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SOL - Sasol Limited - Update From The Chief Financial Officer

Release Date: 24/06/2010 08:00:05      Code(s): SOL
SOL - Sasol Limited - Update From The Chief Financial Officer                   
Sasol Limited                                                                   
(Incorporated in the Republic of South Africa)                                  
(Registration number 1979/003231/06)                                            
ISIN: ZAE000006896        US8038663006                                          
Share codes: JSE - SOL    NYSE - SSL                                            
("Sasol" or "the Company")                                                      
UPDATE FROM THE CHIEF FINANCIAL OFFICER                                         
Dear Sasol follower,                                                            
I am pleased to report that operating profit has further improved in the third  
quarter of this financial year. We continue to benefit from our dedicated focus 
on enhancing operational efficiency while maintaining strict cost discipline.   
Higher realised product prices and improved production volumes have contributed 
to healthy cash generation supporting the strength of our balance sheet.  The   
board of directors` (the Board) approval of a progressive dividend policy       
demonstrates our confidence in the value that Sasol consistently delivers. Our  
focus remains on improving total shareholder return and a progressive dividend  
policy is complementary to the Group`s approach to delivering value for         
shareholders over time. Our growth plans remain on track.  Recent technology    
developments in the cost-effective extraction of shale gas, and resulting lower 
global gas prices, present a significant opportunity for the expansion of our   
Gas-to-liquids (GTL) value proposition. As a result, we intend to actively      
pursue growing our upstream gas reserves. Sasol is well positioned to deliver   
solid financial and operational results for the full financial year.            
Product prices continue to rise                                                 
Despite the recent volatility experienced in currency and commodity markets,    
third quarter average dated Brent prices of US$77/bbl at an average exchange    
rate of R7,50/US$1 supported a 3% increase in domestic fuel prices compared with
the first half of this financial year. Chemical product margins also improved   
significantly with international polymer and solvent commodity prices increasing
between 12% and 14%, respectively, in dollar terms from first half levels.      
The Group`s near-term expectation is that crude prices should bottom out at     
around the US$70/bbl range. We believe that a crude price sustainably below     
US$70/bbl is fundamentally undervalued and expect that OPEC may further cut     
production at levels below this price floor.  The impact of the crude spillage  
in the Gulf of Mexico on oil prices has yet to be determined.                   
The continued restraint in production from OPEC and improving global economic   
fundamentals should support future prices in a range of approximately US$75-    
US$85/bbl. The greatest risk to our oil price forecast remains a protracted     
global recession. Whilst all indications are that the global economy is showing 
signs of improvement, macroeconomic concerns in some European countries         
highlight the fragility of this economic recovery.                              
Risk aversion will continue to place pressure on the rand and we expect that the
currency will remain weaker until strong signals of economic recovery are       
Sasol Synfuels (Synfuels) sustains operational performance                      
Operational momentum was maintained with production improvements across the     
Group`s businesses throughout the third quarter.                                
Management actions taken at Synfuels in South Africa, which included staff up-  
skilling and improving maintenance strategies have realised measurable          
improvements in operational stability. Production for the third quarter of 2010 
reached 1,8 million tons (Mt) despite the rain-related flooding and its impact  
on production at the start of the quarter. Production for the first nine months 
of the financial year therefore totalled 5,5Mt, an increase of 3% on the        
corresponding period in 2009.                                                   
Synfuels remains on track to deliver single digit unit cash cost inflation for  
FY2010 despite higher coal prices from Sasol Mining and increased electricity   
tariffs from Eskom.  Increased production volumes and effective cost management 
have largely offset these cost increases. We are pleased that the National      
Energy Regulator of South Africa has recently approved our Power Purchase       
Agreement with Eskom. We expect that the benefits from this agreement will have 
a significant effect in mitigating the impact of rising electricity costs on an 
overall unit cash cost basis.                                                   
Synfuels has not re-entered into an oil hedge for any portion of its production 
at this time.                                                                   
Production records at Oryx GTL and Arya Sasol Polymers                          
Since the start of the calendar year, Oryx GTL has shown an exceptional         
operating performance. As previously mentioned, the realistic operating rates   
for a facility of this nature are typically 80%-90% of nameplate capacity. It   
is, therefore, pleasing to note that actual production averaged 29 000 barrels  
per day, or 90% of nameplate, during the third quarter of our financial year.   
In mid-April 2010, Oryx GTL undertook a pre-scheduled statutory biennial        
maintenance shutdown. The shutdown was concluded successfully, and the plant has
subsequently resumed production.                                                
The Arya Sasol Polymers joint venture also achieved similar success. The plant  
operated at 68% of design capacity during the third quarter compared with 55% in
the first half. This is a marked improvement in line with our plan to achieve a 
full ramp-up of the facility by September 2010.                                 
Strong performance from Chemical cluster                                        
Our Olefins and Surfactants (O&S) business continues to show the benefits of the
turnaround project with sales volumes in the third quarter increasing by 7%     
compared with the first half of the financial year. The improvements in         
operating margins realised during the first half of the financial year were also
sustained during this period. With O&S leading the way, we expect an improved   
contribution from our Chemical cluster for the full year.                       
Recent developments                                                             
The Board recently approved the construction of a R1,9 billion ethylene         
purification unit at its Sasol Polymers plant in Sasolburg. The plant is        
expected to go on stream in the second half of calendar 2013 and will be ramped 
up to full capacity by calendar 2015 factoring in the phased implementation of  
the Synfuels C2+ Recovery Project.                                              
The unit will allow for additional ethylene production to ensure better         
utilisation of the existing downstream polyethylene plants. Half of the         
feedstock to the unit will be propane and ethane extracted from natural gas,    
with the remainder being a combination of existing propane and flared gases     
sourced from Synfuels. This project illustrates our renewed focus on unlocking  
the full potential of our existing chemical assets.                             
Sasol was pleased by the recent announcement by the Department of Mineral       
Resources (DMR) approving the conversion of Sasol Mining`s old order mining     
rights in respect of both our Secunda complex, and the Mooikraal operation      
situated near Sasolburg in the Free State. The approval is a significant        
milestone for Sasol Mining and will greatly assist in implementing the Ixia Coal
Black Economic Empowerment transaction as part of Sasol`s transformation        
Internationally, new technology to extract shale gas at much lower cost than in 
the past has resulted in large reserves of natural shale gas being available in 
the US and such finds are also expected in other parts of the world.  The       
prospect of additional shale gas reserves has lowered the price of gas relative 
to oil.  As Sasol is one of only two companies that can arbitrage between gas   
and oil through its GTL technology, this development provides a substantial     
opportunity to grow our GTL business.  Accordingly we aim to actively grow our  
gas reserves through further exploration and possible acquisitions.             
Balance sheet strength allows for funding growth and improved returns to        
A solid balance sheet and strong cash flow generation, underpinned by improved  
business conditions, have resulted in a review of our options to enhance returns
to shareholders. Taking into consideration the above mentioned factors as well  
as current capital investment plans, the Group has decided to resume an approach
consistent with its long term track record of dividend growth as a key component
of adding shareholder value. As a result the Board has decided to adopt a       
progressive dividend policy, as stated below:                                   
It is Sasol`s intention to maintain and/or grow dividends over time in line with
the Group`s anticipated sustainable growth in earnings, barring significant     
economic variables such as fluctuations in the oil price and exchange rates.    
When deciding on dividends, the Board will also take into consideration several 
factors including the prevailing circumstances of the Company, future investment
plans, financial performance and the trading and macro economic environments.   
A consistent return of value to shareholders through increasing dividend        
payments allows us to return cash to investors while remaining well positioned  
to fund investment opportunities. The Group`s growth plans remain robust. The   
large international expansion projects are on track with a possible investment  
decision on China Coal-to-liquids (CTL) by the end of this calendar year, and   
the expected completion of the feasibility study on Uzbekistan GTL within a     
similar time frame.                                                             
Capital expenditure is expected to be maintained at R15 billion for the full    
financial year. An update on capital expenditure guidance for the medium term   
will be presented with the release of our year-end financial results on 13      
September 2010.                                                                 
Improved market conditions, higher Group production volumes and cost containment
to benefit operating profit for financial year 2010                             
The improved commodity market performance, anticipated higher Group production  
volumes for the year and cost containment is expected to benefit operating      
profit for financial year 2010.                                                 
Functional and business unit-related cost reduction initiatives are yielding    
positive results. Sasol`s target for the financial year is a cash-fixed cost    
reduction of approximately R1 billion and we remain on track to deliver these   
Currencies remain volatile and given the sensitivity of our earnings to these,  
particularly to the Rand/Dollar closing rate as of 30 June, as well as any      
adjustments arising from our year-end closure process, a trading statement will 
be issued once we have a reasonable degree of certainty on the results for      
financial year 2010.                                                            
The forecast financial information appearing in this update has not been        
reviewed or reported on by Sasol`s external auditors.                           
Best regards,                                                                   
Christine Ramon                                                                 
Staff changes in the Investor Relations department                              
As you are aware we recently appointed Nerina Bodasing as the Group head of     
Investor Relations. Nerina previously headed up the Absa Groups` as well as Gold
Fields` investor relations functions. We wish her well in her endeavours at     
Hubert Naude, who has been with the Investor Relations department for five years
has joined our New Energy business. We thank Hubert for his exceptional         
contribution to the department and wish him well in his new role.               
Nwabisa Piki will be joining the Sasol Investor Relations team in July. Nwabisa 
has previously worked for the Absa Group and JP Morgan. We welcome her to Sasol.
24 June 2010                                                                    
Issued by sponsor: Deutsche Securities (SA) (Proprietary) Limited               
Forward-looking statements:                                                     
In this document we make certain statements that are not historical facts and   
relate to analyses and other information which are based on forecasts of future 
results and estimates of amounts not yet determinable.  These statements may    
also relate to our future prospects, developments and business strategies.      
Examples of such forward-looking statements include, but are not limited to,    
statements regarding exchange rate fluctuations, volume growth, increases in    
market share, total shareholder return and cost reductions. Words such as       
"believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could",   
"may", "endeavour" and "project" and similar expressions are intended to        
identify such forward-looking statements, but are not the exclusive means of    
identifying such statements. By their very nature, forward-looking statements   
involve inherent risks and uncertainties, both general and specific, and there  
are risks that the predictions, forecasts, projections and other forward-looking
statements will not be achieved.  If one or more of these risks materialise, or 
should underlying assumptions prove incorrect, our actual results may differ    
materially from those anticipated. You should understand that a number of       
important factors could cause actual results to differ materially from the      
plans, objectives, expectations, estimates and intentions expressed in such     
forward-looking statements.  These factors are discussed more fully in our most 
recent annual report under the Securities Exchange Act of 1934 on Form 20-F     
filed on 9 October 2009 and in other filings with the United States Securities  
and Exchange Commission. The list of factors discussed therein is not           
exhaustive; when relying on forward-looking statements to make investment       
decisions, you should carefully consider both these factors and other           
uncertainties and events. Forward-looking statements apply only as of the date  
on which they are made, and we do not undertake any obligation to update or     
revise any of them, whether as a result of new information, future events or    
Date: 24/06/2010 08:00:05 Supplied by www.sharenet.co.za                     
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information disseminated through SENS.                                          

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