Despite a 23% decrease in the rand/barrel oil price, its adjusted EBITDA decreased by only 6%.
Sasol delivered a good set of results for the six months ended 31 December 2020. Sasol’s earnings increased by more than 100% to R15,3 billion from R4,5 billion in the prior period.
Despite a 23% decrease in the rand/barrel oil price, its adjusted EBITDA decreased by only 6%. This achievement is as a result of a strong cash cost, working capital and capital expenditure performance in response to the challenging environment.
Cash generated by operating activities decreased by 40% to R11,7 billion compared to the prior period and our net cash on hand decreased from R34,1 billion as at 30 June 2020 to R27,6 billion.
Although company’s cash flows were impacted by low crude oil prices, softer chemical prices, plant downtime and the impact of COVID-19, its cash conservation initiative and asset divestment programme enabled it to repay approximately R28 billion (US$2 billion) of debt. In addition, Sasol repaid ZAR banking facilities of approximately R4 billion.
Actual capital expenditure amounted to R7,5 billion compared to R21,4 billion during the first six months of 2020. The free cash flow for the period was R0,4 billion in a low US$43,62/barrel average oil price environment.
At 31 December 2020, Sasol’s total debt was R126,3 billion compared to R189,7 billion as at 30 June 2020. During the period, we utilised proceeds from our asset divestments to repay the US Dollar syndicated loan, as well as a portion of our revolving credit facility, reducing our US dollar denominated debt by almost R28 billion (US$2 billion) to R121 billion (US$8,2 billion).
Through its comprehensive response plan and planned asset divestments, we intend to further reduce our net debt to achieve a Net debt: EBITDA ratio of less than 2,0 times and gearing of 30% by 2023.
Sasol’s gearing decreased from 114,5% at 30 June 2020 to 76% at 31 December 2020 mainly due to repayment of US dollar debt (20%) and a stronger closing Rand/US dollar exchange rate (7%).
As at 31 December 2020, Sasol’s liquidity headroom was in excess of R53 billion (US$3,6 billion) well above its targeted liquidity of at least US$1 billion, with available rand and US dollar-based funds improving as the company advances its focused management actions. Sasol continue to assess our mix of funding instruments to ensure that we have funding from a range of sources and a balanced debt maturity profile.
Sasol has no significant debt maturities before November 2021 when the R2,2 billion (US$150 million) term loan becomes due. In terms of the covenant waivers with the lenders that existed at 30 June 2020, we remain obliged to use certain planned disposal proceeds to settle debt. As a result, R14,3 billion (US$975 million) has being classified as short-term debt.
On 19 February 2021 the Board approved the final investment decision (FID) on the Mozambique PSA license area. The total estimated project cost is US$760 million.
Importantly, this project will entail Mozambique in-country monetisation of gas through a 450 megawatt gas-fired power plant and a liquefied petroleum gas (LPG) facility in the same time frame. The balance of the gas produced will be exported to South Africa to sustain our operations.
The PSA development underpins Sasol's gas transformation strategy by securing additional gas supply from southern Mozambique into Sasol's gas value chain starting 2024 and serves as a cornerstone in addressing Sasol's sustainability agenda.
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