER TO BECOME MORE COMPETITIVE.
THE SOUTH AFRICAN CABINET DECIDED IN DECEMBER 1995 TO PHASE DOWN THE CRUDE OIL
FLOOR PRICE APPLICABLE TO TARIFF PROTECTION ON SYNTHETIC FUELS. THIS FLOOR
PRICE, WHICH WAS ORIGINALLY SET AT $23 PER BARREL, HAS BEEN PROGRESSIVELY
PHASED DOWN FROM A LEVEL OF US$21,40 PER BARREL IN 1995 TO ITS PRESENT LEVEL OF
US$17 PER BARREL. IN TERMS OF THE 1995 AGREEMENT WITH GOVERNMENT, THE FLOOR
PRICE WILL BE REDUCED FURTHER TO A LEVEL OF US$16 PER BARREL ON 1 JULY 1999 AND
THE LEVEL AND STRUCTURE OF TARIFF PROTECTION FOR THE SYNTHETIC FUEL INDUSTRY
WILL AGAIN BE REVIEWED IN JUNE 2000. NO FURTHER REDUCTION HAS BEEN AGREED.
INTERNATIONAL EXPERIENCE HAS DEMONSTRATED THAT THE AVAILABILITY OF A
COMPETITIVELY PRICED, CLEAN-BURNING ENERGY SOURCE, COULD STIMULATE INDUSTRIAL
ACTIVITY AND ECONOMIC GROWTH. INTERNATIONALLY, REGULATORY FRAMEWORKS FOR
NATURAL GAS HAVE, HOWEVER, BEEN CAREFULLY CRAFTED TO ENCOURAGE INVESTMENT. A
SIMILAR INVESTMENT-FRIENDLY REGIME IS REQUIRED IN SOUTHERN AFRICA, PARTICULARLY
IN LIGHT OF THE RELATIVELY INEXPENSIVE COAL WITH WHICH NATURAL GAS MUST COMPETE
THE SOUTH AFRICAN PIPELINE GAS INDUSTRY IS OPERATING IN A TOTALLY DEREGULATED
MARKET WHICH REMAINS SASOL'S PREFERRED CHOICE.
THE ENERGY WHITE PAPER'S PROPOSED FUTURE REGULATORY MEASURES FOR THE PIPELINE
GAS INDUSTRY ARE BASED ON A MATURE GAS INDUSTRY MODEL. CONSEQUENTLY, THE DRAFT
RECOMMENDATIONS ARE NOT TARGETED AT THE ENCOURAGEMENT OF NEW INVESTMENTS TO
DEVELOP THE NATURAL GAS INDUSTRY. WITH SUCH CONCERNS IN MIND, SASOL HAS
SUBMITTED ITS COMMENTS ON THE DRAFT ENERGY WHITE PAPER TO THE GOVERNMENT'S
PORTFOLIO COMMITTEE FOR MINERALS AND ENERGY.
IN LINE WITH INTERNATIONAL NORMS, THE REGIME SHOULD INCLUDE AN APPROPRIATE TAX
ALLOWANCE FOR THE DEPRECIATION OF PIPELINE INVESTMENTS AS WELL AS A SUITABLE
MEANS OF INITIALLY LIMITING ACCESS TO PIPELINES TO ENSURE THAT INVESTORS ARE
AFFORDED A REASONABLE RETURN. SUCH MEASURES COULD BE MODIFIED AS THE MARKET
MATURES. WITHOUT SUCH MEASURES, PROJECTS SUCH AS THE PROPOSED INTRODUCTION OF
NATURAL GAS INTO THE SOUTHERN AFRICAN MARKET WILL NOT MATERIALISE.
ECONOMIC POLICY
GOVERNMENT'S GROWTH, EMPLOYMENT AND REDISTRIBUTION (GEAR) STRATEGY IS ENDORSED
AS AN ACCEPTABLE FRAMEWORK FOR GROWTH AND FOR A BETTER BUSINESS ENVIRONMENT.
THE NATIONAL IMPERATIVE REMAINS THAT OF PROMOTING ECONOMIC GROWTH AT RATES FAR
BEYOND THOSE THAT HAVE BEEN ACHIEVED BY SUCCESSIVE GOVERNMENTS OVER THE PAST 30
YEARS. IF SOUTH AFRICA IS TO REACH REAL GROWTH IN GROSS DOMESTIC PRODUCT OF SIX
OR SEVEN PERCENT AND THE HIGH LEVELS OF JOB CREATION THAT WOULD FOLLOW, THE
DOMESTIC BUSINESS CLIMATE MUST BE MADE FAR MORE INVESTOR-FRIENDLY. THIS MEANS,
AMONG OTHER THINGS, A DETERMINED ASSAULT ON CRIME, CLEAN AND COMPETENT
GOVERNMENT THROUGH NATIONAL, REGIONAL AND LOCAL AUTHORITIES AND OPENING THE
ECONOMY TO GLOBAL MARKET FORCES.
LABOUR LEGISLATION
SASOL IS ACTIVELY PROMOTING AFFIRMATIVE ACTION, ON MERIT, WITHIN ITS OWN RANKS
AND, IN THE VITAL MATTER OF ENABLING BROADER BLACK ECONOMIC EMPOWERMENT, HAS
ALSO BEEN FACILITATING OWNERSHIP AND MANAGEMENT BEYOND NARROW HISTORICAL
BOUNDARIES. THE INHIBITING EFFECT ON FOREIGN INVESTMENT OF THE EXCESSIVELY
INTRUSIVE NATURE OF MUCH OF THE RECENT DRAFT LEGISLATION, HOWEVER, IS A
CONCERN.
CRIME
SOUTH AFRICA'S UNACCEPTABLY HIGH CRIME LEVEL SEEMS TO PERSIST UNABATED DESPITE
REPEATED ASSURANCES FROM THE GOVERNMENT THAT FURTHER STRINGENT MEASURES WILL BE
UNDERTAKEN TO REMEDY THIS PROBLEM. TO THE GOVERNMENT'S CREDIT, SOME FURTHER NEW
INITIATIVES HAVE BEEN UNDERTAKEN RECENTLY TO BOLSTER THE RESOURCES OF THE
HARD-PRESSED SOUTH AFRICAN POLICE SERVICE.
THE ALARMING CRIME LEVELS CONTINUE TO RETARD SOUTH AFRICA'S INVESTMENT
POTENTIAL BY SCARING OFF PROSPECTIVE INTERNATIONAL INVESTORS. SIMILARLY, CRIME
HAS ALSO CONTRIBUTED TO THE EMIGRATION OF YOUNG, PRODUCTIVE CITIZENS. SADLY,
EMIGRATION IS OCCURRING WHEN SOUTH AFRICA, INCLUDING SASOL, MOST NEEDS TO
DEVELOP AND EXPLOIT ITS INTRINSIC HUMAN TALENTS TO ENABLE DYNAMIC AND
SUSTAINABLE SOCIO-ECONOMIC DEVELOPMENT.
EXCHANGE RATE, INFLATION AND INTEREST RATES
IN THE BROADER CONTEXT OF SOUTH AFRICA'S GENERAL ECONOMIC PERFORMANCE, SOME
SERIOUS RESERVATIONS REMAIN. THE DEPRECIATION OF THE RAND AND A HIGHER
INFLATION RATE ARE OF CONCERN, BUT OF MUCH GREATER CONCERN, ARE THE EXTREMELY
HIGH REAL INTEREST RATES. IT IS CLEARLY A BRAKE ON ECONOMIC DEVELOPMENT AND HAS
RISEN TO A LEVEL THAT IS COUNTERPRODUCTIVE. IF THESE EXORBITANT INTEREST RATES
ARE NOT EASED EXPEDITIOUSLY, THEY WILL LEAD TO THE DEMISE OF MANY SMALL
BUSINESS VENTURES AND A DOWNWARD SPIRAL IN THE ECONOMY, WITH CONSEQUENCES
IMPOSSIBLE TO PREDICT.
COMBINED EFFECT OF RECENT LEGISLATION
THE TRANSFER OF POLITICAL POWER IN OUR COUNTRY HAS INDEED BEEN A MODERN
MIRACLE. MOREOVER, GOVERNMENT'S CONCERN FOR AND PREOCCUPATION WITH THE
TRANSFORMATION OF THE SOUTH AFRICAN ECONOMY AND SOCIETY ARE APPRECIATED AND
FULLY ACCEPTED. TAKEN COLLECTIVELY, HOWEVER, THE POTENTIALLY DAMAGING NATURE OF
SOME OF THE RECENT SERIES OF LEGISLATION AND DRAFT LEGISLATION COULD SERIOUSLY
HINDER THE ECONOMY'S ABILITY TO DELIVER REAL GROWTH - ESPECIALLY IN TODAY'S
ADVERSE GLOBAL ECONOMIC ENVIRONMENT.
   GLOBALLY, THERE IS AMPLE EVIDENCE THAT THE ABILITY OF THE ECONOMY OF A
NATION TO DELIVER IS HIGHLY DEPENDENT ON OVERALL POLICY SUPPORTED BY INVESTMENT
- ENABLING LEGISLATION - A NATION GETS THE INVESTMENT IT DESERVES.
CONCLUSION
DURING THE YEAR DR DIRK MOSTERT AND MESSRS COLIN ADCOCK AND HERC HEFER RETIRED
AND ADV CHRISTO WIESE RESIGNED AS DIRECTORS. I THANK THEM FOR THEIR VALUED
CONTRIBUTIONS OVER MANY YEARS AND WISH THEM WELL FOR THE FUTURE. IT IS ALSO MY
PRIVILEGE TO WELCOME MRS ELISABETH BRADLEY, MESSRS BRIAN CONNELLAN AND JURGEN
SCHREMPP AS DIRECTORS AND MESSRS PAT DAVIES, JAN FOURIE AND RALPH HAVENSTEIN AS
EXECUTIVE DIRECTORS TO THE BOARD.
I THANK ALL MEMBERS OF THE SASOL BOARD, ALL MEMBERS OF MANAGEMENT AND EVERY
EMPLOYEE FOR THEIR VALUED SUPPORT AND DEDICATION DURING THE PAST YEAR. IT
CERTAINLY WAS A CHALLENGING YEAR AND I HAVE NO DOUBT THAT THE NEW FINANCIAL
YEAR WILL PLACE EVEN HIGHER DEMANDS ON ALL OF US. I AM CONFIDENT THAT, UNDER
THE COMPETENT AND VISIONARY GUIDANCE OF PIETER COX, THESE DEMANDS WILL AGAIN BE
MET AND THAT EVERY DIVISION IN THE GROUP WILL RISE TO THE GLOBAL CHALLENGES
FACING US.
I ALSO TAKE THIS OPPORTUNITY TO THANK OUR MANY VALUED CUSTOMERS ACROSS THE
WORLD FOR THEIR LOYAL SUPPORT. OUR STRONG GLOBAL CUSTOMER BASE AND THE HEALTHY
PARTNERSHIPS WHICH CUSTOMERS FORMED WITH THE VARIOUS SASOL BUSINESS DIVISIONS,
HAVE PLACED US IN A STRONG POSITION TO WEATHER THE STORM THAT SWEPT ACROSS
GLOBAL ECONOMIES DURING THE YEAR UNDER REVIEW.
P DU P KRUGER
DECLARATION OF DIVIDEND NUMBER 38
NOTICE IS HEREBY GIVEN THAT THE DIRECTORS HAVE DECLARED A FINAL DIVIDEND OF 82
CENTS PER SHARE (1997 - 82 CENTS PER SHARE) IN RESPECT OF THE FINANCIAL YEAR
ENDED 25 JUNE 1998. THE DIVIDEND IS DECLARED IN THE CURRENCY OF THE REPUBLIC OF
SOUTH AFRICA AND WILL BE PAYABLE TO SHAREHOLDERS REGISTERED IN THE BOOKS OF THE
COMPANY AT THE CLOSE OF BUSINESS ON FRIDAY, 2 OCTOBER 1998. CHEQUES WILL BE
POSTED ON OR ABOUT 29 OCTOBER 1998. ELECTRONIC PAYMENT OF THE DIVIDEND WILL
TAKE PLACE AT THE SAME TIME.
NOTICE OF ANY CHANGE OF ADDRESS OF SHAREHOLDERS MUST REACH THE TRANSFER
SECRETARIES, MERCANTILE REGISTRARS LIMITED, PO BOX 1053, JOHANNESBURG 2000, ON
OR BEFORE 2 OCTOBER 1998.
BY ORDER OF THE BOARD
N L JOUBERT
COMPANY SECRETARY
16 SEPTEMBER 1998
REGISTERED OFFICE:
1 STURDEE AVENUE
ROSEBANK
JOHANNESBURG 2196
(PO BOX 5486
JOHANNESBURG 2000)
WEB SITE: HTTP://WWW.SASOL.COM
TRANSFER SECRETARIES:
MERCANTILE REGISTRARS LIMITED
94 PRESIDENT STREET
JOHANNESBURG 2001
(PO BOX 1053
JOHANNESBURG 2000)
THERE'S A BETTER LIFE FOR YOU IN EVERYTHING WE DO



                                        
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