Sasol Ltd (SSL) 2013 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for joining us this afternoon for our year end results presentation. I would also like to welcome those people joining us via teleconference. Our panel this afternoon, from my left is our Chief Executive Officer David Constable; our Chief Financial Officer and Executive Director Christine Ramon; our Executive Director Nolitha Fakude; Senior Group Executive Andre de Ruyter; Senior Group Executive Lean Strauss; and Group Executive Bernard Klingenberg. I'd also like to welcome those other members from our GEC sitting in the front row.

Your safety and the safety of our employees and contractors is critical to us so please take note of the safety instructions. Should we need to evacuate the venue, please leave from the two doors at the rear and Sasol safety marshals will meet you outside and will direct you at the stairs to either exit at number one Sturdee, reception or through the emergency doors behind the bar which will take you out at Baker Street and Bolton Avenue. In an emergency, please do not use the lift and also do not [force] to pack your things. Please exit immediately.

As with all presentations, I'd like to remind you of our disclaimer and forward-looking statements which you can find on page two of your slide pack. And, with that, I hand over to our CEO.

Thanks, Sam. Good morning -- good afternoon, everyone. Thank you for joining us for Sasol's audited year-end results presentation today.

This past financial year, the Group posted another outstanding all-round performance against our safety, operational and financial targets. While we acknowledge the tailwinds, obviously, of macroeconomics our success in large part is due to managing the factors within our control. Our strong results are also testament to the resilience of our strategy where a volatile external environment is weighing heavily on economic growth. I'd like to acknowledge and thank my Sasol colleagues from around the world who have again distinguished themselves with their commitment, passion and hard work. And, thanks to their resolve, is -- we continue to deliver a high level of performance even through often uncertain times.

Let me, as usual, start with an overview of what you're going to hear today. First of all, we'll highlight our solid full-year earnings and then discuss how we are growing sustainably in South Africa and abroad. Next, I'll provide you with a brief overview of our business performance enhancement program, which is going to be driving cost optimization across the Group. Christine will then go into more detail on the financial and operational performance of our businesses, and I'll come back up to talk you through Sasol's current project pipeline, the status there, and wrap up this morning's session -- this afternoon's session by summarizing our strong investment case. We'll then open it up for any questions.

Earlier this year, Sasol celebrated the 10th anniversary of our listing on the New York Stock Exchange. In 2003, Sasol's ADRs listed at $10.73 per share on the NYSE. A decade later, the share price has increased almost fivefold to close at $48.41 on this past Friday. Over the same period, our market capitalization has risen more than fourfold from $7.7b to $32.6b. Throughout this timeframe we remained a consistent and strong performer with our attributable earnings trending favorably upward, as you can see from the graph here on the screen. And, despite a sharp dip in 2009 at the start of global recession, we bounced back in 2010 and continued our upward trajectory to a new all-time high in FY13.

It's equally important to consider other indicators over this period, which speaks to our commitment to act responsibly. Through our contributions we create value, not only for our shareholders but also for all of our other stakeholders.

Looking at the broader contributions we're making, at the end of last year we announced our ZAR800m commitment to the Ikusasa public private partnership. Today, we've already contributed ZAR135m to the Govan Mbeki and Metsimaholo Municipalities. These contributions served to improve local infrastructure, upgrade education and resource centers, including public libraries, and enhance healthcare, sports and recreational facilities.

Through targeted interventions, our global investment in socioeconomic developments was ZAR627m this past year, of which close to ZAR600m was invested here in South Africa. In addition, we increased the level of investment in our Sasol people across a wide range of initiatives, spending more than ZAR837m in FY13 on skills development.

Turning to one of our -- just one of our many environmental initiatives, in April 2013 we launched the Water Sense campaign with the Department of Water. The Emfuleni water conservation project achieved 2.1m cubic meters of water savings through the repair of leaks in 60,000 homes. That's about a half of the municipality's current water usage.

Next, we do remain the largest corporate taxpayer in South Africa, contributing ZAR30.8b in direct and indirect taxes to the national fiscus this past financial year. Importantly, and notwithstanding our international growth aspirations, our South African CAPEX in 2013 was ZAR19.8b, which equates to 59% of our Group spend.

Finally, we continue to make great progress in our transformation activities in South Africa, achieving level 3 B-BBEE status earlier this month. Our unwavering focus at Sasol on equity ownership, enterprise and socioeconomic development, employment equity, skills development and preferential procurement are delivering exceptional results well beyond the targets we'd initially set out for ourselves.

In addition to touching many facets of life through our broader contributions, we're also delivering on our key business milestones in Southern Africa. Our ZAR13.9b Secunda growth program is nearing completion. Following the commissioning of the 17th reformer, the 16th Oxygen Train and four additional gasifiers, the first pair of gas heated heat exchange reformers were completed in June. And we expect a second set of GHHERs to be installed by the end of calendar year 2014, which will signal the successful close-out of the entire program.

In Sasolburg, the ZAR1.9b ethylene purification unit, EPU5, is currently being commissioned with the official opening scheduled for later this month. EPU5 will be integrated with the existing monomer unit adding a further 48,000 tonnes of volume annually.

In Mozambique, we advanced our 140-megawatt gas-fired power plant in Ressano Garcia. Construction has commenced and beneficial operation is on track for the first half of next year. Also in Mozambique, we're commissioning a ZAR2b 26-inch loop line to increase the capacity of the existing gas pipeline. Gas sales agreements have already been concluded for the additional capacity and beneficial operation is expected at the end of June 2014.

Turning back to South Africa in a key project to ensure sustainable Synfuels operations is the development of the Impumelelo and Shondoni collieries. These collieries are part of Sasol Mining's ZAR14b mine replacement program. While the issuing of water licenses by the relevant authorities has caused some delay, both collieries are expected to be completed on time and within budget.

Looking further afield at our US mega projects, we have taken significant strides forward, specifically at our world-scale ethane cracker. We've appointed key EPC contractors and have placed orders for crucial long-lead items. In addition, we have submitted our environmental permit applications and have received the requisite approvals for key project incentives.

Turning to our US GTL project, we'll be commencing the FEED phase later this year. A final investment decision is expected within 18 months to 24 months after that of the cracker.

Following detailed assessments with our partners, we took the decision to reduce our participation in the Uzbekistan GTL joint venture from 44.5% to 25.5% at the end of the FEED phase. This notwithstanding, the Uzbekistan GTL project remains an important development in Sasol's GTL growth portfolio. And the business case for the proposed facility remains very robust.

Turning to our operations highlights, this year's success were coupled with the best annual safety performance result in the Group's 63-year history. That's an incredible achievement by all of our colleagues and service providers who collectively worked 245.7m exposure hours in FY13, so you can think of that as over 120,000 people, day in and day out, at our facilities working safely.

At our Synfuels facilities, decisive management action and improved plant efficiencies resulted in a production performance of 7.443m tonnes; that's the highest volume output since our 2006 financial year.

Our ORYX GTL plant continues to achieve new production records, coupled with an impressive safety recordable case rate of zero over the past 18 months. The facility maintained an average utilization rate of 80% of design capacity over the financial year despite an extended statutory shutdown. And in May and June in Qatar the average run rate equaled 106% of design capacity; proof that our GTL technology is fully commercialized and ready to roll out elsewhere in the world.

With regard to our energy efficiency improvements, to date we have spent ZAR5.1b on low-carbon electricity. Today, we can generate up to 69% of our South African electricity requirements, thereby reducing our carbon footprint dramatically and mitigating our exposure to rising energy costs.

In terms of our overall FY13 results, you've seen them. Sasol Synfuels production was up 4%. Our operating profit, excluding once-offs, was up 26% to ZAR40.6b. Headline earnings per share up 25% to ZAR52.62; that's a new record high. And cash flow from operations were up 24% to ZAR59.3b, enabling a total dividend of ZAR19 per share. Another record which remains aligned with our progressive dividend policy.

Of course, a strong operational financial performance does not mean that we can afford to be complacent. In fact, the best time for an organization to make improvements is when things are going well. Our strategy both in relation to enhancing our existing asset base and delivering our growth projects is an ambitious one. And to achieve our strategic objectives we're looking closely at how to become more effective and at the level of organizational change required to ensure our ongoing success.

During 2013, our focus on operational performance resulted in improved plant stability and more reliable production volumes. Looking ahead at our business performance enhancement program, we will continue to improve our operational productivity while implementing an effective, simplified and tailor-made operating model. Our aim is to drive initiatives which will address both cost creep and organizational complexity, making Sasol much more fit for the future. Through our program we expect to generate sustainable annual savings of at least ZAR3b. This will be achieved, to a large extent, by arresting our cash fixed cost increases over the next two years to three years.

The drivers for the saving target will be a combination of efficiency benefits stemming from our new operating model, productivity improvements in our operations, establishing fit-for-purpose functions in the Company, and driving procurement cost reductions. And I'll be able to share more details on the Group's new operating models as well as the source of these savings and the related charges during our interim results announcement in March of next year.

Before I hand over to Christine, as you know this will be Christine's last results announcement at Sasol. After more than seven years with the Group. Christine announced her resignation in order to pursue new opportunities. This comes at a time when the year-end results have been finalized and we've concluded key deliverables, including the divestiture of our stake in the Arya Polymers joint venture in Iran. As we enter new financial year we agree that this presents an opportune juncture for Christine to move on from Sasol.

Under her financial stewardship, Sasol maintained a prudent balance sheet and sound financial risk management processes. Christine has developed a strong and talented team of people within the Finance Division which has left us exceptionally well placed in our appointment of an Acting CFO, Paul Victor. Paul's in the front here, who is currently our Group Finance Executive, has been working closely with Christine to ensure a seamless handover. Paul has the ability to think both strategically while at the same time interrogating detailed financial and operational data. Paul's 10 years at Sasol Synfuels, along with his hands-on detailed knowledge at the Group level, made him an obvious choice to assume this new role. And I'm pleased to have an acting CFO of his caliber working alongside me and the GEC.

Let me now hand over to Christine as she unpacks our results in a little more detail. Christine.

Thank you, David, and good afternoon, everyone. I'm certainly pleased to present another set of excellent results to you today. We've delivered record earnings for financial year '13 and our reported earnings are at the midpoint of the guided range provided in our recent trading statement and ahead of consensus forecasts.

Before I discuss the results in detail, I'd like to make the following three comments. Firstly, our continued focus on operational performance has resulted in improved plant stability with Synfuels' production performance delivering ahead of our stated target. Secondly, although the operating profit was significantly impacted by once-off charges, a solid production performance together with the favorable impact of the average weaker rand/dollar exchange rate has enabled us to deliver record operating profits. And, finally, our balance sheet remains strong on the back of very strong cash flow generation across our businesses, which continues to position Sasol well to fund our objective growth projects, to fund our progressive dividend policy, as well as to provide a buffer for volatility.

The past year continued to be characterized by a predominantly favorable but volatile macroeconomic environment. Oil and product prices were softer throughout most of the 2013 financial year, although the average rand/dollar exchange rate was about 14% weaker than the prior year. Although the weaker rand/dollar exchange rate was overall positive from an operating profit perspective, it certainly contributed to an already challenging cost environment.

The chemicals market remained challenging, impacted by volatility in global markets. Chemical prices continued to soften on the back of weaker demand in downstream markets. Coupled with higher feedstock prices, the industry-wide margin squeeze prevailed.

We also see that the average Henry Hub gas prices were higher, which is positive for our Canadian shale gas operations. And the oil to gas differential remains at levels that remain attractive to pursue our GTL value proposition.

As you're aware, we remain sensitive to oil prices and the rand/dollar exchange rate and we remind you of our sensitivity to each of these variables which we issue with a health warning.

We estimate that for every ZAR0.10 change in the annual average rand/dollar exchange rate, it will impact our operating profit by approximately ZAR940m. Furthermore, we estimate that for every dollar per barrel change in the annual average crude oil price, it'll impact our operating profit by approximately ZAR610m.

The Group recorded a record operating profit for the 2013 financial year of ZAR40.6B. Operating profit was impacted net once-off charges of ZAR8.5b, which I will elaborate on in the next slide. If one had to exclude the impact of these once-off charges, our increase in operating profit would have been enhanced by 15% to an increase of 26%. And our operating margin would be enhanced by 5%, reflecting a margin of 27%.

Importantly, despite the impact -- or shall I say the positive impact of the weaker rand/dollar exchange rate, our overall underlying operating performance compares favorably when we compare ourselves to the performance of our global peers over the same period in US dollar terms. Our South African businesses delivered another strong performance driven by improved Synfuels volumes and a favorable macro environment. The international energy cluster was, however, negatively impacted by lower ORYX volumes, mainly as a result of the extended shutdown.

Our chemical businesses, as alluded to earlier, remained under pressure, experiencing lower demand and continued margin squeeze. Despite the negative impact of the partial impairments as well as the translation losses, our chemical businesses contributed ZAR1.9b or 4% to Group operating profit.

Cash flows generated from the chemicals operations were, however, stronger, contributing ZAR11.1b or 18% to Group cash flows generated from operations.

Other income includes foreign exchange gains on the Canadian forward exchange contracts amounting to ZAR1.3b, of which ZAR439m is unrealized.

Overall, our international businesses, including the Mozambican value chain, brings good balance to our portfolio, contributing to just under 15% to Group operating profit, with Europe and North America being the main contributors.

Moving on to the impact of the once-off charges, we can see that, overall, looking on the list operating profit was boosted to the larger extent by the positive impact of the weaker average rand/dollar exchange rate and that was despite the impact of flattish Brent crude oil and product prices. On the factors under our control, on the right-hand side of the slide, it's encouraging to note the positive impact of sales volumes across the Group.

However, we see the large impact of once-off items of ZAR8.5b and this relates primarily to the partial impairment of Arya and the FTWEP expansion project of ZAR3.6b and ZAR2b respectively, as well as ZAR2b of translation losses, also primarily relating to Arya. And that was mainly due to the depreciation of the Iranian rial against the US dollar. There were further negative impacts to operating profit, which include higher depreciation charges on our Canadian shale gas assets as well as higher growth and study costs.

Moving on to cash fixed costs, we see that the increase has been compounded by the challenging South African environment. Normalized cash fixed costs, which exclude once-off and growth costs, as well as the impact of the weaker rand/dollar exchange rate, increased by 7% in real terms, primarily due to the challenging cost environment in South Africa in respect of labor, maintenance and energy costs. The impact of a weaker rand added a further 3% to total cash fixed costs. Uncontrollable factors, as we can see, the (inaudible) contributed 10% to the total increase in cash fixed costs and that includes inflation, exchange rate effects and abnormal electricity price increases.

Moving to the right, we see that growth in study costs added a further 1% while plant maintenance, increased labor, headcount costs and other once-off costs added a further 7% to total cash fixed costs increase.

As we know, labor and energy costs are the main drivers of our cost base, with labor comprising almost 60% of cash fixed costs. Labor costs per head increased ahead of PPI inflation, which is indicative at about 6% for the past year, and that was driven by an increase in share-based payment expenses and that's given the recent strong share price performance as well as new grants. We have concluded wage settlements with the trade unions in the chemicals and the petroleum sectors so far for the current year at increases averaging between 7.5% and 7.9% before adding any growth-related costs.

Energy cost inflation for the past year averaged at about 13.4% for the year, in line with previous guidance given. We expect energy cost inflation for the coming year to be approximately 7.5%.

As David has said, we continue with our strategy to contain energy costs and that has seen us successfully ramp up our electricity generation capacity in South Africa to approximately 69% of our own requirements.

Our investment in plant maintenance has successfully delivered plant stability and improved volumes. However, we do remain concerned about the rate of cost inflation in South Africa and are focused on procurement and maintenance cost reduction strategies. Through our business performance enhancement program that David actually spoke to earlier, we are looking to significantly reduce our cost base on a sustainable basis. There will, however, be costs relating to this initiative in order to deliver annual sustainable savings, which will be realized over the next three years. More color on this will be given at interim results announcement in March next year.

Moving on to the South African energy cluster, we see it continues to underpin the Group's profit and cash flow generation, now contributing over 90% to Group profitability. The SA energy operating profit increased by 28% and mostly expanded operating margins.

Despite increased production volumes and higher sales volumes in prices to Synfuels, Mining suffered a 3% decline in operating profits and an operating margin contraction and that was primarily due to increased mining costs, external coal purchases and increased transport costs.

Our gas business benefited from a 5% increase in sales volumes, mainly on the back of gas consumed by the new electricity generation plant in Sasolburg. These factors supported a 36% increase in operating profits and operating margin expansion to 49%.

Synfuels delivered a sterling performance with a 30% increase in operating profit and a 4% expansion in operating margins to an impressive 49%. Performance was driven by the higher production volumes, the 4% higher production volumes, as well as favorable product prices and margins due to a weaker average rand/dollar exchange rate. Synfuels cash unit cost, however, increased by 13% due to higher feedstock costs, which are largely internal to the Group, as well as increased labor and energy costs. Management in this business remains focused on optimizing maintenance and renewal costs over the longer terms.

Sasol Oil's operating profit increased by 30% and the operating margin expanded to 3%, and that was despite lower sales and production volumes mainly due to the extent of planned maintenance shutdown at Natref, which was also coupled with lower demand experienced.

The international energy cluster remains our growth engine and we do continue to invest in the form of feasibility studies, FEE] and exploration expenditure. Sasol Synfuels International operating profit declined for the first time by 15% and that was primarily on the back of lower volumes from ORYX GTL due to the extent of the statutory shutdown, as well as higher US GTL feasibility study costs. Despite the planned shutdown, ORYX achieved a full year average utilization rate of 80% of nameplate capacity, which is well within the guided range, reinforcing our GTL value proposition. Operational benefits since the start-up of the planned shutdown have already been achieved, with the average throughput during May and June 2013 above 106% of design capacity on an instantaneous basis. Now that both the US and Uzbekistan GTL projects are in the FEED phase, the FEED-related costs are largely capitalized and will no longer impact the income statement.

Sasol Petroleum International recorded another operating loss for the period, although improved from the prior year on higher gross margins and improved volumes. Our Canadian shale gas assets remain cash positive. However, the Canadian shale gas assets do remain under pressure due to low gas market prices and high depreciation contributing to the loss for the year. We are stabilizing our Canadian production and actively derisking this asset to optimize the ramp-up of development activities once gas prices increase. It's also positive to note the downward trend in drilling costs has been maintained in this business.

Moving on to the chemicals business, the global chemicals landscape does remain challenging where low product prices and high feedstock prices prevail. Several global companies have announced cost-cutting measures, including focus on operational efficiencies in order to reverse the decline of profits. Our chemical businesses remain under severe pressure. Although sales volumes have improved in some of our underlying businesses and the weaker rand/dollar exchange rate has positively impacted profits, the high feedstock costs, coupled with low product prices, continued to squeeze margins.

Chemicals reported a 70% decline in operating profit and operating margins contracted, and that was exacerbated by the partial impairments as well as the translation losses. If one had to exclude the impact of these once-off items, chemicals delivered ZAR9.5b operating profit, reflecting an increase of 32% compared to the prior year. We continue to optimize our European chemical business's production to match lower demand and optimize margins in light of the continuing weak European market conditions.

Polymers recording an operating loss of ZAR2.8b compared to an operating profit in the prior year. The South African Polymers business suffered a loss of about ZAR1.8b as feedstock prices increases continued to outweigh increases in selling prices. Although the business did achieve a 5% increase in sales volumes despite the slow recovery in the polymers market, we also saw sales prices in the second half improve on the back of a weaker rand/dollar exchange rate.

Arya achieved an average capacity utilization rate of 80% within the previously guided range. However, due to logistical disruptions at Arya, sales volumes at our international operations were 19% lower than the prior year.

We're also pleased to announce that we entered into a definitive sale and share purchase agreement to dispose of our 50% interest in Arya Sasol Polymer company for a purchase consideration of $365m, of which $35m is still outstanding to date. As a result of this transaction, Sasol has no investment in Iran.

As demonstrated by the figures, we see that Solvents continued to experience a challenging environment as well. Olefins & Surfactants, however, remains the largest contributor to the chemical cluster's operating profit. The business grew operating profit by 12% and expanded operating margins to just under 9%, which is well within the guided range previously provided to the market of 7% to 11% operating margin through the cycle. While our US operations continue to benefit from low US ethane prices, our European businesses, while still profitable, remained under pressure on softer demand, coupled with higher feedstock prices.

Our growth strategy continues to gain momentum, as demonstrated by the increase in capital investments to ZAR32b for the past year. Our capital investment estimate for 2014 has been increased to ZAR42b as a result of the impact of the weaker rand/dollar exchange rate on our capital expenditure program, as well as progress made on our growth strategy with particular reference to the Lake Charles ethane cracker as well as the increased spend in respect of the FTWEP project. We estimate CapEx for 2015 of approximately ZAR50b.

Approximately half of these capital investments over the next two years will be spent in South Africa, and a large portion of future growth capital investments will be allocated to growth projects in the international energy and chemicals businesses which is in line with our growth strategy.

Our continued strong cash generation ability, particularly from our foundation businesses, remains strong as demonstrated by a 24% increase in cash generated by operations to ZAR59.3b.

However, given the challenging environment and about a 1% increase in working capital we do continue to focus on strengthening our working capital management across the Group, and monitoring credit exposure and counterparty risks.

Our balance sheet remains strong and is deleveraged. We expect gearing to remain low in the short term, and are comfortable that it can be managed within our targeted gearing range of 20% to 40% in the medium to longer term.

This, together with our capacity to raise funding in global markets as demonstrated by a successful $1b bond issuance in November last year positions Sasol well to fund our international or attractive growth projects rather, fund our progressive dividend policy and provide a buffer for volatility.

As shown in the return on invested capital slide we remain committed to delivering on our stated targeted returns when advancing our growth strategy and allocating capital in a way that delivers on our stated return on invested capital targets of 30% above our weighted average cost of capital.

We remain committed to our progressive dividend policy. Taking into account the ongoing stream of our financial position and our current investment plans, we are in a position to continue the upward trajectory of our dividend to ZAR19 per share, which is the new underpin, reflecting an increase of 9% on the prior year.

Notwithstanding -- sorry, I just need to move the slide and it's not moving, okay here we are. Notwithstanding our recent strong share price performance this translates into a dividend yield of 4.4%. Coupled with the total shareholder return of 14% in rand terms over the past five years and 32% in rand terms over the past year to June 2013, this positions us competitively with our peer group, reinforcing our commitment to consistently return sustainable value to our shareholders.

Moving onto the last slide on the FY14 profit outlook, with respect to the macro environment we are expecting global economic growth to remain modest, particularly given the uncertainties in both the European and the US markets. This does impact our assumptions in terms of the economic variables. On the factors under our control we do continue to focus on volume growth margin improvement and cost reduction.

In terms of volumes we expect Synfuels to deliver between 7.3m to 7.5m tonnes of product, taking into account that financial year '14 is a full shutdown year.

Internationally, ORYX GTL is expected to maintain an average utilization rate of above 85%. And in Canada we expect production volumes will increase marginally as new wells come on stream.

However, the South African cost environment does remain challenging. We do expect normalized cash fixed costs to exceed South African PPI inflation. And as discussed by David earlier, cost reduction is a key focus area for management, however, additional costs will be incurred to achieve future sustainable savings.

Lastly, in the Chemicals division, we expect continued pressure in the Polymers South African business. However, we do expect some improvement from current levels. And that takes into account improved market conditions as well as the commissioning of EPU5 and the C3 stabilization projects due in financial year '14.

Following the sale of our interest in Arya during the first half of 2014 we are currently estimating the impact of the change in the official Iranian rial exchange rate, applicable from the 2014 financial year. And this change could result in a loss on disposal of less than $100m.

In conclusion, management's strong focus on operational performance has delivered on improved profitability and a record operating profit. And our balance sheet and healthy cash flows continue to position Sasol well to fund our attractive growth projects, sustain our progressive dividend policy as well as provide a buffer for volatility, allowing us to consistently return value to shareholders.

Before I hand back to David, I would just like to say a few words following the recent announcement of my resignation. I feel incredibly honored and privileged to have been inspired by and to have worked with great people and a strong team at Sasol for more than seven years in building a successful company. However, the time has come for me to seek out new challenges and opportunities as I embark on a new journey. I will continue to follow Sasol with much interest in the future. Sasol is a great company and I wish you all well in the exciting future that lies ahead for the Group.

On that note, I will now hand back to David.

Thanks, Christine. And on behalf of the management team and the Sasol Ltd Board we want to wish you and Ritchie and the girls of our best going forward.

Okay, just a few more slides here to conclude, despite persistent turbulence within the global context, Sasol's ability to match and in many instances better the performance of the past demonstrates the resilience that has become the Company's hallmark.

It is clear that our US growth projects are very large, and we are fully aware of the importance of focusing on their successful completion. This being the case, the management team embarked upon a thorough review of our entire product portfolio and commenced a carefully considered prioritization process. The purpose of this exercise was a simple one to ensure that we advance the right projects that can unlock maximum value for our shareholders over the long term.

Based on our review, and particularly the financial and human capital requirements of our various projects as well as our near-to-longer-term strategic direction, we were unanimous as a management team as was the Board to proceed with the FEED work on our US projects, thereby prioritizing them over our proposed Canada GTL venture.

As part of our capital allocation determinations, we give due consideration to creating the right balance between investing the Company's capital for longer term benefit and returning cash to the Company's shareholders.

Today our strategies are very closely aligned to our product pipeline, as you can see from the slide on the screen. To the left we highlight the five key drives that comprise our high level strategies.

Looking at the first line, accelerate GTL growth, here we are moving on several fronts, in Escravos in Nigeria where we are -- our third GTL plant is close to commissioning. Is Uzbekistan where we are concluding the FEED phase, and our US GTL project in Louisiana which will be, as I said, progressing to the FEED phase later this year.

Next, in the second line, grow value chain based on feedstock, market and/or technology, here we achieved several key milestones on a range of chemical projects in South Africa and in the US. Later this month, we'll be opening the FT wax expansion catalyst plant. And next month we'll be inaugurating the tetramerization plant in Lake Charles. In tandem and most significant as I said earlier we are progressing well with the FEED phase of our US ethane cracker.

Looking at the next row, develop and grow low-carbon power generation, we expect beneficial operation of our Mozambique Gas Engines Power Plant in the first half of calendar year 2014.

In the fourth row, improve and grow existing asset base, this relates largely to the initiatives which are critical to the success of our project 2050 which aims to extend the lifespan of our Southern African value chain to the middle of the century.

Finally, looking at our upstream activities as part of our prioritization efforts, we've rationalized our exploration portfolio this past year, and relinquished various licenses in Mozambique, Papua New Guinea and Australia. In so doing, we graded our portfolio which contains a number of promising assets in other parts of Mozambique, Australia and in South Africa and Botswana.

From the slide it's evident that our project pipeline is full yet manageable, and that with our focus on delivery several projects have advanced well down the track.

In closing, clearly, Sasol continues to provide a strong investment case. The reasons for this can be summarized in the three columns you can see on the screen.

First, looking at our existing asset base, our foundation businesses, these remain solid. Here our proven technologies and flagship plants in South Africa and Qatar continue to achieve impressive gains in throughput and efficiencies. As you've heard today from Christine our businesses remain highly cash generative, delivering consistent and strong cash flows. Our foundation businesses worldwide provide us with a solid platform from which we can springboard our international expansion aspirations.

Next, our growth opportunities remain exciting and attractive here, our ambitions are based on harnessing a mix of key criteria including our skill in monetizing hydrocarbon resources, utilizing our competitive technologies and manufacturing know-how, our ability to capitalize on low-cost feedstock over the long term, our access to markets where the demand for high quality fuels and chemicals continues to grow and a strong, focused project pipeline.

And finally, we continue to create value. A solid balance sheet, healthy cash flow generation continues to support our progressive dividend policy and the funding of our growth aspirations. Sasol continues to achieve leading long term shareholder value through our share price performance. And we are a proud South African company, and our commitment to the region remains firm.

So to conclude we have no doubt that Sasol represents a strong investment case, and the management team and I have every confidence that the future for Sasol is indeed very bright.

Before I open it for any questions you may have, today as previously announced is also Lean Strauss's last results announcement with Sasol. Although Lean will continue to support me as an industry advisor after over three decades of dedicated service, he is setting his sights on a lifestyle change and a very well deserved retirement.

This past Friday the Sasol Ltd Board approved the appointment of Lean's successor, Ernst Oberholster, Ernst is here with us today. Ernst is currently the managing director of Sasol New Business Development. Ernst has been with Sasol for more than 23 years now, and has been working very closely with Lean in the International Energy and Business Development arenas. Ernst is a seasoned dealmaker and an astute business man, and has been the driving force behind the initiation of many of our largest projects, including our US mega-projects, the Canadian gas acquisitions and Uzbekistan GTL. And on behalf of the Sasol Ltd Board and the management team, I'd like to wish Ernst all the very best as he assumes his new role on the Group Executive.

Also on Friday our Chairman, Hixonia Nyasulu indicated she will step down at our AGM on November 22. It's been a great pleasure working with Hixonia. And her wise and constructive and frank approach is a testament to her sound and engaging leadership style.

The Sasol Board appointed Dr. Mandla Gantsho as our new Chairman. Mandla is no stranger to Sasol having served as a non-Executive Board Member for 10 years now. I'm looking forward to working with Mandla in his new role. His expertise and also his knowledge of the Company will most certainly prove beneficial to both Sasol and our stakeholders.

So with that, and those updates, we'd now be happy to open it up for any questions that you might have for us. Thank you.

If I can please just ask that you keep it to one to two questions as there is quite a few people that would like to ask questions, and if you could also just introduce yourself. Thank you.

Gerhard Engelbrecht, Macquarie. Thanks for the opportunity. David, just a couple of questions. One, maybe can you give us a little bit more around your thinking in the Uzbekistan decision. I see also now you say that for the project to go ahead you want 50.1% non-government interest. Do you have a buyer that can contribute to the capital spending there? So that's the first question.

On ORYX you often talk about instantaneous production being higher than 100% yet your production guidance for next -- for this year is actually very similar to what you achieved in 2012, so all the improvements that you've made at ORYX doesn't really seem to come through in production. Is it still stop/start at ORYX or what exactly is the situation there?

And then maybe just lastly a financial question, last year you said on provisions that you lowered the discount rate and in Sasol Synfuels the -- there was quite a big increase in provision and now you're talking about the discount rate changing and a release of provisions. Is this something that we can expect every year as interest rates change? And will the earnings be more volatile as a result?

Great, thanks for the questions. And we'll start at Uzbekistan GTL and then move to ORYX, and the provisions, Christine, maybe you can handle. Uzbekistan obviously, as I said, remains a great project, very robust returns there. As we prioritize our portfolio and look at the requirements across the Group from a capital perspective and project execution perspective we -- and risk perspective obviously we found it appropriate to take a reduced shareholding there.

It's encouraging, certainly from a financing perspective, initial indications are positive feedback from the lenders is strong. And we have a process in place right now where we are out talking to potential new partners who have quite a bit of interest. It's quite a long list from a number of different countries. And to answer your question, yes, they will be able to bring CapEx support to the project.

Lean, anything to add to that?

No, David, I think you've covered it well.

Okay. ORYX, you can stay on the mic, Lean, because as I walked up here today you said 85% is very conservative at ORYX for a guidance and I think it was at least 85% that we are talking about. In August, the month of August we had a run rate of 108% so barring any challenging shutdown issues at ORYX I think that 85% is a very conservative number, and maybe -- Lean was just there, maybe he can comment as well.

Yes, I see we've used the words exceed 85%, we haven't given a range and I think there is upside, significant upside. We are comfortable that we can maintain continuous operations.

Are you running continuously at ORYX or is it stop/start?

No, no, we are running continuous.

Continuous, yes. So, last question to answer before [Alec], Christine, on the provisions and the discount rates.

Yes. So there was a ZAR1.6b positive impact from the release of the provisions, and that related to a 0.5% reduction in the discount rate. So clearly, I think one can expect that as the interest rates change one has to, it's an accounting requirement that you actually have to look at the impact on the discount rates and flow through the necessary impacts.

So I think it's something that you've got to watch going forward. And clearly the rehabilitation provisions relate primarily to Synfuels but there is also the mining business that has some rehabilitation provisions in it as well.

Thanks, Christine. Alec?

Yes, a couple of questions. Just on your labor costs they were up I think 21%. I just wondered how much of that was currency, how much of it was organic?

And then if you look at your share-based payments stripping out the Inzalho, up from 800%, EPS was up 11%, HEPS 25% and the share price 26% how do we model what that number is going to be going forward?

And then just on the polymers business, and I ask this question a lot but when I look at what you've said in terms of your polymer selling prices and what's happened to the Synfuels selling prices and the oil prices there should have been a gap opening up not going the other way. So what am I missing in the ongoing profitability shortfall there? And just on that maybe there has been a bit of a turnaround in polymer pricing in the last few months. Are you close to breaking even there?

Thanks, Alec. Let's start with labor costs and the effect of increased manpower and share-based payments, Christine, if you could comment.

Okay. So you're correct that the labor cost increase in total was about 20.6%. If one had to look at the impacts of that clearly inflation was the biggest impact, and you can probably say about 7.5% related to inflation there. The next biggest impact was about 7% relating to share-based payments.

And I think followed then by the exchange rate effects of about 3.5% and then we saw headcount, increased headcount effects coming through of about 1.6%. And that's mainly related to the acquisition of the outside shareholders' interests in Merisol. We did see some smaller increases coming through in businesses like [Sastic] but the biggest increase in headcount really came through in the Merisol business.

How does one -- and obviously when one increases the headcount, one has to look at the flow through of the increase in headcount and that does relate to employee benefit costs, etc. that one has to take into account, and there was some growth costs across our businesses as well.

In terms of modeling share-based payments I think it is quite a difficult modeling exercise because one can't anticipate in advance as to what the increase in the share price is actually going to be. But really one sees these impacts coming through every six months and I think for me to give you guidance on modeling I think it's a bit difficult. Maybe we could have an offline discussion on -- you've got to study the IFRS statement and the accountants and experts actually get involved in the full valuation, but we could maybe have an offline discussion on that.

Okay, thanks. And then Polymers, sales volumes up, Andre, of course you've got impairments and the translation losses but maybe you could comment on the profitability of Polymers.

Yes, as you know and this is becoming a repeat dialogue, I think I've seen this movie before, fuel products which is the basis for the transfer pricing out of Synfuels into the Polymer business went up by 11% in rand terms. And polymer prices, also in rand terms, went up by 11%, so you can see there that in spite of polymer prices going up feedstock prices went up as well and therefore the margins remained very tight.

Are we close to breakeven? Our gross margin on Polymer South Africa is still under a lot of pressure. We are addressing those issues that are within our control and that's, as David has referenced, why we are implementing a cash fixed cost reduction exercise and that should play out in improving our cash cost position in the Polymer business as well as the other businesses.

But until such time as we are in a position to reconsider how we allocate profit in the different parts of the value chain, polymer margins will remain depressed unless of course there is an increase in global ethylene utilization rates.

So you basically said the gross margin is flat, (technical difficulty) so is there something else going on?

No, I think you need to look --.

(inaudible question - technical difficulty).

All right, let's take it offline but I don't think that you can extrapolate quite as linearly as that.

Next question. Thanks, Alec.

Okay. Nic Dinham, BNP Paribas (multiple speakers). Just a couple of questions. Firstly, the numbers that we -- the idea that you'll do a high density polyethylene plant in a joint venture with Ineos is that -- it wasn't clear to me whether the cost of that would be incorporated in the ethane cracker, so if you could explain that perhaps and any other further possibilities.

The second thing comes to Lean, Lean, it's probably a big question but Canada shale gas is costing you a lot of money in headline earnings per share and you're spending money on capital, and you're still short of your total carry that you set yourself up to do. What is your proposed scenario? When are you going to stop the field development plan? And if -- and when -- what are you going to do after that given that we hear that your joint venture partner isn't particularly keen on Montney. That's the second question.

The third question relates to the question that my colleague here rose about the utilization rate. Is the lack of a crisp utilization forecast from yourselves ever a reflection of your uncertainty about the GTL plant at ORYX? Thank you.

Okay. Thanks for the questions. Just for everyone's awareness we signed an MOU with Ineos on the high density polyethylene unit in the US. It is not a part of the ethane cracker project. It's a separate project that will be taken on and run by Ineos. They've -- they are taking the project and executing it. It's a 470,000 tonne per year plant of HDPE, of course 235,000 tonnes to Sasol and that will be starting up in the second half of calendar year '15, so some more volumes for us to talk about at Sasol before the cracker comes on line so I think that's very good.

I think, Andre, anything else to -- okay. Shale gas field development, Lean, you can take that one.

Thank you, Nic. Maybe just to say that I think if you follow our partner's announcement that they have withdrawn the Montney from their sales to the market, they are going to continue to develop with us. There's other assets they are selling in Canada, but they are not selling Montney anymore.

Look ,the big challenge there is the low gas price, it doesn't make sense for us to develop when gas prices sit in the $3 to $3.50 range. I think we've gone a long way with the de-risking, I think we're satisfied that we now understand the field. We've drilled just about 130 wells now.

And I think from next year on our approach would be more to drill economic wells, to drill those wells that we can drill on the economic basis rather than just to do some de-risking, although we haven't done de-risking on Cypress A and that's starting this part of the year and also next year we are going to do some exploration work in Montney, our -- in Cypress A.

Our prognosis is that long-term gas prices will continue to increase and that it will be very economical for us to develop the field. We are still confident that we will achieve overall the rates that we will -- in terms of the investment returns that we expected.

What's very encouraging is the decrease in drilling costs. Drilling cost is now well below what we've expected in our investment scenarios. We are more than -- we have now drilled wells at less than $1m -- $1m less than we anticipated, so I think the economics are going to improve significantly.

As far as ORYX is concerned I think we've used the word there exceed, and I think we will exceed this by a significant margin. We -- but we would like to prove that, we haven't run for 12 consecutive months. I think after the shutdown the operations have been very stable, we've exceeded design significantly and watch this space. I think we will give you a nice number come March next year.

Thanks, Lean. Questions, got a couple more minutes.

Hi, it's Jarrett Geldenhuys from Investec. Just a couple of questions, I'll keep it brief. Just in terms of you sustaining capital or CapEx, sorry should I say. It's up from ZAR12b to ZAR17b this year and if I look on your projects on that slide it looks like the inflation rate your using to 2015 is around 5%. Is that -- is there not a lot of upside risk given your 2050 policy?

And also I would just like to know if there is any capital allowance in there for Clean Fuels 2 which should slowly be coming through.

Then one last question just for Christine, you mentioned you're starting to capitalize some of the SSI funding costs. It's -- how can we model that going forward? It's around about ZAR1b, last year it was ZAR1b as well somewhere around that, can we see that going to zero or is it just going to stay around those kinds of levels. Thank you.

Thanks, Jarrett, Sustenance CapEx, Bernard, you okay with that one and also talk about 2050 and when that starts coming into play on our CapEx graphs.

Yes, thanks, David. I think -- let me start with the Clean Fuels, we have Clean Fuels in our earning capital plan I think ZAR11.6b or ZAR11.7b over the next few years so that certainly features.

In terms of the rest of the sustainability capital, we have made provisions for some of the costs coming through in the environmental space. Not everything that's envisioned because we do think that our strategy with government around the air quality space will be successful. And then with respect to 2050 we are still doing the work to confirm the numbers that will be required, but we are quite confident that the capital spend levels that we've got in the rolling capital plan will be sufficient going forward, but there is still some work that needs to be done in that area.

Thanks, Bernard. And then on the cracker and the growth costs getting capitalized, Christine, can you give us a timeframe?

Yes, so what I said was that when -- sorry, the feed costs in future will actually be capitalized. So whereas in the past year you've actually seen that for US GTL we've actually had to expense costs, in future you can expect to see lower growth costs coming through in SSI. And so in future, the FEED costs will actually be capitalized and that's then regarded as part of the total capital investment program then for Uzbekistan and US GTL. So we've put our previous guidance with respect to the numbers there.

I think, sorry, just to clarify on the sustenance-related capital because we've only given two-year forecasts even though Bernard has spoken to the total Clean Fuels number. For the next two years for financial '14 we've included about ZAR1b and for financial '15 there is about ZAR2b for Clean Fuels 2.

I can't give you the exact impact of the weaker rand/dollar exchange rate, but as you know on imported components, etc. we have to actually factor in the weakening of the rand. And the rand is at current levels a lot weaker than what we've even factored in the impact on these numbers and so clearly we will have to review that and take appropriate hedging when investment decisions are made.

Thanks, Christine.

If we can take the last question off the telephone?

Is there one?

There is one on the telephone.

Thank you. Our question comes [from David Lovell] from Deutsche Bank. Please go ahead.

Yes, good morning, thanks, guys. Just got a question on Escravos in Nigeria, as this starts to commission, what are the rights and obligations of Sasol and will we see any impact on your income statement coming through in the next six-month period or 12-month period. What should we hear or not hear from you guys in regards to that ramping?

Okay, EGTL, Lean, December 2013

Yes. We are still on track to commission the plant and to have beneficial operations in December. Obviously the first couple of cargos we still have to get the product on spec, but everything is on track to have beneficial operations and first product to market in December. I think full operations at around the second quarter of next year, but everything is on track things are going actually very well at Escravos.

Thanks, Lean.

And that brings to --

(multiple speakers) one follow up, are there any operational hurdles that Sasol has undertaken and is responsible for.

Yes, we play a major part in commissioning the plant. We currently have about 70 Sasol colleagues at the plant. And it's quite an integral part of the commissioning of the plant.

Thanks, Lean.

Shall we take one last question from the floor?

Okay, one from the floor and then we'll close up.

Caroline Learmonth, Barclays Africa. Can you comment on the process and timing in terms of finding your next CFO?

And then also just on the dividend you've explained your dividend policy going forwards but when you look at -- when you do a sanity check of how covered dividends are by earnings do you look at it on a headline basis or a basic basis? Thank you.

Thanks, Caroline. On our next CFO like I said we've got, because of our talent in the finance division, we've been able to name an acting CFO with great experience and institutional knowledge from one of our most complex businesses Synfuels, Paul has spent a good amount of time here at corporate now with the numbers, so very comfortable. That gives us a lot of flexibility and we don't need to rush into any decision making.

But we'll be looking for candidates both internally and externally, looking in South Africa and outside South Africa and take a good look and find the best candidate for Sasol and put someone in who again is in the best interest of the company. Timing-wise it's going to be some time next year is -- in the near to medium term.

And then on dividend policy and the cover and HEPS and all that good stuff?

Yes, so the progressive dividend policy is determined on the earnings per share number. We do however take HEPS forecast into account as well as how does it pit against our own numbers.

We've purposely moved away from the dividend cover. So I think quite importantly is the progressive dividend is to maintain or grow dividends into the future and so clearly see the ZAR19 as a new underpin in the dividend and we certainly seek to remain competitive with our peer group as we increase our dividends going forward. I think clearly as we've stated I the past should the dividend -- should the earnings decline then there is an underpin in the dividend

Okay, thanks, Caroline. Great, thanks, everyone, look forward to seeing you on the road shows and answering more detailed questions in our one-on-ones and our lunches. And until the next time please stay safe. Thanks very much.