Sasol avoids rights issue as turnaround near complete

Sasol SENS statement: 

Interim results announcement for the six months ended 31 December 2020

Earnings performance

Sasol delivered a good set of results for the six months ended 31 December 2020, our earnings increased by more than 100% to R15.3bn from R4.5bn in the prior period. Despite a 23% decrease in the rand/barrel oil price, our adjusted EBITDA decreased by only 6%. This achievement is as a result of a strong cash cost, working capital and capital expenditure performance in response to the challenging environment.

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Our earnings were positively impacted by the following non-cash adjustments:

  • Gains of R4.6bn on the translation of monetary assets and liabilities due to a 15% strengthening of the closing rand/US dollar exchange rate compared to June 2020;
  • Gains of R5bn on the valuation of financial instruments and derivative contracts; and
  • R3.3bn gain on the realisation of the foreign currency translation reserve (FCTR), mainly on the divestment of 50% interest in the US LCCP Base Chemicals business.

Our key metrics were as follows:

  • Working capital ratio of 14.9% compared to 14.6% for the prior period. Investment in working capital was R27.3bn;
  • Capital expenditure of R7.5bn;
  • Normalised cash fixed reduced by 10% (R3.2bn) compared to the prior period;
  • Profit before interest and tax (EBIT) of R21.7bn compared to R9.9bn in the prior period;
  • Adjusted EBITDA declined by 6% from R19.8bn in the prior period to R18.6bn;
  • Basic earnings per share (EPS) increased to R23.41 per share compared to R6.56 in prior period; and
  • Headline earnings per share (HEPS) increased by more than 100% to R19.16 per share compared to the prior period.

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Rights issue

A decision was made not to pursue a rights issue given the current macroeconomic outlook, and the significant progress made on our response plan initiatives. The balance sheet deleveraging pathway will continue to be prioritised to ensure that we operate within our financial covenants and maintain adequate liquidity headroom, whilst delivering the Sasol 2.0 transformation programme.

Balance sheet management

Cash generated by operating activities decreased by 40% to R11.7bn compared to the prior period and our net cash on hand decreased from R34.1bn as at 30 June 2020 to R27.6bn. Although our cash flows were impacted by low crude oil prices, softer chemical prices, plant downtime and the impact of Covid-19, our cash conservation initiative and asset divestment programme enabled us to repay approximately R28bn (US$2bn) of debt. In addition, we repaid ZAR banking facilities of approximately R4bn. Actual capital expenditure amounted to R7.5bn compared to R21.4bn during the first six months of 2020. The free cash flow for the period was R0.4bn in a low US$43.62/barrel average oil price environment.

To create flexibility in Sasol’s balance sheet during this peak gearing period our lenders agreed to lift our covenant from 3 times to 4 times of Net debt: EBITDA (bank definition) when measured at 31 December 2020. This provided additional flexibility, subject to conditions, which were consistent with our capital allocation framework, i.e. prioritising debt reduction through commitments to suspend dividend payments and acquisitions while our leverage is above 3 times Net debt: EBITDA. We are appreciative of the continued support from our lenders during this challenging period.

Our Net debt: EBITDA ratio at 31 December 2020 was 2.6 times (bank definition), significantly below the threshold level.

At 31 December 2020 our total debt was R126.3bn compared to R189.7bn as at 30 June 2020. During the period, we utilised proceeds from our asset divestments to repay the US Dollar syndicated loan, as well as a portion of our Revolving credit facility, reducing our US dollar denominated debt by almost R28bn (US$2bn) to R121bn (US$8.2bn). Through our comprehensive response plan and planned asset divestments, we intend to further reduce our net debt to achieve a Net debt: EBITDA ratio of less than 2 times and gearing of 30% by 2023.

Our gearing decreased from 114.5% at 30 June 2020 to 76% at 31 December 2020 mainly due to repayment of US dollar debt (20%) and a stronger closing Rand/US dollar exchange rate (7%).

As at 31 December 2020, our liquidity headroom was in excess of R53bn (US$3.6bn) well above our targeted liquidity of at least US$1bn, with available rand and US dollar-based funds improving as we advance our focused management actions. We continue to assess our mix of funding instruments to ensure that we have funding from a range of sources and a balanced debt maturity profile.

We have no significant debt maturities before November 2021 when the R2.2bn (US$150m) term loan becomes due. In terms of the covenant waivers with the lenders that existed at 30 June 2020 we remain obliged to use certain planned disposal proceeds to settle debt. As a result, R14.3bn (US$975m) has being classified as short-term debt. We continue to actively manage the balance sheet with the objective of maintaining a healthy liquidity position and a balanced debt maturity profile.


Given our current financial leverage and the risk of a prolonged period of economic uncertainty, the Board believes that it would be prudent to continue with the suspension of dividends. We expect the balance sheet to regain flexibility following the implementation of our comprehensive response plan strategy.

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