SASOL LIMITED - Trading statement for the financial year ended 30 June 2018

Release Date: 20/07/2018 07:05
Code(s): SOL SOLBE1
 
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Trading statement for the financial year ended 30 June 2018

Sasol Limited
(Incorporated in the Republic of South Africa)
Registration number 1979/003231/06
Sasol Ordinary Share codes:           JSE: SOL                 NYSE: SSL
Sasol Ordinary ISIN codes:            ZAE000006896             US8038663006
Sasol BEE Ordinary Share code:        JSE: SOLBE1
Sasol BEE Ordinary ISIN code:         ZAE000151817
("Sasol" or "the Company")


SOL: SASOL LIMITED - Trading statement for the financial year ended 30 June 2018

Sasol is expected to deliver a resilient set of results, underpinned by higher sales and production
volumes and much higher crude oil and product margins in the second half of the financial year. Our
financial results were however negatively impacted by several unplanned Eskom electricity supply
interruptions and two internal outages at our Secunda Synfuels Operations (SSO) that resulted in lower
production volumes.
Our underlying cash flow performance is expected to be strong. Earnings before interest, tax,
depreciation and amortisation (EBITDA*) are expected to increase by between 6% and 16%. Core**
headline earnings per share (HEPS) are however expected to decrease by between 1% and 11%
(approximating R0,46 to R4,30 per share) compared to the 2017 financial year (prior year) Core HEPS
of R38,47. The difference between Core HEPS and EBITDA in the current year is largely due to
depreciation of approximately R16 billion and employee share-based payment expenses of R1,5 billion
due to the marked improvement of the Sasol share price at the end of the financial year. The share-
based payment relating to our Khanyisa Broad-Based Black Economic Empowerment (B-BBEE)
transaction of R3 billion is excluded from Core HEPS and EBITDA as it is considered to be a once-off
and non-cash item.
HEPS for the financial year ended 30 June 2018 are expected to decrease by between 16% and 26%
(approximating R5,64 to R9,16 per share) compared to the prior year HEPS of R35,15. Earnings per
share (EPS) for the same period are also expected to decrease by between 52% and 62%
(approximating R17,46 to R20,80 per share) from the prior year EPS of R33,36.


 Key macro-economic summary                                         Financial   Financial
                                                                      year        year         %
                                                                      2018        2017       change
 Rand/US dollar average exchange rate                                   12,85       13,61        (6)
 Rand/US dollar closing exchange rate                                   13,73       13,06          5
 Average dated Brent crude oil price (US dollar / barrel)               63,62       49,77        28
 Refining margins (US dollar / barrel)                                   9,32       10,09        (8)
 Average Henry Hub gas price (US dollar / million British                2,95        3,00        (2)
 thermal unit)


From a macro-economic perspective, the stronger average rand/US dollar exchange rate and the
negative impact of remeasurement items, largely driven by the stronger longer-term rand exchange
rate, resulted in a much lower operating profit and earnings per share for the financial year. However,
the closing exchange rate weakened by 5% which negatively impacted gearing and the valuation of our
derivatives and foreign debtors and loans. Our hedging programme for the 2018 and 2019 financial
years is complete and positions Sasol well to steer through these periods of volatility. The average
Brent crude oil price moved 28% higher compared to the prior year, and, since December 2017, spot
prices have moved closer to the US$75 per barrel mark which positively impacted our results. The rand
per barrel oil price increased by approximately 20% to R818 per barrel compared to 2017, (refer to table
above), and has subsequently increased by approximately 15% – 25% since the end of June 2018. The
spot rand per barrel oil price is now ranging between R950 and R1 050 per barrel.
 Significant hedging activities                                                 Financial    Financial
                                                                                  year         year
                                                                                  2018         2019
 Brent oil – put options
  Number of barrels hedged                                           mm bbl         50,25        48,00
  Average Brent crude oil price floor, net of costs                 US$/bbl         47,82        53,36
  Premiums paid                                                     US$ mm            125          131
 Rand/US dollar currency – zero-cost collar instruments
  US$ exposure hedged                                                 US$bn          4,00         4,00
  Annual average floor                                                R/US$         13,46        13,14
  Annual average cap                                                  R/US$         15,51        15,14
 Export coal - swaps
  Number of tons hedged                                             mm tons          2,80         1,40
  Average coal swap price                                           US$/ton         76,11        81,82
 Ethane gas – Swaps
  Number of barrels hedged                                           mm bbl          2,30         3,50
  Average ethane gas swap price                                    US$ c/gal        27,54        27,30


Sasol experienced some challenges with regards to its operational and cost performance during the
year, largely due to planned and unplanned production interruptions at Natref and a safety related
stoppage at Mining in the first half of the year, which adversely impacted sales and cost across the
value chain. Despite two additional safety related stoppages at Mining and unplanned electricity
outages in Secunda, we managed to claw back and deliver a stronger operational performance in the
second half of the year through focused interventions and management actions. Our Eurasian
operations increased production volumes by 3% due to stronger product demand and increased plant
availability. In the last quarter, we have seen considerably higher yields and production volumes across
the value chain which are more closely aligned to our internal targets. We are well positioned to continue
with this improved operational performance into the 2019 financial year.
Sales volumes increased by 1% for our Performance Chemicals business spurred by robust market
demand despite Eskom electricity supply interruptions. Base Chemicals reported a 1% decrease in
sales volumes mainly due to production interruptions at SSO and an initial stock build for our high
density polyethylene joint venture in the US. Excluding the impact of Eskom electricity supply
interruptions, sales volumes increased by 1%. Liquid fuels sales volumes were down 2% due to lower
volumes from SSO and Natref and a challenging South African retail liquid fuels market.

A detailed production summary and key business performance metrics for the financial year for all our
businesses is available on our website, www.sasol.com

Sasol´s earnings for the financial year ended 30 June 2018 have been impacted by the following notable
once-off and period close items:
                                                                                HEPS           EPS
                                                                               Rand per      Rand per
                                                                                share         share
 Mark-to-market valuation of commodity and foreign exchange hedges                 3,81          3,81
 using a forward rate at 30 June 2018
 Net remeasurement and once-off items                                                   -        13,52
 Khanyisa B-BBEE transaction share-based payment                                     4,82         4,82

Remeasurement and once-off items include:
1. Items recorded in the second half of the financial year:
- As highlighted in our 2018 Interim Results Announcement, we expressed some caution with regards
  to the impact of a stronger long-term rand on the valuation of our Southern African value chain’s
  assets. A partial impairment of R3,7 billion (net of tax) on our South African Chlor Vinyls cash
  generating unit has been recorded as a result of the continued and sustained strengthening of the
  exchange rate outlook and the resulting impact on Base Chemicals margins.
- Due to the weaker long-term macro-economic assumptions, as well as a result of lower than
  expected oil volumes from the Production Sharing Agreement (PSA) in Mozambique, a partial
  impairment of R1,2 billion (US$89 million) was recorded.
- The implementation of Sasol Khanyisa, our B-BBEE ownership transactions, resulted in the
  recognition of a share-based payment expense (IFRS2 cost) of R3 billion.
2. Items recorded during the first half of the financial year and communicated previously:
- A partial impairment of our Canadian shale gas assets of R2,8 billion (CAD281 million) largely due
  to a further decline in gas prices.
- The scrapping of our US gas-to-liquids project amounting to R1,1 billion (US$83 million).


The increase/(decrease) from HEPS to Core HEPS is as follows:
                                                                             Financial       Financial
                                                                             year 2018       year 2017
                                                                             Rand per        Rand per
                                                                               share           share
 Translation impact of closing exchange rate                                      (0,35)           1,39
 Mark-to-market valuation of oil and foreign exchange hedges                        3,81         (0,42)
 Implementation of Khanyisa B-BBEE transaction                                      4,82              -
 Once-off Uzbekistan license fee                                                       -         (0,58)
 Strike action at Mining and related costs                                             -           1,45
 Provision for tax litigation matters                                                  -           1,49


The tax litigation matter in respect of our crude oil procurement process is ongoing and we expect that
the court hearing will take place on 21 August 2018. No further provisions have been recognised in the
current year in respect of this matter.
Our results for the financial year may be further affected by adjustments resulting from our year-end
closure process. This may result in a change in the estimated earnings noted above. All references to
years refer to the financial year ended 30 June.

The financial information on which this trading statement is based has not been reviewed and reported
on by the Company's external auditors. Sasol's financial results for the financial year ended
30 June 2018 will be announced on Monday, 20 August 2018.

* EBITDA is calculated by adjusting operating profit for depreciation, amortisation, remeasurement
items, share-based payments and unrealised gains and losses on our hedging activities.
** Core HEPS are calculated by adjusting headline earnings with once-off items, period close
adjustments and depreciation and amortisation of capital projects, exceeding R4 billion which have
reached beneficial operation and are still ramping up and share-based payments on implementation of
B-BBEE transactions. Period close adjustments in relation to the valuation of our derivatives at period
end are to remove volatility from earnings as these instruments are valued using forward curves and
other market factors at the reporting date and could vary from period to period. We believe core headline
earnings are a useful measure of the group’s sustainable operating performance. However, this is not
a defined term under IFRS and may not be comparable with similarly titled measures reported by other
companies. The aforementioned adjustments are the responsibility of the directors of Sasol. The
adjustments have been prepared for illustrative purposes only and due to their nature, may not fairly
present Sasol’s financial position, changes in equity, results of operations or cash flows.
20 July 2018
Sandton
Sponsor: Deutsche Securities (SA) Proprietary Limited

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