Sasol Limited 2026 H2 Earnings Call

Good morning, and welcome to Sasol's annual results presentation for financial year 2026. My name is Tiffany Sydow from Investor Relations, and on behalf of the Sasol executive management team, we are pleased that you could join us today. With me is Simon Baloyi, our President and CEO of Sasol, and Walt Bruyns, the Chief Financial Officer. The group executive team is present today as well and will join for the market call, which follows directly after the presentations. As a reminder, the presentation and all supporting materials are available on our website since this morning. As a reminder, our strategy follows a two-pillar approach. Firstly, to strengthen our foundation business, where Simon will begin today's presentation with a business overview, which is then followed by Walt, who will take us through the financial performance for the full year.

The second pillar addresses our pathway to grow and transform the business in the long term, where Simon will conclude and provide an update on our progress in this area. A market call will follow immediately after the presentation, where you can submit your questions via the webcast or join the teleconference facilities. As a reminder, the presentation contains some forward-looking information, and more detail is shared on the slide in front of you. I would now like to hand over to Simon to commence his presentation.

Thank you. Good day, everyone, and thank you for joining us today.

We appreciate your time. The past year has been about turning commitments into delivery. At Capital Markets Day, we set out a clear roadmap. Today, we can demonstrate meaningful progress in strengthening the foundation business. In the past year, we have done the following: improved reliability across the value chain, strengthened the balance sheet, advanced the reset in International Chemicals, and continued to progress our grow and transform agenda. However, today's results reflect more than improved market conditions. They are evidence of a business that is becoming stronger, more resilient, and more competitive. I wish to thank every member of Team Sasol who has contributed to this excellent set of results.

While there is still work ahead, financial year 2026 gives us greater confidence that the foundation we are building is becoming stronger and that we are moving in the right direction. Before getting into the detail, let me highlight the five key messages I would like our stakeholders to take away today. Firstly, safety remains our foremost value. While we are deeply disappointed by the loss of two colleagues, there are encouraging signs that the interventions we have implemented are strengthening our safety culture. Secondly, we are restoring stability across the Southern African value chain. Improvements in coal quality, reliability, operational performance are translating into better outcomes. Thirdly, International Chemicals reset is delivering measurable progress and improving competitiveness. Fourthly, improved execution is translating into a stronger balance sheet and increased financial resilience. Finally, we continue to advance our grow and transform strategy in a pragmatic and value-accretive manner.

Taken together, these outcomes show that we are not only delivering today, we are positioning Sasol for tomorrow. At Capital Markets Day, we committed to strengthening the foundation business. What matters most is delivery, and today I am pleased to say that we have delivered or exceeded our key FY 2026 targets. We improved coal quality, exceeded our Secunda production target, reduced the Southern African oil breakeven to $49 per barrel, and strengthened the balance sheet below our target. In International Chemicals, performance benefited from both self-help actions and a more supportive fourth quarter market environment. The reset actions we have implemented effectively position the business to capture those opportunities. We also continue to make tangible progress on our grow and transform agenda. During this year, we brought more than 500 megawatts of renewable energy online in South Africa. We remain on track towards our renewable energy targets.

This progress supports our emission reduction roadmap, while at the same time creating long-term returns and future growth optionality. These outcomes reinforce an important point. We understand the challenges in our business, we understand the levers within our control, and we are executing accordingly. This is how credibility is built, by doing what we said we will do and consistently delivering against our commitments. Turning to safety, the loss of two colleagues during the year is unacceptable and deeply regrettable. Once again, let me extend our heartfelt condolences to the families, friends, and colleagues of Mr. Godfrey Mamafa and Mr. Sonwabo Makamba. Any loss of life reminds us that no matter how strong our operational or financial performance may be, there is nothing that matters more than ensuring that every person returns home safely every day.

Following these incidents, we implemented targeted actions plans focused on the following: strengthening leadership accountability, improving risk identification, and reinforcing safety ownership across our people, leaders, and service providers. Our safety culture interventions focus on disciplined execution and process safety management so that the rules are followed every time on every shift. While we remain deeply disappointed by the fatalities, the broader trends are encouraging. Hospitalization fell to record lows and process safety performance improved. This is reflected in the meaningful reduction in significant process safety incidents like fires, explosions, and releases. We again had no major process safety incidents in the past year. This was accompanied by substantial lower human-related safety failures, indicating progress in the behavior and discipline that underpin a stronger safety culture. This improvement also reflects in the recordable case rate. However, we will not measure success by statistics alone. Our objective remains unchanged. Every employee and every service provider must return home safely every day to their loved ones.

I will now briefly touch on the financial highlights. Walt will provide a more detailed review of the performance and underlying business drivers later. For much of the past year, we operated in a volatile and uncertain environment. We experienced geopolitical disruption, supply chain pressures, and changing market conditions. I am proud to say that Team Sasol acted decisively to manage the direct and indirect consequences of events in the Middle East. The business captured the benefits of supportive macro conditions in the fourth quarter due to improvements we have made in operational reliability, cost discipline, and commercial agility. While we do not control geopolitics, exchange rates, or market cycles, we remain intensely focused on what we can control. In that context, we delivered a 17% increase in adjusted EBITDA of ZAR 61 billion.

We held cash fixed costs flat compared to prior. We reduced capital expenditure by 18% to ZAR 21 billion without compromising safety or asset integrity, and we generated approximately ZAR 12 billion of free cash flow. This reflects a business that is becoming more disciplined, more resilient, and increasingly focused on what we can control. Feedstock security remains fundamental to the competitiveness of the Southern African value chain. In mining, the implementation of the destoning plant has materially improved coal quality to strengthen Secunda operation by achieving our goal of reducing sinks below 12%. Looking ahead, we will ensure sustained coal quality while focusing on increasing own coal production, reducing external coal purchases, and improving the cost competitiveness of our feedstock. The assessment of scenarios to ensure our long-term coal supply is progressing well. We will give feedback to the market in 2027.

In gas, although production was impacted during the year by some well constraints and flooding events, we continue to make progress across multiple horizons. We achieved a significant milestone with PSA reaching beneficial operation. This enabled the first in-country production of LPG in Mozambique, reducing imported LPG requirements while also contributing additional natural gas, light oil, and condensate production. Gas remains a critical bridge to the future for the Southern African value chain. As with the rest of the foundation business, our focus is on balancing short-term reliability with long-term optionality. NERSA approved our gas pricing application for FY 2027 and part of 2028, with FY 2029 and 2030 pending. This is a positive step towards enabling the MRG bridge solution. Our focus remains on maximizing existing gas supply, managing the transition as natural gas declines, and preserving future optionality through LNG and broader gas solutions.

Here, we believe Sasol can play a critical aggregation role. Importantly, we assess all opportunities through an integrated value chain lens because reliability, affordability, and value creation must remain linked. Our objective is clear: to protect feedstock security and sustain the competitiveness of the value chain. The Southern African business delivered one of its strongest operational performances in recent years. Production reached a five-year high at Secunda, where we produced 7.26 million tons because of improved coal quality, improved gasifier availability, and more stable operations. Natref also delivered stable performance. These improvements enabled us to capture stronger margins when market conditions became more favorable in quarter four. Sales continued to grow as a result of driving our strategy to increase our market share in higher value retail and commercial fuel channels. Oryx was shut down earlier this year following the geopolitical disruptions experienced in the Middle East.

However, the facility successfully brought back online during the earlier month of August. Chemicals performance improved during the second half, supported by higher sales volumes and recovery in basket prices during the fourth quarter. All of these improvements resulted in the Southern African oil breakeven reducing to $49 per barrel. While this result includes $69 per barrel improvement due to macro tailwinds and the absence of a Secunda shutdown, it also reflects genuine progress in restoring the value chain and improving performance. The value chain is not yet where we want it to be, but reliability is improving, competitiveness is improving, and the direction of travel is clear. For FY 2027, our focus thus remains on the following: gasifier turnaround initiatives in Secunda, as well as the safe execution of the shutdown. Implementing the hybrid refinery project at Natref, which includes the production of clean fuels to compliant fuels.

Driving our strategy to increase our share in higher value retail and commercial fuel channels. Finally, improving value delivery across our chemicals portfolio. The reset in International Chemicals continued to gain momentum. Over the past 2 years, we have streamlined the portfolio, reduced the costs, improved operational performance, and strengthened commercial excellence. In FY 2026, we continued to see the benefits of these actions. We delivered further cost savings during the year and also went live with our ERP program in Germany, Slovakia, and the U.K. during July this year. This gives us more efficient way of working across the business. From a market perspective, we continued to strengthen commercial excellence and agility across the business. When market condition improved in the fourth quarter, the business was better positioned to capture value and respond quickly to opportunities.