Sasol Ltd (SSL) 2011 Q4 法說會逐字稿

Good afternoon, everybody, and welcome to Sasol's results announcement for 2011. Just before we get started in the interest of safety, I would like to point out the doors at the rear of the auditorium. In the case of an emergency, we will ask you to exit through those doors in an orderly fashion, from where Sasol representatives will further assist you to evacuate the building.

Your presenters for today is our Chief Executive Officer, David Constable; and our Chief Financial Officer, Mrs. Christine Ramon. Also on the panel for Q&A later on, a few familiar faces; our Senior Group Executives, Lean Strauss and Andre de Ruyter.

Just before we get started, I would like to point your attention to our forward-looking statement, if you can just take a moment to familiarize yourself with that; it's also in your packs.

And with that, I would like to hand over to David. Thank you.

Thank you, [Kgosi]. I appreciate it. Hello, everyone; welcome. Great to be here in Johannesburg and here at Sasol, here with all of you today.

As I said this morning, it was also good to see the Springboks conserving their energy yesterday. You don't want to peak too early in such a big tournament, but that was a nerve-wracking second half that I watched yesterday. But congratulations to the Boks on their win against Wales, and all the best to them as they drive to defend the championship, World Cup championship in New Zealand.

Also, congratulations to the Orlando Pirates. They won the MTN8 Soccer Championship this weekend. Condolences to the Kaiser Chiefs fans out there. Still trying to figure out which of those two teams I'll be cheering for, so I'll take any advice on that.

And then finally, Sasol-sponsored women's national soccer team Banyana Banyana tied with Ethiopia yesterday, and they previously beat them 3/nothing, so they'll be going through to the Olympics, which is very good news for Sasol and for the team as well.

Now I've known Sasol since the early days of my career, and I've always had an extremely positive view and admiration of the Company. Now seeing it from the inside, I can tell you I have not been disappointed. The professionalism, the talented people, the technology leadership position we enjoy, and the strong can-do attitude of the team has made a great impression on me. Sasol's values also resonate with those I've lived by throughout my career, and so I'm very excited to be a part of the Sasol family.

Before getting started, I'd like to first acknowledge every single Sasol employee at each of our facilities and offices, all the management teams, the Group Executives; and my predecessor, Pat Davies, for the outstanding performance delivered this financial year. I am honored to be communicating our results on their behalf.

Let me start with an overview of what you're going to hear today. First, Sasol has performed strongly over the financial year, both operationally and financially. And equally important, we're well positioned to pursue the abundant growth opportunities in front of us. We're committed to responsible growth that ensures long-term sustainability. And finally, the Company remains an extremely compelling investment proposition.

So these are the key messages you'll be hearing throughout today's presentation. For the agenda, I'll begin with some high level introductory remarks, followed by Christine Ramon, our Chief Financial Officer, who will be reviewing our financial and operational performance for 2011. I'll come back up to review our strategy going forward, and then open it up to the floor for any questions you would like to ask us.

Let's start with the big picture by looking at GDP forecast. Notwithstanding the recent weakening in the external environment over recent months, such as the ongoing and spreading sovereign debt crisis in Europe and the US debt ceiling challenge, most of the world's growth is expected to come from emerging and developing economies over the next four years.

With respect to energy consumption, as countries develop and populations expand, the demand for energy increases to power additional cars, transportation fleets, electricity generation and, of course, the manufacturing and construction industries.

It also results in demand for products such as plastics, cosmetics and household cleaning supplies, many of which require using Sasol's chemicals as feedstocks.

Sasol is well positioned to benefit from this demand in growth. We're present in and already serve many of the large growth markets in Africa, Asia, and the Middle East. While we have good exposure to these high growth areas, we also have activity in the developed markets, including Canada, the USA and Europe.

Now our business is not just about international growth. South Africa is our home base, and we remain firmly rooted in this country. We're committed to investing in growth, and in making a positive contribution into South Africa over the long term.

We've invested a significant amount of money in South Africa, ZAR42 billion over the last three years. And we plan to do much more; another ZAR40 billion committed over the next three to four years.

We're one of the largest corporate tax payers in South Africa with more than ZAR25 billion contributed annually in direct and indirect taxes. In total, Sasol contributes about 5% of South Africa's GDP.

Over 82% of our staff complement is here at home. That's around 28,000 jobs for the country, not to mention the thousands of indirect jobs that we create.

Very pleased to report that we've made progress on transformation as well. Ixia Coal, our BEE partner with Sasol Mining, now owns 20% of the mining business. Clearly, we're committed and continue to make progress on the South Africa mining charter.

This year, we became the very first company in the country to have a BEE listing on the Johannesburg Stock Exchange. Our stated BEE objective was to achieve level 4 status by 2012, and we're pleased that we reached our target earlier than planned. Our focus now is to ensure this achievement is sustainable.

Also at home, we continued to make positive steps on climate change matters. We voluntarily reduced our greenhouse gas emissions significantly since 2004, down from 12% in absolute terms. That equates to 10 million tons per year reduction.

We also established Sasol New Energy to look at low and no carbon energy solutions. And we're engaging positively with government to address policy matters, and are supporting them in hosting a successful COP 17 in Durban later this year.

Let's now move on to our performance over the 2011 financial year. Our pursuit of responsible, sustainable operations in growth over the year has been successful. Operating performance improved significantly. Overall, Group production volumes were up 1.5% supported by strong contributions from offshore businesses in Qatar, Iran, and Mozambique. This is a significant achievement for the Group.

Despite Synfuels volumes being down 4% primarily due to our largest planned maintenance outage ever, the Group's other businesses made up -- more than made up for the shortfall.

Our Chemicals cluster performed well. Along with a 3.6% improvement in Chemicals volumes, the cluster contributed 29% of the Group's operating profit.

Cash fixed costs on a like-for-like basis was only up 4%, well below inflation. This is due to the concerted effort on cost management through business improvement plans, and functional excellence in particular.

Next, we've made good progress on upstream and technology driven growth. We're very pleased with our two Canadian shale gas acquisitions, Farrell Creek and Cypress A. These upstream acquisitions provide us with fixed cost feedstock for a new GTL facility. Of course, the acquisitions provide us with near-term cash flow from gas sales, and contributed 2.6% increase in Group production of fuels, oil and gas.

We also advanced our US GTL project into feasibility phase. More on that a bit later. And then, feasibility study for Uzbekistan GTL has been completed. The decision to proceed to feed has been conditionally approved by our Board, and its financial decision will be taken in the very near term, now, only dependent upon certain commercial conditions being met.

It almost goes without saying that maintaining business sustainability is critically important to our future.

Sasol's safety performance during financial year 2011 was mixed. We're sad to report that 10 people tragically died as a result of injuries sustained at Sasol sites or on public roads. In addition, five people also lost their lives in a boating accident last November in an offsite year-end function. These fatal incidents had a profound effect on the Company, and our deepest sympathies have been extended to the families of the deceased. Major safety interventions were put in place midway through 2011 which helped contribute to a zero fatality rate for the remainder of the year.

On a positive note, we achieved a record low recordable case rate of 0.42%, which was an 18% improvement from the previous year, and is clearly a world class performance in this safety category.

Moving on, increased gas production from Mozambique was used to generate electricity and reduce our carbon footprint. This self-generated electricity also helped to mitigate significant power price increases. Our open cycle gas turbines in Secunda have served us well in the past financial year adding 200 megawatts of electricity. Additional efficiencies by converting to a combined cycle will add another 80 megawatts in the near term. Our 140 megawatts Sasolburg project will eventually increase total gas-fired electricity to 420 megawatts. All these actions that have been mentioned we believe demonstrate Sasol's ongoing pursuit of responsible growth.

Turning to the highlights of our results for the year, headline earnings per share and earnings per share were up 27% and 24% respectively. We've already mentioned our strong performance on costs, which are well contained within inflationary levels. In line with our progressive dividend policy, we've increased the total dividend for the 2011 financial year by 24% to ZAR13 per share.

I must also highlight our very strong cash generation, up 41% from last year, which supports this dividend, and together with a strong balance sheet enables us to fund our growth aspirations.

Finally, our international business contribution to Group operating profit is 36% this year, further illustrating our diversified geographic portfolio.

Christine's now going to take us through a review of our financial and operational performance. Christine?

Thanks, David. Good afternoon, everyone. It's certainly my pleasure to take you through a great set of results that we've delivered for this year, but before I get into that detail, I'd like to make the following three points.

Firstly, we've delivered on our operational and cost control targets for the year with significantly enhanced profitability and ensured sustainable performance.

Second, our strong financial performance is underpinned by our strong cash flows. We are now better placed to deal with a potential global recession, global economic recession should it materialize, as well as fund our abundant growth opportunities.

And thirdly, our strong final dividend takes the total dividend to ZAR13 per share, beating market expectations, and equaling the dividend declared in 2008 which was a year of record high earnings. This certainly confirms our commitment to deliver superior returns to shareholders through increased dividends and through capital investments that deliver long-term value and growth.

In setting the economic scene for the past year, we note that the first three quarters of the past financial year saw very favorable global economic conditions. And that was supported by a continued resilience and improved activity in emerging economies, and growing confidence in developed economies as the financial markets showed signs of improvement.

However, the last quarter showed signs of a mild slowdown as risks of a more fragile economic recovery in the US and Europe became apparent. On average, we saw the crude oil price for the past year at 30% higher, and that contributed to the overall performance of our energy businesses; and chemical markets certainly benefited from the favorable economic environment and higher product prices and margins, despite the high crude oil price.

We saw the negative impact of an 8% stronger rand. However, that was offset by the higher commodity prices. And on a positive note, the strengthening of the rand is reflected in the lower inflationary trends and cash fixed costs. The strong rand is also beneficial for dollar CapEx.

As you know, we do remain sensitive to these economic variables, and we put out these estimates for budgeting and forecasting purposes with a health warning.

So here they are. For every $1 change in the annual average crude oil price, our Group operating profit is impacted by approximately ZAE600 million; and for a $0.10 change in the rand/dollar exchange rate, it impacts our operating profit by ZAR950 million.

So margin expansion and cost containment enhanced our bottom line. We saw the Group operating profit increasing by 25% compared to last year, and despite some large once-off charges, our Group operating margin improved to a healthy 21%, which is the highest that it's been in the last three years; and that was primarily driven by the Chemical margin expansion.

The large once-off costs totaled ZAR1.1 billion, and mainly related to the Ixia share-based payment expense, the polymers administrative penalty, and impairments.

As David mentioned, we saw an overall increase in Group volumes, and although it's marginal, it was quite an achievement given the impact on the Group volumes by Synfuels' major planned maintenance outage. I think certainly the volume growth that we saw with Oryx, Arya and most of our other businesses, more than compensated for this. However, it does demonstrate our strong portfolio of performing assets.

Costs were well contained, and I will speak more about the key initiatives that underpinned that shortly.

Cash fixed costs were contained and were really -- and were reduced in real terms, taking into account that the South African CPI and PPI averaged between 4% and 7% for the past year. Certainly, the main drivers for cash fixed costs in our Group are labor costs, which were 7.5% for the past year, and the abnormal electricity cost inflation, which was 27% for the past year.

For financial year '12, we've concluded the wage settlements with the labor unions, and they are at between 8% and 8.5%.

So our cost control strategy is underpinned by the strategic Group initiatives that David also spoke about; operational excellence, functional excellence, business improvement plans and increased electricity generation. Through operational excellence, we continue to focus on maximizing the up time and operational performance of our plants, with the aim of improving productivity, and thereby containing the cash fixed costs on a unit basis.

In addition, in our functional excellence initiative, we aim to further reduce functional costs through standardization and simplification with the drive for Group-wide shared services. Our cumulative net functional excellence cost savings amounted to ZAR836 million, of which just under half that was banked in the current year.

There were certain once-off costs that we incurred that is included in this amount, and that will also enable future sustainable savings to be delivered. We're certainly expecting more savings to come, but the sustainability of that will be dependent on enabling IT platform.

Overall in the Group, we saw cost reduction of about ZAR1.2 billion that were delivered in this year, and in additional to functional excellence, it primarily reflects the benefits of the power purchase agreement after the successful commissioning of the open cycle gas turbines in July 2010. There are also further savings that we've realized through supplier contract negotiations and strategic sourcing.

On the electricity generation side, we certainly remain on track to increase our own electricity generation to 60% by 2013 from the current 50%, and that will certainly help us contain the abnormal electricity price increases in South Africa, and on our aim to reduce carbon emissions. And David will talk more about our drive for energy efficiency and reducing our carbon footprint.

We do have a bracket on the slide there called once-offs, and I think quite importantly what's included in that are growth costs. So what's quite important is that while we continue to exercise strict cost discipline in the organization, we certainly need to ensure that we develop and grow our talent to support our growth strategy. So we continue invest in and grow our skills base, as reflected in the higher headcount in our growth businesses. And we certainly aim to remunerate our employees competitively.

We saw a strong performance across all our business clusters, as reflected in the healthy double-digit operating margins. In particular, we've spoken about the strong performance from Chemicals, but they had a strong volume performance as well, and the margin expansion which sustained their contribution to operating profit at 29%, and this is quite noteworthy, taking into account the higher oil related feed stock costs.

Quite importantly, our geographic and portfolio diversification is evident from that 36% profit contribution from our offshore businesses, both in the Chemicals and the Energy businesses. This diversification of risk does make us more resilient as a Group, and it allows for further volume and margin growth, both from emerging markets and developed economies.

The South African energy cluster still remains our primary contributor to Group profit, contributing two-thirds to the overall profit. And if one looks at the performance of the Mining business, what we see is that if you had exclude the impact of the Ixia BEE share-based payment expense, Mining's profit doubled on the back of higher coal export prices and increased selling prices to Synfuels.

Our Gas business delivered 22% higher sales volumes and an improved margin, and that was supported by the start-up of a new compressor in Mozambique.

Synfuels remains the largest contributor to Group operating profit, contributing half of the total profit; and there are really not too many businesses that can boast a 41% operating margin that was delivered by Synfuels, and that was despite the lower productions.

I think in addition, the cash fixed cost increases were well contained in Synfuels on a unit basis at 4%, reflecting the benefits of the PPA, as well as well as other efficiency and cost savings in that business unit.

Despite the higher wholesale margins, Oil's operating profit declined due to the stronger rand/dollar exchange rate and weaker refining margins. And the 9% increase in production volumes from Natref enabled higher retail and commercial volumes in that business. Certainly, the outlook for 2012 is positive but it will be challenging given the volatility in prices and currency.

Our investment in growth is delivering value, as reflected in the International Energy businesses' profitability, which has trebled from last year, and that's despite further growth and exploration expenditure.

Oryx contributed 6% to Group operating profit, and continued to perform well within the targeted average utilization rate of 80% to 90%. And that certainly endorses the commercial viability of our proprietary technology.

At SPI, our upstream business, we are expanding our onshore gas production facilities in Mozambique to increase the annual production capacity from 120 million gigajoules to 183 million gigajoules.

What we also note that there has been higher exploration expenditure, and this does reflect increased exploration activities by SPI; and it includes the dry well write-offs during the year of ZAR441 million relating to PNG and Mozambique.

Production from our Canadian assets, although small, the contribution has been small in the last four months of the financial year, we're certainly expecting improved volumes in 2012; and I'm certainly excited about the significant value add of the Canadian gas acquisitions to our long-term production growth profile. And David will expand more on this later.

Moving on, we spoke about the favorable market conditions that favored the Chemical cluster's performance, but I think it's important that it has been -- the favorable conditions were combined with successful cost management and improvements in margin optimization activities by the business.

Polymers remained resilient, largely due to the positive contribution of Arya Sasol, where production volumes increased by 20%; and an average utilization rate of 80% has been achieved in the past year.

The local Polymers business, margins remain tight, and the business is engaging initiatives to improve sales and marketing and operational performance, as well as optimizing the C3 value chain.

Capital projects such as EPU 5 and C3 stabilization projects to come on stream in 2012 and '13 respectively are expected to improve the profitability on a sustainable basis in this business.

We note that Solvents' margins grew on the back of strong demand through continued focus on cost containment and business improvement plans.

The O&S business was once again the star performer, contributing almost half of the Chemical cluster's operating profit, and delivered a 13% operating margin. Certainly, O&S benefited from favorable market conditions, and the successful turnaround of this business supported the once-off impairment reversal of Sasol Italy amounting to ZAR491 million.

As we've said, strong cash flow generation underpins our strong financial position, giving us the flexibility required in uncertain credit markets where the cost of funding has increased. In the current environment, we also continue to focus on strengthening working capital management, and that's reflected in our improved balance sheet ratio, as well as managing counterparty credit risks.

Our gearing remains low, and so we have sufficient headroom in our balance sheet to fund certain selected growth opportunities, grow dividends, and to provide a buffer against volatility.

Our capital investment estimates for 2012 and '13 are ZAR31 billion and ZAR32 billion respectively. And that includes the Canadian shale gas acquisitions and related capital development costs.

So importantly, the question always is asked when do we expect to return to within our targeted gearing range; the answer is in the medium term. And what that takes into account is our large capital intensive growth plans, and it includes our intention to pursue further gas acquisitions.

So as the graphs reflect, certainly on the left-hand side, we see the ROIC graph. We do have a strong track record of delivering superior shareholder returns. And our hurdle rates are 16.8% in rand terms that we've delivered on through the cycle.

I think importantly, a strategic initiative is capital excellence, and that aims to enhance our project IRRs, and has already delivered benefits in the past year.

Looking to the right-hand side of the slide, we see the progressive dividend growth. Importantly is that the Board considered the strength of our balance sheet and our capital investment plans, and approved the 24% increase in total dividend aligned to earnings growth. And at today's value, I think it gives us in excess of 4% dividend yield.

So our total shareholder returns over the past five years, certainly at 52% compares well with our peer group, and competitively positions Sasol with other large and mid cap peer companies, endorsing our commitment to maximizing shareholder returns.

So ending off on the outlook, it is cautiously optimistic. Why? Because of the uncertain volatile macroeconomic environment.

The high oil prices continue to be supported by turmoil in the Middle East and loss of Libyan production. However, we have seen healthy demand, particularly from Asia. We believe that oil supply remains constrained, and the marginal cost of production has increased to nearer $100 a barrel with the new wave of Saudi Arabian spending, and we believe that this is the new oil price floor.

Although commodity price fundamentals remain intact, there are some signs of softening. Polymers margins above oil are not in a good space, with the price level currently being around $200 per ton below the long-term industry trend. And although Polymers' consumption has recovered since the 2008 economic crisis, the new capacity additions in the Middle East, Middle and Far East, have depressed global margins.

In addition, the strengthening of the rand certainly remains the single biggest external factor exerting pressure on our profitability, and it certainly remains a challenge going forward. So our focus remains on the controllable factors, which are an improved operational performance and the containment of cost inflation.

On the production side, we're targeting overall improvement in production in the Group for the year. Synfuels is targeting a range of 7.2 million to 7.3 million tons, taking into account the impact of the recent industrial action and production incident. And capital projects, i.e., the 17th Reformer and the four additional gasifiers due for commissioning in the second half of financial year '12, will increase our production baseline to 7.4 million tons.

We are expecting to maintain Oryx at 80% to 90% utilization rate for the full year. And Arya, which is still ramping up to design capacity, is expected to exceed the current 80% utilization rate for the full year.

We're also expecting improved volumes from Mozambique and Canada. And on the Canada production, we're expecting to achieve the previously guided production ramp up by the end of financial year '12. And David will be fleshing out more on SPI's upstream activities.

So in summary, we remain firm in our commitment to grow profitability and ensure sustainable performance in our Group. And we are well positioned to deal with another potential global economic recession, as well as pursue growth opportunities.

Over to you, David.

Thank you, Christine. Let me start my closing remarks with a familiar slide. You've all seen it, the Group's strategic agenda.

We're building on a solid foundation, and we have to some extent here mentioned the progress that the Group has already made, not only on the Group imperatives which you see on the left-hand side of the screen, but also on our foundation and growth aspirations.

The foundation businesses remain important, as do the people in technology that drive these businesses. It's important to continually improve on the development of our people, as well as on the operations and maintenance of our existing asset base.

Sustainable growth is obviously important. In a moment, I'll give you an update on our major growth projects that support our strategic thrust into upstream, GTL, focused CTL, Chemicals and New Energy.

And when we talk about growth projects, our capital excellence Group imperative is a key enabler here. It must ensure that capital is employed effectively from the translation of our strategy into a portfolio of successfully delivered projects.

Basically, this is all about ensuring that we achieve healthy and robust internal rates of returns on every project. And it's something I'm quite passionate about, obviously, and intend to focus steadily on going forward.

You will see two new Group imperatives on this slide. Sales and marketing excellence is aligned with our Sasol shared value of customer focus. Many of our efforts in the past have focused on the buy and make parts of the sale for value chain. This new program is designed to improve our performance on the sales side, allowing us to improve customer relationships, customer value propositions and sales margins.

Extracting value across Sasol's integrated operations through planning and optimization is the other new and important Group imperative. Improved optimization across business unit boundaries has been identified as a major opportunity. This program will improve the way we allocate our feedstocks, utilize our factory capacity, and place our various liquid fuels and chemical products into the market. The number one objective here is to deliver significant bottom line improvements to the Group.

Here are the top priorities for the current financial year which underline and support the strategic agenda slide you've just seen. Despite our record low recordable case rate for the year, we not only aim to further improve on this, but also to prevent fatalities. We're implementing a focused safety improvement plan which includes the measurement of leading indicators, and we've already seen promising results in this area.

Improving plant availability and stability, establishing and rolling out sales and marketing excellence, and driving a Group-wide carbon dioxide mitigation program, including energy efficiency, are all part of our efforts on further improving operational performance.

The functional excellence focus will remain on cost optimization. We continue to implement process and organizational changes, and we'll bank the associated cost savings, as Christine mentioned.

We're on a good trajectory to do more gas acquisitions when the timing and pricing makes sense, and we're focusing on progressing various GTL projects. As I said, capital excellence is key here to pursuing growth and maximizing IRR.

And with respect to our values-driven behavior, we continue to focus on strengthening compliance and governance at all levels of the organization through training and role modeling. We also focus on building a high performance culture that is centered on meritocracy, empowerment and accountability. Developing leadership capacity with a focus on diversity and inclusion is key to successful growth for a global company, and is another area that I am extremely passionate about.

Here is our updated project pipeline to demonstrate how we continue to optimize our portfolio. Let's look at the first row, accelerating GTL and focused CTL growth.

We're evaluating a number of GTL prospects, and with new widespread interest in GTL, we're being approached with new opportunities on a regular basis. A massive growth opportunity was realized with the acquisition of two material shale gas interests in Canada from Talisman Energy.

During the year, we started a feasibility study to determine the technical and commercial viability of a GTL plant in Western Canada tied to those acquisitions. The study is progressing well, and we're on track to complete the feasibility phase by the end of calendar year 2012.

And again, the feasibility study for Uzbekistan GTL is complete, and a decision to proceed to the feed phase, conditionally approved by the Board, will be taken in the very near term.

In India, together with our joint venture partners, Tata, our CTL pre-feasibility study, and the drilling program to verify coal quality assumptions, continues to make progress. We expect the pre-feasibility to be completed in the first half of calendar year 2012. And as previously guided, commissioning of the Escravos GTL facility is expected in 2013.

You will notice that the China CTL project is no longer in the pipeline. In December 2009, Sasol and its partner, Shenhua Coal, submitted a project application report to the Chinese Government for a coal to liquids project. At the present time, neither Sasol nor its partner have received a response from the Chinese Government.

Given the long delay in the approval process, with developing other investment strategies, both in South Africa and abroad, we've reallocated the planned project funding for the China CTL plant, and have redeployed all staff to other projects. We do, however, remain very interested and committed to growing our other businesses in China.

Looking at Chemicals in a [second role], implementation of our Tetramerization facility at our Lake Charles site in Louisiana progressing as planned, and our R&D teams are already looking at opportunities to commercialize this unique technology in other locations.

During 2011, a pre-feasibility study into an integrated GTL and Chemicals facility in the United States was completed. Recently, the Sasol Board approved that that project proceed to full feasibility.

The FT WAX expansion in Sasolburg is a complex brownfield project. While there is pressure on schedule, we still plan for Phase 1 to come on line by the end of calendar year 2012. Growth in demand for hard rocks remains robust, so the current outlook for Phase 2 is to come on line about two years after Phase 1.

On to the third row. Sasol New Energy has undertaken various studies related to clean and low carbon energy options. Progress has been made on concentrated solar power and underground coal gasification concepts. We're currently executing a 140 megawatt natural gas fired power project in Sasolburg, and the implementation is on schedule. That plant is expected to be operational in 2013.

In the fourth row, which is the improvement in growth of our existing asset base, we're investing in several energy efficiency projects at our various sites; and both the C3 stabilization project, as well as the ethylene purification unit, EPU 5, are progressing well.

C3 stabilization is currently in feasibility phase, with a final investment decision is expected by the end of this year. EPU 5 is on track for beneficial operation by the end of calendar year 2012.

The Secunda growth program is also making good progress. New projects due for commissioning in second half 2012 will increase our production baseline to 7.4 million tons. We remain on track to increase fuel volumes by 3% in the second half of 2013.

In Mining, mine replacements to ensure security of coal supplies for Synfuels are on track. And it works. We're expanding the facility by about 10%, with an expected completion date in the 2014 calendar year.

Looking at the bottom block, our upstream business, SPI is also very busy as they continue to evaluate opportunities to acquire further natural gas assets. SPI is also looking at acquiring three coal bed methane prospecting licenses in Southern Africa. That covers an area of approximately 3,000 square kilometers.

In Canada, 10 drilling rigs and two fracking crews are mobilized at Farrell Creek. As Christine discussed previously, guided production ramp up will now be achieved by first half 2012. We should state this is early days. We've only drilled about 3% of the envisaged wells, and at this time there are no changes in resource estimation, and gas rates from completed wells are as per the original plan.

And in Mozambique, work on the expanded onshore gas production facilities in Pande and Temane is nearing completion, and will increase annual production capacity from 120 million gigajoules up to 183 million gigajoules. Gas production marketing initiatives are underway, and beneficial operation there is imminent.

So with low priced North American shale gas and high value alternative fuels conversion technology playing right in Sasol's sweet spot, I'd like to highlight these dynamics in a little more detail.

Here, you can see the phenomenal growth in natural gas supply from unconventional wells. In the US, shale gas supply is expected to grow from 14% in 2009 to around 45% in 2035. As the supply of natural gas increases, of course, gas prices remain low relative to oil. You know Sasol uses natural gas as feedstock in its GTL plants, and makes a high quality diesel, which is sold in line with oil prices. The wider the gap between natural gas and oil prices, obviously, the more attractive our already strong GTL value proposition becomes.

In addition, we're seeing a rise in shale gas activity across the globe. In North America, production continues to grow, and new shale plays are being proven. Associated with this is an increase in M&A activity. In Europe, early test wells are being drilled, and industry collaboration has begun.

Initial steps to assess shale gas plays in China have been taken, while Indonesia has announced shale gas finds there. In Australia, shale gas exploration is to begin soon. And of course, the possibility of shale gas in many other regions should not be ruled out; specifically in South America, the Middle East, North Africa, and here in Southern Africa.

As we said at the outset, these are all regions with increasing energy consumption needs where Sasol can bring its proven alternative fuels and chemicals value proposition to the party.

Taking a look at the impact of our Canadian shale gas acquisitions, volumes from our two assets will significantly increase the Group's production profile over the long term. By around 2020, we expect an approximately fivefold increase over existing production from our upstream business SPI.

Just to put this into perspective, the additional gas from these assets can add more than 30% to our current total Group production in the next 10 years. Now some of you may argue that selling to a depressed North American gas market limits the upside of these volumes, but I want to reiterate that we have the technology to convert this gas into high value fuels and chemicals. If the gas prices open up, we also have the option to monetize the gas via the industrial gas market. We believe this demonstrates that we're well positioned to deliver on our growth aspirations.

We're also driving energy efficiency and reducing greenhouse gas emissions. Sasol New Energy is delivering on its mandate to develop and implement opportunities for Sasol in a carbon constrained world. Focusing on low and no carbon electricity, by 2013, Sasol's self-generated power capacity will be up to 60%, and carbon emissions will be reduced by another 1 million tons of CO2 per year.

New Energy is also progressing a similar gas-to-power opportunity in Mozambique, and is investigating other low carbon and renewable opportunities, such as concentrated solar power. In parallel, Sasol has engaged constructively and positively with government on the matter of climate change, and on the carbon tax proposal.

Sasol supports a transition to a lower carbon economy in a way that does not undermine the competitiveness of businesses, and does not result in reduced investment, lower income for the country, or a reduction in jobs.

On to my last slide. Clearly, Sasol remains a compelling investment proposition. We have a solid foundation of assets which are performing well. We have proven over 60 years that we can operate and continuously improve large scale Synfuels facilities.

As you've seen, our businesses are highly cash generative, supported by a focused delivery on cost containment. Our growth strategy is compelling. There's a growing need for countries to secure supply of energy. For many countries, particularly those with stranded coal and gas reserves, and even those with low grades of coal, in-country conversion of these resources into liquid fuels not only improves energy security, but also improves the country's economy.

Sasol CTL and GTL technology can monetize these hydrocarbon resources, producing liquid fuels and chemicals projects which stimulate further downstream manufacturing. We've demonstrated our ability to develop, commercialize and improve our technology; Oryx GTL is a perfect example of this.

I've already mentioned the attractive arbitrage between gas and oil prices which are currently very favorable due to shale gas in North America. And we're well positioned in emerging markets, which is where global growth and demand for liquid fuels will come from.

Finally, we deliver superior returns. Our strong and current deleveraged balance sheet underpins our ability to fund our growth strategy. Through our capital excellence program, we plan to further improve our IRR, and we're targeting top quartile returns as we execute our growth projects.

Sasol is unique in that it is both a value stock and a growth stock. Our highly cash generative set of foundation businesses allows us to pay attractive progressive dividends. At the same time, we've a full pipeline of projects. And again, note that our Canadian shale gas acquisitions alone can increase Group volume by 30% in the next decade with more of our growth projects delivering in the future.

My main objective as CEO is to maximize long-term shareholder value as measured by total shareholder return. I believe that Sasol is a company that offers a unique value proposition, and has over the years delivered results. Together with my management team, I look forward to engaging with our stakeholders and taking Sasol to its next level of performance.

Thank you for your attention. I think we'd now like to open the floor up to any questions you may have.

Gerhard Engelbrecht, Renaissance Capital. Three questions, if I may. Could you expand a little on the US GTL project? Do you have a partner? Do you plan on acquiring gas reserves, integrating back into feedstock? And what kind of chemicals are you targeting? Petrochemicals, ammonia, methanol? That's the first one.

Secondly, given that LNG prices in Japan at the moment, what in your mind is the best economic use of gas in Canada? Is it LNG into Japan, or does GTL trump that?

And then maybe lastly, if you look at chemical and oil company multiples and Sasol's multiple, it doesn't appear as if the market is giving Sasol the benefit of the chemical diversification. Isn't now the time to divest from these chemical assets and unlock shareholder value?

Are we going to continue, or do you want to take those?

You can go for those. I can take the next one.

Okay. Well, US GTL, I'll start, and Lean will support on this one. Very exciting opportunity for us next to our existing facility in Lake Charles, Louisiana. It's a very favorable state and a great opportunity for us to drive value through GTL and associated integrated chemicals.

No partner; we'd like to do this on our own. That's the first point. Gas feedstock right now, we are looking at both options. Hopefully, we'll integrate upstream. That's probably the preferred, or at least partially the preferred route. And SPI is helping us with that.

Chemicals, I'll turn it over to Lean, and if you want to talk a little bit about the associated chemicals and what those are. I know we don't want to get into too much detail, but Lean and Andre could probably help with that.

At this stage, we only look at WAX extraction; also some paraffin extraction. That's the two projects -- two chemicals we're looking at in the United States.

Then on to LNG and whether to ship it out of Canada to Japan versus GTL production. We've got two camps on that. We've got other companies looking at that as well right around our reserves. So it's a possibility. It's very difficult to get that pipeline across the Canadian Rockies. That's a big, big cost.

So right now, we're very comfortable with what we're doing with those reserves and driving that into GTL. This isn't to say LNG is not in Sasol's future at some point, but for that specific opportunity in Canada, economically, that's the way we're heading with GTL, and we think that makes more sense.

On multiples and diversification, unlocking shareholder value, we're always looking at that obviously for our shareholders. And at this point, we're comfortable. We've done some consolidation in Chemicals and getting our cost structure where we need to be. Anyone on the panel like to add to that?

The point I'd like to make is that Chemicals contributed quite significantly, and thereby, if you look at the portfolio diversification, both geographically and from a portfolio perspective, it adds to the resilience of Sasol. So what I'd like to say is we are focusing on further extracting value from that business. I think you're referring to the Non-Integrated Chemicals business, and there are no plans at this stage to unlock or unbundle Chemicals.

I just wanted to say, Gerhard, that I agree completely with you, and I would like to give you the opportunity to guide the market to a re-write.

I also enjoyed the letter on let's break up David. Interesting reading. Question?

Caroline Learmonth, Absa Capital. Can you comment now that you're in place as CEO, is it business as usual, or are you going to re-visit strategy, re-visit operations in any way, and over what timeframe?

And then question number 2. On China CTL, can you remind us how much has been spent on that project over the years in terms of pre-feasibility/feasibility? And do you have any indication roughly of how many man hours would have been spent on that project? And are you going to be limiting that going forwards? Obviously, you talked about India CTL, but just an indication of where priorities on that part of the growth versus GTL.

And then just on -- an add-on question to the previous question. So on Olefins and Surfactants, if that is a continuing core part of operations, what sort of operating margins do you think are sustainable for that business in the longer term over the cycle?

Thanks very much.

Thank you. I'm going to ask Andre to answer the O&S operating margin question, and then have Lean to talk about China CTL pre-feasibility and feasibility costs and man hours. And also, that we're very -- still positive on India's CTL, I can say that, and that project continues to come along nicely.

So let's go with O&S to Andre, and then to China CTL to Lean, and I'll take of course the strategy and a question that you've asked at the start.

Thanks, David. The O&S business historically performed at about -- well, negative operating margins, but on the whole between 3% and 5% operating margins. We feel reasonably confident that we will be able to maintain operating margins of between 7% and 11% throughout the cycle.

Thank you. Lean, China CTL?

The cost of the feasibility study was just -- our share of the cost just around $120 million. The pre-feasibility study was not costly at all. We've done it mostly out of South Africa. So I think we've probably spent over the years in total between $130 million and $140 million in China. All of that has been charged already to the income statement, so there's no more cost coming through.

Unfortunately, I don't know the man hours. I quickly tried to do a calculation, but I guess I'm a bit off target here, so can I come back to you on that one?

We at the top of the cycle probably had about 30 South African experts in the office, but also we had supporting officers all over the world. So I'll have to come back to you with the man hours calculation.

Okay, and then the final one about -- is it business as usual and strategy? Transitions are trying to capitalize on opportunities and challenges and take stock and look at some low-hanging fruit, some early wins, so that's what we're doing. But the team and I have discussed that. As you see with these results, this ship is going in a pretty good direction.

So we're coming together as a team to get it going in a better direction by optimizing costs and operational performance, and all the things you heard about under our top priorities. So that's what we're doing right now. So it's not a major shift because the strategy we're working off right now is working.

The GTL strategy was started back in the late '90s and early 2000s when the Company took their GTL technology to the market to take on the stranded gas issue, all that stranded gas in the Middle East. It was a great opportunity to demonstrate that Sasol's GTL technology could play a part. And that's played very well for us, the international growth, the low cost of stranded gas that makes those projects very viable and have great returns.

So that's -- and then this gets turbocharged. This strategy is getting turbocharged with all this low cost shale gas. So the strategy we're working off right now is playing out very nicely. It will take us into the next decade, obviously. But we do need to come together as a team and look at scenario planning on what's next; what's post GTL; what's Sasol going to look like; so it's a viable and growing Company well after we retire here.

So that's also on the books for early next year to take a look at a longer-term scenario planning analysis about which way transportation and mobility is headed and what the world's going to do with CO2 and what they decided -- COP 17 here in Durban around Kyoto-II. And all these things are going to play a part in the scenarios we look at as we --

Again, happy with our current strategic agenda for several more years, but we're going to look at a middle state and a long-term state that keeps the Company very healthy well into the future.

Thank you.

Can I just give you the questions one by one?

Sorry, and your name?

Nic Dinham, Cadiz Securities, Cadiz BNP shortly.

Just right next door, Mozambique, there's a really large coal deposit at Moatize, and the early announcements that have come out of them that's attracted the attention of a variety of big major companies, and one of them is Vale. And Vale is talking about a CTL plant. Are you involved? And if not, why not?

Do you want to take these one at a time? Is that what you want to do? Okay.

Well, certainly we all know Vale, a huge organization. And I have not heard from them specifically. We're getting lots of calls on GTL and our CTL technology. I know Poland has been looking at our technology. But from Vale and Mozambique's perspective, I'd have to see if Lean's been talking to them.

The short answer is we're not involved. I think we signaled to the market some time ago that we're limiting our CTL projects to China and India and that we are accelerating GTL. So we're not involved in Mozambique.

Okay, thanks. The next question is really about these liquid hydrocarbons you've found in Mozambique. What are liquid hydrocarbons? Is that what I call oil?

It's a good description. It's a [like] product.

Okay. The following question is how much of that oil, if any, is embedded in the resources that you publish?

That's nothing; nothing of those resources has been included as yet, because we still have a lot of work to do to firm up those resources.

Thank you. Third question. Sorry, last question. The question is about the capacity of Synfuels. So we now have a baseline of 7.3 million tons, and we're working to a 3% improvement on the 7.3 million tons, I gather. And there has been a temporary delay. Now the emphasis that's been placed in this presentation is the accident that happened down there, and that's why we're only going for 7.2 million tons/7.3 million tons for this year, which is a bit lower than what we had previously guided.

Was that accident so severe, or are we looking at other impacts and other effects on Synfuels which you're not making quite so explicitly clear? We've had numerous downgrades in a relatively short period of time on the capacity or production forecasts.

I can tell you that we have got it downwards to 7.2 million tons to 7.3 million tons based on, as Christine said, the industrial action that took out three weeks of -- during July, where we were working with the trade unions to get everyone back to work. And it did affect production. It was a larger strike than normal, and it affected people operating the facility through one of the unions that we work with.

The process incident on August 24 was in the West Plant in the gasifier section, and it's a unique situation. It's not systemic in the plant whatsoever, so it was a once-off issue that's been taken care of. We're working hard to bring it back on line with a lot of steel and pipe and utilities that need to be put back in place, but the plant is coming back nicely. But it's going to take a bit more time to get this last couple of gasifiers back on line.

So that's why we're having to guide down to 7.2 million tons to 7.3 million tons. There's no other issues. I think we're comfortable that the guidance to get to 3% by the end of second half of 2013 is a good statement. Our projects are coming along out there, and so that's where we're at right now.

Jarrett Geldenhuys, Deutsche Securities. Just three quick questions. The first one is on sustainability, or sustainable CapEx. It looks like in 2013 it takes quite a big jump. I don't know if you can just chat to that.

And then second of all, you mentioned several GTL opportunities. Gents, if you could just give us an indication of what percentages of those [set in] North America; and I suppose the rest is probably somewhere in Central Asia. If you can just give us some kind of a breakdown of that.

And then thirdly, if I understand the accounts correctly, it looks like there's a small provision raised against catalyst performance at Oryx. I don't know if you can comment about that, or maybe I've just misread that completely.

Thank you.

Sustained CapEx comes out at for 2013 about ZAR7.3 billion. And what that relates to primarily are the replacement mines for Impumulelo, and Shondoni. And then we've certainly got some environmental CapEx, and one has to also bear in mind that shutdown CapEx was also included in that.

On GTL opportunities, I mentioned that statement within the -- that they're in the idea and concept stage, so I'd rather not I think want to go there to signal anything to any competition. So I think we'll just let you know that, as you see from the graph, shale gas is large and growing and that we have a lot of opportunities to take a look at and prioritize.

Catalyst performance at Oryx, Lean?

There's no additional provisions. There has been provisions that we've made since start up, but in terms of certain transactions we've done with them, so there's nothing that we've added that's new.

Campbell Parry, Investec Securities.

Just -- David, early on in your time there as CEO, the new CEO, what's impressed you most about the business as you've stood back from a strategic level and had a look at it?

And then when you've taken a look at the programs underway, or in pre-feasibility, feasibility study, or even at the idea phase, when you look at the list of projects, do you think there's any way to accelerate any of them? One of the common criticisms of the business is that GTLs are wonderful, but could you perhaps [erect] 10 of them very quickly over the next couple of years. It's a bit of a silly remark, but it certainly is something that is spoken about around the world quite frequently.

So when you take a look at projects like US GTL, and anywhere in Europe, perhaps anywhere in Australia, and when you talk about some of these shale gas programs, is there any way of getting in there more aggressively and quicker than has normally been the case with Sasol?

So let me just replace -- replay that for you. What have I been most impressed with at the Company? And then, how do we think we can get the FID faster? Is that what I heard?

Correct, yes.

Well, it's a long list as far as what I've been impressed with. And certainly, the first thing is the people and all the hard work and the talent in the Company that has got us to this point. And I think the focus on going after the right opportunities and leveraging our technologies is really something to be proud of. And I just think that the Company's done a great job with that and it's positioned us so well.

Like I said earlier, our current strategic agenda has us going in a very good direction, and we've got the right platform in place to really take off on this opportunity we have in front of us.

If you think about the Canadian -- those Canadian acquisitions, that was a great, great move strategically, and it's going to change the whole face of the Company for the better. So just the way that all the employees and the management teams are focused on growing the Company, both domestically and internationally, is something that has been great to see and started to be a part of for me.

On getting to a final investment decision sooner, also what I've been impressed with is the gated process that the Company uses. It is best in class. The gated process we use to move from idea phase to pre-feasibility to feasibility and on to feed and implementation on the EPC and start up and commissioning of our projects. And for the magnitude of these mega projects we're talking about, you do need that type of a gate process in place to ensure that your business development and implementation is done correctly.

Clearly, we have some great opportunities in front of us that we'd all like to move along a little faster. But if you do that and you accelerate too quickly, you can have a real train wreck on the back end, whether it's an estimate that hasn't been done with the right scope, or some issues with not getting all the commercial arrangements set up properly at the outset.

So we are focused on moving them along as quickly as possible. Hopefully, you've seen today that we've taken some off the list and we're moving some along quite nicely. And we're very excited about Uzbekistan and Lake Charles, as well as others in the pipeline. So that's where were at on pipeline.

Thanks, Campbell.

David, just on Uzbekistan, you mentioned commercial conditions necessary to move that into a [five-year] stage. Could you be more specific on those conditions?

Yes, we're very positive on that. I'm actually going into the country on the 19th to meet with the President, and along with our partner from Petronas. And things look very positive. It's commercial -- we do have most of our documents in place. It's probably -- we've heard best in class -- and these are from third parties now, best in class in what we've done as far as getting all of our agreements in place. There are just a few, I would say, minor commercial conditions that we just need to make sure that we're all buttoned up, and then hopefully we can make a positive decision in the very near term.

Okay, thanks.

Alex Comer, JPMorgan. Couple of questions, just on costs. As far as I can see, your costs were up, cash fixed costs were up 15% in the second half. Just wondering how confident you are on costs being maintained within inflation next year.

Also, this time last year, a lot was said with regard to a voluntary redundancy program and taking people out. If I just look at the breakdown, it looks to me like you've taken about 200 out of Energy and about 200 out of Chemicals and added close to 1,000 to Other. I don't want you to take this the wrong way, but what do those people in Other actually do? What are you going to get out of these extra 1,000 people?

On the GTL projects, I just wonder whether or not you could give us an indication what you think the CapEx cost difference would be in a GTL plant in Western Canada and one in Louisiana. And, David, your background in that side of the business, you may be able to suggest typically what we should use as a discount.

And then in terms of the stock, you mentioned that it was both a value stock and a growth stock. Now clearly, I think we can all agree it's not being valued as a growth stock. And the history has been one of disappointment on volumes, and yet when you look at the reserves in place in Canada, the stock should have materially higher volume growth, and we would expect a materially higher valuation with a bit of luck. What are you going to do to convince the market that this time this is actually going to happen, given what's happened historically?

Okay, let's talk about costs first; up 15% in the second half. Christine, can you talk about keeping us within inflation this year?

Yes, I think that is our target, and it's certainly looking like we're on track to achieving that. I haven't done the half cost comparison, but I did make the point that there was ZAR1.1 billion worth of once-off costs in the current year. And so I think that would have certainly contributed to the 15% that you're referring to up in the second half, part of that. But I'm quite comfortable that with the initiatives that we've undertaken that we will actually achieve our targets for the full year.

Do you want to add on to that with the headcounts? I know that we've been up and down because of growth as well.

Yes. The point that I made in the presentation is that in our international Energy businesses in particular, our headcount numbers are actually up, and that certainly ties into investing for growth. I think certainly if you look at the other businesses, the headcount numbers are down. So I think when we also do the cost comparison, we look at it on a normalized basis, so we take out the once-off related costs, which is fair.

I can understand on International Energy, but it's just the extra 1,000 in Other that I'm somewhat surprised about.

I think certainly on the functional excellence side, we've moved -- we've transferred people from the businesses into shared services, so that would have been the move that's actually come through. But maybe we can get back to you on more detail offline. It's a bit difficult to answer the exact detail over here.

Okay. Thanks, Christine.

Okay, GTL CapEx cost difference between Canada and the US. Well, certainly, there are some differences, right? Gulf Coast Louisiana is open shop; productivity better. And in Canada, you will be dealing with unions, and you'll also have a decreased productivity because of weather. So I think that's all I need to say on that.

There will be a difference, but we'll be looking at -- modularization is critical to keep that as much as possible in the fab shops and moving up as much of the plant into the location in either Alberta or British Colombia; keeping productivity up when you're inside a fab shop. So, yes, there's a difference, and Canada will be slightly more expensive, definitely.

On growth versus value stock, I think it's a great story. When you look at those curves up there, I think we should be valued for what we've been able to -- valued as a growth stock based on what we've been able to put in place, and I believe we're going to deliver on that. We're going to start getting some of these projects over the goal line in North America and in Eastern Europe and construct them successfully. And that's going to drive, just like Oryx GTL has, drive some major bottom line growth through the medium term. So I'm very positive and, hopefully, the markets will see that.

Okay, thanks.

Right, I think we've run out of time. Sorry. I know there's lots more questions, but we're already 15 minutes over our time.

Please join us for a drink next door, and our management will be available, so you have opportunity to ask further questions.

Thanks very much, everyone. Thank you.

Thank you. This does conclude the Sasol year-end financial results conference call. Thank you for your participation. You may now disconnect.