Sasol Unveils Strategy to Drive Future Value-based Growth
Sasol Unveils Strategy to Drive Future Value-based Growth
PR71214
JOHANNESBURG, Nov. 23, 2017 /PRNewswire=KYODO JBN/ --
Sasol today unveiled its refined corporate strategy, which sets a clear path
for sustainable growth and accelerated shareholder returns.
Joint President and Chief Executive Officer (CEO), Stephen Cornell says: "In
developing our strategy, we considered both the opportunities and risks we
face, informed by developments in the external environment. It is clear that
megatrends influential to our business will result in greater demand for
chemicals and energy products in key markets we serve."
Key megatrends and assumptions informing Sasol's strategic choices are global
population growth and further urbanisation, the move to even greater efficiency
and performance, in all aspects of business, supported by digitalisation and
sustained volatility in both oil prices and exchange rates.
"Against this backdrop, our value-based growth strategy is premised on further
enhancing our foundation businesses, leveraging our core strengths in specialty
chemicals, exploration and production (E&P) and retail fuels, underpinned by
increased discipline in capital allocation," says Cornell.
Sasol's foundation businesses, which are already cash positive at a US$40 per
barrel oil price, provide a robust platform for long-term growth and delivery
of ongoing value to shareholders.
Joint President and CEO, Bongani Nqwababa says: "Our delivery track record -
evidenced in recent years by significant volume improvements at key facilities,
our competitive cost position and global portfolio of highly cash-generative,
diversified assets - places us in a strong position to realise greater value
from our foundation businesses. Here, operational excellence, continuous
improvement and digitalisation programmes, as well as rigorous asset reviews,
will enable us to become a more resilient, efficient and effective
organisation."
To date, Sasol has completed reviews on more than half of its global assets,
underpinned by the company's drive to improve asset performance, not liquidity
requirements. Thus far, the reviews have confirmed that the majority of the
company's assets will be retained and clear improvement actions have been
defined for each.
The reviews conducted to date did, however, identify the Canadian shale gas
asset as being non-core. In this respect, Sasol will commence a structured
divestment process involving Progress Energy, the partner in this asset.
With reference to the clear choices made to drive value-based growth, in
Sasol's Chemicals Business the company will progressively grow its portfolio of
high-value specialty chemicals in attractive growth sectors.
"Our existing application know-how and strong product portfolio in a broad
range of specialty chemical products, gives us confidence we can deliver in
this area," says Cornell. "Our push into specialty chemicals is further
supported by the benefit of the scale and cost advantage we enjoy through our
investments in commodity chemicals in South Africa and North America. We will
take full advantage of these large, cost competitive facilities to grow our
specialty chemicals portfolio."
On the upstream front, the company will pursue progressive, disciplined growth
in E&P both in Mozambique and in selected countries in West Africa, to expand
production levels with a bias to liquid plays.
"To win on the African continent, we will leverage our current upstream
expertise, while continuing to strengthen our E&P capabilities given the larger
role we envisage for Sasol Exploration and Production International going
forward," says Nqwababa.
Regarding Sasol's Energy Business, Nqwababa adds: "To ensure we drive more of
our own liquid fuel production through Sasol's retail network, where we enjoy
higher margins, we will continue to aggressively grow our liquid fuels retail
footprint in Southern Africa. We will capitalise on our strong brand and
existing cost advantage to achieve our retail fuels growth aspirations."
On Sasol's financial framework, Paul Victor, Chief Financial Officer says: "We
will apply increased discipline in our capital allocation approach, focused on
delivering improved cash flow generation through the cycle, adopting a balanced
approach to shareholder returns and a capital structure that is fit for the
future."
Translating Sasol's strategy into measurable value for shareholders will
comprise two distinct phases.
"From now until 2022, Sasol will focus on delivery of the Lake Charles
Chemicals Project (LCCP) in the US and the Production Sharing Agreement in
Mozambique, while extracting further value from our existing portfolio of
diversified assets. In this period we are targeting an improvement in return on
invested capital (ROIC) of at least 2% on our financial year 2017 base. This
will be achieved through continuous improvement that will encompass various
initiatives across our value chain," says Victor.
He adds that successful delivery of these initiatives will drive earnings
growth and greater efficiency and effectiveness, which in turn, support the
earlier delivery of returns to shareholders through an increase in Sasol's
dividend payout to 40% or 2,5 times cover by 2022.
"Beyond 2022, we will focus on building an investment portfolio of smaller to
medium-sized organic and inorganic opportunities, in the range of US$500
million to US$1 billion. This will be directed towards our growth focus areas
in specialty chemicals, exploration and production and retail fuels," says
Victor.
"In the longer term, we will leverage our investment base with flexibility for
greater growth that we will drive through partnerships. In the 2022 plus
timeframe, we are confident that we will be in a position to progressively
increase the dividend payout to 45% or 2,2 times cover."
Victor concludes: "Based on our scenarios and modelling, we believe we can
deliver at least 12% ROIC and 5% earnings before interest and tax (EBIT) growth
through the cycle, in the medium to longer-term."
Sasol has also made several key decisions in areas where the company does not
believe it can maintain a leading position or deliver strong returns.
In this regard, one of several important decisions is that Sasol will not
invest in further Greenfields gas-to-liquids (GTL) projects. This decision
means the company will no longer pursue its proposed GTL project in the US. In
January 2015 Sasol announced it was delaying a final investment decision on the
project to conserve cash in response to lower oil prices.
"While our current GTL assets are generating good returns and cash flows, the
value proposition for Sasol to build new GTL projects is uneconomic against a
volatile external environment and structural shift to a low oil price
environment."
Cornell adds Sasol will maintain its industry-leading position in
Fischer-Tropsch (FT) technology.
"We will continue to work on opportunities to optimise and improve our existing
facilities in regard to catalyst performance, product yields and energy
efficiency. We also see further opportunities to high-grade the value from our
GTL molecules through base oils extraction, and we will continue to license and
support our FT technology," says Cornell.
Sasol has also decided not to invest in any additional crude oil refining
capacity.
"This decision was informed by the large investments that will be required to
meet changing fuel specifications in South Africa and a lack of any clear
competitive advantage for Sasol outside our existing position in Secunda," says
Cornell.
"We have also made an important call on commodity chemicals," says Nqwababa.
"While we have a solid foundation business in commodity chemicals and the
world-scale LCCP under construction in the US, the risk profile to execute such
projects alone, in the future, is larger than what Sasol wishes to undertake.
Such investments in feedstock-advantaged locations may still be considered, but
we will not entertain wholly-owned investments in similar mega-projects, such
as the LCCP, going forward."
In line with enhancing its robust foundation, Sasol will continue to invest in
extracting further value from its chemicals facilities in the US and South
Africa, while also pursuing commodity chemicals investments where this can
support the company's desire to grow its specialty chemicals portfolio.
"Our strong foundation competitively positions the company for ongoing value
creation and future growth, underscored by a clear, focused strategy that taps
into our core strengths and exploits potential in key growth markets," says
Cornell.
"We will be executing our strategy in a phased, disciplined and progressive
manner. Our growth ambitions will, of course, take into account our balance
sheet, our earnings flow and ability to successfully execute our plans to
ensure we deliver superior returns to our shareholders," concludes Nqwababa.
Note:
• Additional supporting information relating to Sasol's 2017 Capital Markets
Day is available on the Investor Centre page of Sasol's corporate website at
About Sasol:
Sasol is an international integrated chemicals and energy company. Through our
talented people, we use selected technologies to safely and sustainably source,
produce and market chemical and energy products competitively to create
superior value for our customers, shareholders and other stakeholders.
Sasol may, in this document, make certain statements that are not historical
facts and relate to analyses and other information which are based on forecasts
of future results and estimates of amounts not yet determinable. These
statements may also relate to our future prospects, developments and business
strategies. Examples of such forward looking statements include, but are not
limited to, statements regarding exchange rate fluctuations, volume growth,
increases in market share, total shareholder return, executing our growth
projects, (including LCCP), oil and gas reserves and cost reductions, including
in connection with our BPEP, RP and our business performance outlook. Words
such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan",
"could", "may", "endeavour", "target", "forecast" and "project" and similar
expressions are intended to identify such forward-looking statements, but are
not the exclusive means of identifying such statements. By their very nature,
forward-looking statements involve inherent risks and uncertainties, both
general and specific, and there are risks that the predictions, forecasts,
projections and other forward-looking statements will not be achieved. If one
or more of these risks materialise, or should underlying assumptions prove
incorrect, our actual results may differ materially from those anticipated. You
should understand that a number of important factors could cause actual results
to differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements. These factors are
discussed more fully in our most recent annual report on Form 20-F filed on 28
August 2017 and in other filings with the United States Securities and Exchange
Commission. The list of factors discussed therein is not exhaustive; when
relying on forward-looking statements to make investment decisions, you should
carefully consider both these factors and other uncertainties and events.
Forward-looking statements apply only as of the date on which they are made,
and we do not undertake any obligation to update or revise any of them, whether
as a result of new information, future events or otherwise.
Please note: A billion is defined as one thousand million. All references to
years refer to the financial year 30 June.
Any reference to a calendar year is prefaced by the word "calendar".
Comprehensive additional information is available on our website:
Contact:
Cavan Hill
Senior Vice President: Investor Relations
Telephone: +27(0)10-344-9280
Alex Anderson
Head of Group Media Relations
Direct telephone: +27(0)10-344-6509
Mobile: +27(0)71-600-9605
alex.anderson@sasol.com
Matebello Motloung
Senior Specialist: Media Relations
Direct telephone: +27(0)11-344-9256
Mobile: +27(0)83-773-9457
matebello.motloung@sasol.com
Source: Sasol Limited
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