Sasol Limited · JSE:SOL
Sasol — Investor Presentation (March 2017)
73 slides from Sasol's investor presentation, Mar 24, 2017
Slide 1: Sasol Site Visit, Lake Charles
SASOL SITE VISIT LAKE CHARLES, LA. 24 March 2017
Slide 2: Forward-looking statements
Forward-looking statements 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 pros
Slide 3: Welcome
WELCOME Stephen Cornell Joint President and Chief Executive Officer
Slide 4: What we will cover today
What we will cover today Topic Presenter Steve Cornell Welcome and strategic positioning Joint President and CEO Fleetwood Grobler Chemicals strategy and existing operations Executive Vice President: Chemicals Business Brad Griffith and Tom O’Brien Products, applications and market strategy Senior V
Slide 5: Safety moment – evacuation routes
Safety moment – evacuation routes 5
Slide 6: Strategic positioning
STRATEGIC POSITIONING Stephen Cornell Joint President and Chief Executive Officer
Slide 7: Key messages
Key messages ● Dual regional strategy focused on North America and Southern Africa ● Today, focusing on the development of Sasol’s North American strategy ● Transitioning to being more chemicals biased ● Value created through access to low-cost feedstock, smartly integrating technologies and being c
Slide 8: Our investment criteria underpin a sound business case
Our investment criteria underpin a sound business case Do we have a technology, scale of plant or operating Technology know-how that provides a competitive advantage? Feedstock Do we have a low-cost feedstock position? Robust Do we have a product or market position that provides us Market project wi
Slide 9: Poised for growth through dual regional growth strategy
Poised for growth through dual regional growth strategy Multi-asset hubs in Southern Africa and North America 9
Slide 10: Chemicals strategy and existing US operations
CHEMICALS STRATEGY AND EXISTING US OPERATIONS Fleetwood Grobler Executive Vice President: Chemicals Business
Slide 11: Key messages
Key messages ● The LCCP is a key component of the Sasol Chemicals strategy ● Diversified in product slate and geographic marketing channels ● In BC: Few products grounded on cost leadership and feedstock advantage ● In PC: Grow business with high margins and returns with focus on customers and diffe
Slide 12: The chemicals strategic triangle
The chemicals strategic triangle 1 3 Strong portfolio foundation Profitable growth (expand and deliver) • Integration into C1/C2 value chains incl. IMAS¹ • Leverage and support mainly C1 and C2 value anchor chains to harvest integration benefit • Value addition through FT integration • Participate i
Slide 13: Sasol's robust portfolio of Base and Performance Chemicals
Sasol’s robust portfolio of Base and Performance Chemicals Base Chemicals Performance Chemicals A producer and marketer of A producer and marketer of commodity chemicals based on the commoditised and differentiated performance chemicals FT, C2, propylene and ammonia value chains built on the base ch
Slide 14: Existing operations
Existing operations • Excellent operational track record • Access to robust infrastructure • Positive stakeholder relations 14
Slide 15: LCCP significantly increasing our US and global chemicals production
LCCP significantly increasing our US and global chemicals production 2 400 Sasol’s FY16 global chemicals sales US Production volume (ktpa) Base Chemicals 3,0 mtpa Performance Chemicals 3,5 mtpa 1 800 US capacity under construction LCCP 1,7 mtpa Gemini 0,2 mtpa 1 200 600 0 Ethylene Polyethylene ZAG*
Slide 16: Access to robust transportation infrastructure
Access to robust transportation infrastructure Barge and marine Railroad Port of Lake Charles Access to three rail lines: • 13th busiest in the U.S. • KCS Port of Houston • Union Pacific • Approximately 100 miles • BNSF Road Lake Pipeline Charles Major east-west, coast-to-coast Well-supplied with pi
Slide 17: Sasol's US Gulf Coast cracker and derivatives project is differentiated
Sasol’s US Gulf Coast cracker and derivatives project is differentiated ● LCCP has a much greater diversity of product slate, technology and targeted end-use markets than the other large cracker projects currently being constructed ● Sasol’s diversified and differentiated product slate allows us to
Slide 18: Diversified in product slate and geographic sales and marketing channels
Diversified in product slate and geographic sales and marketing channels Base Chemicals project sales, Performance Chemicals project sales, steady state steady state ROW US Europe Asia Latin America US Asia Latin America Europe 18
Slide 19: LCCP economics based on conservative ethane supply/demand dynamics
LCCP economics based on conservative ethane supply/demand dynamics going forward Range of USGC ethane prices from 3 consultants (IHS, Nexant and Wood Mackenzie real 2016 prices; using Sasol's CPI) 80 Feedstock volume secured c/gal (real 2016) 70 60 50 40 30 20 3 - 5 years OPIS linked 10 Linked to na
Slide 20: Base Chemicals products, applications and markets
BASE CHEMICALS PRODUCTS, APPLICATIONS AND MARKETS Brad Griffith Senior Vice President: Base Chemicals
Slide 21: Key messages
Key messages ● The global PE market is large, growing fast and can absorb the large amount of capacity coming on-line in the next few years ● We have chosen to focus on the key commodity grades for the film and pipe applications and these are sufficiently large global markets that we are confident i
Slide 22: Polyethylene average demand growth outpaces world GDP
Polyethylene average demand growth outpaces world GDP Global PE demand growth faster than global GDP growth* 2.0 Drivers for high PE growth Index ● Used in non-durable consumer-driven 1.8 applications 1.5 ● PE growth is 1,4x GDP due to population, urbanisation, and middle 1.3 class growth 1.0 ● Dema
Slide 23: Building on extensive polymers experience
Building on extensive polymers experience ● Producing and selling polyolefins and PVC since 1965 ● Current global sales of polymers > 1 million tons/annum to more than 75 countries ● Existing customer base for polyolefins extends into all global regions ● Proven manufacturing and commercial experien
Slide 24: Sasol's capacity additions are less than the annual global growth
Sasol’s capacity additions are less than the annual global growth Market segment Annual growth New Sasol capacity Pipe 7,7 mt Pipe growth Sasol Pipe 0,3 mt Polyethylene demand 108 mt Sasol capacity Film PE growth 1,1 mt 58,5 mt 4,0 mt Sasol Film Film growth 2,0 mt IHS Supply Demand Forecast Jan 2017
Slide 25: Global supplier to four regional markets
Global supplier to four regional markets ● 103 polymers marketing & sales and technical services personnel in 4 regions ● Key channel partners for all target regions ● Regionally nimble to provide solutions Polymers sales offices Act globally, but behave like a local supplier 25
Slide 26: Global supplier to four regional markets
Global supplier to four regional markets ● USA market is strategic but other export markets are just as Competitor concentration (Europe) attractive ● The USGC location creates options to target all attractive markets around the world ● Developing a portfolio of geographical markets and channels for
Slide 27: Sasol's North America PE plant capacities in 2020 will be in top quartile
Sasol’s North America PE plant capacities in 2020 will be in top quartile 700 Plant capacity kt 600 Sasol/ INEOS JV Sasol 500 Sasol 400 300 200 100 0 HDPE LDPE LLDPE Sasol’s NA PE plants will be among the top 5 world scale plants for all PE types Highly efficient/low cost producer Integrated into et
Slide 28: Competitive cost position on the ethylene cost curve
Competitive cost position on the ethylene cost curve Global dynamics strongly favor polymers investments in North America World cost curve: ethylene $/ ton 1 000 0 20 40 60 80 100 120 140 160 Cumulative production – million metric tons Demand US price W Europe price China price 2016 Cost basis = pla
Slide 29: Performance Chemicals
PERFORMANCE CHEMICALS Tom O’Brien Senior Vice President: Performance Chemicals
Slide 30: Key messages
Key messages ● Commodity segments growing in line with GDP ● Growth above GDP in differentiated segments and targeted new applications ● Increased focus on market development and innovation ● Continuous R&D collaboration with customers for the development of enhanced products and new applications ●
Slide 31: LCCP focuses on expanding Organics and Inorganics
LCCP focuses on expanding Organics and Inorganics ● PC SBU has six major sub-product groups including Alcohols, Surfactants, EO and Alumina ● Sold into >50 diversified markets including detergents, cosmetics and personal care products, pharmaceuticals, lubricants and other industrial solvents, produ
Slide 32: Existing customers and applications provide great base for growth
Existing customers and applications provide great base for growth Applications Customers Sales volumes Revenue 15% 8% 26% 34% 66% 74% 85% 92% Incremental LCCP growth Existing Includes Organics and Inorganics Applications increase through market development and further differentiation 32
Slide 33: Performance Chemicals adds value through derivatisation
Performance Chemicals adds value through derivatisation and sales to differentiated applications LCCP EBITDA – uplift over ethylene 300 EBITDA per ton ethylene 250 200 150 100 50 0 1 10 Project year ZAG EO value chain PE Merchant ethylene Sasol’s cracker and derivatives project is differentiated 33
Slide 34: Sasol is the largest and most diversified global producer of C6+ alcohols
Sasol is the largest and most diversified global producer of C6+ alcohols ALCOHOL FEEDSTOCK, TECHNOLOGY AND PRODUCT SLATE COMPARISON FEEDSTOCK TECHNOLOGY PRODUCTS C12-C15-semi linear C16-C17-semi linear C9-C11-semi linear Tailor-made blends C12-C15-branched C12-C32-Guerbets C7-C9-semi linear C9-C11-
Slide 35: Ziegler alcohols
Ziegler alcohols Diversity of applications reduces industry ● Capacity expansion of existing business concentration risk ● Maintain global market share ● Additional capacity enhances operational efficiency and flexibility ● Currently sold out in North America ● Exploit global network ● One third int
Slide 36: Alumina
Alumina Improved market outlook since FID enables better ● Capacity expansion of existing business sales ramp-up ● Currently sold out globally ● Investment in existing assets to bridge until LCCP start up ● Technical cooperation with customers ● Growth rates > GDP ● Catalyst growth of 3-7% CAGR expe
Slide 37: Guerbet alcohols
Guerbet alcohols Guerbet alcohols enhance specialty lubricants ● Capacity expansion of existing business ● Strong demand globally ● Recent expansion of German capacity to meet growing sales from the Personal Care and MWL markets ● Exploit global network ● Highly technical specialty applications Crud
Slide 38: Ethoxylates
Ethoxylates Commodity detergent market creates base load ● Capacity expansion of existing business ● Ethoxylate value chain fully integrated with addition of on-site ethylene oxide production ● Sasol will be one of only three fully integrated producers in North America ● Regional market with many no
Slide 39: Research and technology
ZAG leverages Sasol’s world leading technical expertise - manipulating molecular structures and controlling surface interfaces HIGH ● Oil and Gas Chemicals – unique Alumina differentiated/specialty surfactants successful in the most challenging reservoir (process and applications capacity) RESEARCH
Slide 40: Execution strategy and progress
EXECUTION STRATEGY AND PROGRESS Stephan Schoeman Executive Vice President: Technology and US Mega Project
Slide 41: Key messages
Key messages ● Overall project completion 64%, with start-up of the first units in the second half of 2018, on track ● Overall construction progress around 25% complete ● Procurement activities nearly completed ● Modularisation approach benefitting overall construction progress ● Above ground constr
Slide 42: Our footprint in Lake Charles
Our footprint in Lake Charles 42
Slide 43: LCCP program status and construction statistics
LCCP program status and noteworthy construction program statistics ● With almost 16 million hours worked , safety on site remains well within industry norms (4 recordable injuries, no lost time injuries since start of project) ● Capital expenditure on LCCP amounts to US$6 billion (at 31 December 201
Slide 44: LCCP enablers for success and sustainable improvement
LCCP enablers for success and sustainable improvement Schedule adherence Materials supply Progress earned Control base Work face Supply Actionable planning chain progress Purposeful Ongoing Tracking and critical metrics fully Off and on metrics, learnings data LCCP against milestone deployed site mo
Slide 45: Assurance provided by third parties for risk control
Assurance provided by third parties for risk control and performance measurement Key performance and risk aspects Engineering deliverables Construction material supply Guides leadership action Contractor performance Planning Completed Opportunity rigour performance targets Measure Monitor Action for
Slide 46: Upcoming key milestones
Upcoming key milestones ● Close out of engineering by end 3rd quarter 2017 ● Bulk materials and equipment supply, module delivery and construction activity to reach peak in support of construction plan ● Resourcing and site logistics at full capacity ● Close out of civil and foundation construction
Slide 47: Break
BREAK
Slide 48: Business readiness
BUSINESS READINESS Mike Thomas Senior Vice President: North American Operations
Slide 49: Key messages
Key messages ● More than 50 years experience making and selling products out of Lake Charles ● Extensive experience with majority of the products from LCCP ● Located in the US Gulf Coast with some of the most robust petrochemical experience and infrastructure anywhere in the world ● Operations & bus
Slide 50: Integrated approach towards business and operations readiness
Integrated approach towards business and operations readiness Steerco Exco Programme Plan Communications plan 51
Slide 51: Key components of On Ramp plan
Key components of On Ramp plan Existing UO&I Cracker LLDPE EO/EG LDPE Ziegler ETO/GB units Production Maintenance Supply Chain FUNCTIONS Continuous SERVICE IM assessment Finance • Capacity Laboratory/Quality • Cost SHE • Quality HR • Safety Legal • Environment Capacity management • Standardised P&O
Slide 52: Readiness progress
Readiness progress Marketing and Sales Supply Chain ● Learnings from Gemini On Ramp ● Long term pipeline agreements in provides best practice templates for place for ethane/ethylene; feedstock/ LCCP utility supply contracts finalised ● Product commercialisation programs ● Rail fleet under constructi
Slide 53: Investment case and funding
INVESTMENT CASE AND FUNDING Paul Victor Chief Financial Officer
Slide 54: Key messages
Key messages ● Earnings streams from businesses and geography will change fundamentally ● Project to deliver substantial cash flows to Sasol ● Capital framework implemented to guide how value will be returned to Sasol ● Project economics strong and project fully funded with sufficient liquidity head
Slide 55: Dual regional strategy drives EBITDA growth
Dual regional strategy drives EBITDA growth in the short to medium-term (excludes projects not past FID) EBITDA Rbn ±R2-4bn EBITDA 6% p.a. ~R2bn CAGR ±R10-14bn ~R8bn ±R15-19bn ~R12bn FY16 FY19-FY20 FY21-FY23 FY24+ EBITDA LCCP Mozambique PSA (Phase 1&2) Other* All numbers in nominal terms, * Includes
Slide 56: LCCP changes the profile of the company
LCCP changes the profile of the company EBITDA Rbn EBITDA Rbn 31% 64% 14% 9% 13% 47% 55% 78% 53% 36% Current business Post-LCCP startup Current business Post-LCCP startup South Africa Rest of world USA Energy Chemicals Strategic drive towards a globally focused chemicals company 57
Slide 57: Balance sheet deleverages quickly post LCCP completion
Balance sheet deleverages quickly post LCCP completion Gearing (net debt:equity) Net debt to EBITDA times 40% 1,7 30% 1,0 Opportunity Opportunity for capital for capital allocation allocation FY 17 18 19 20 30 FY 17 18 19 20 30 Base case Base case Gearing target @30% (under consideration) Net debt:E
Slide 58: Sufficient liquidity headroom available to fund project
Sufficient liquidity headroom available to fund project with reduced working capital and capitalised interest 15 $bn Funding requirement Funding plan Current funding requirement of $11,7bn (At FID $10,5bn, WC of $0,4bn and capitalised interest of $1,2bn) 0,7 5,3 11,0 10 8,1 0,3 11,0 0,4 1,0 1,7 1,5
Slide 59: US tax landscape in context
US tax landscape in context Effective income tax rate* Tax rate Tax incentives US federal rate* 35,0% ● Cumulative impact of tax incentives on EBITDA is $1,4bn in nominal terms State tax rate (estimated blended rate 1,5% (included in economics) – net of federal deduction) ● Property tax exemption fo
Slide 60: Project returns remain above WACC of 8% in USD terms
Project returns remain above WACC of 8% in USD terms Sasol US$ WACC: Project IRR < Sasol US hurdle rate ● Ethane price remains 8% Sasol US hurdle rate 10,4% the key driver ● 55c/g real average Brent Crude Low oil case High oil case price over the life of oil price the project ● Capital overrun and E
Slide 61: Key take-outs and way forward
KEY TAKE-OUTS AND WAY FORWARD Bongani Nqwababa Joint President and Chief Executive Officer
Slide 62: LCCP remains an attractive investment
LCCP remains an attractive investment ● Dual regional strategy drives growth in the short and medium-term with strong focus on chemicals ● Sasol’s US Gulf Coast cracker and derivatives project is differentiated ● Performance Chemicals adds value through derivatisation and sales to differentiated app
Slide 63: LCCP video
LCCP VIDEO https://www.youtube.com/watch?v=ZkNH4FmcVnY
Slide 64: Questions and answers
QUESTIONS AND ANSWERS
Slide 65: Site visit logistics
SITE VISIT LOGISTICS Mike Thomas Senior Vice President: US Operations
Slide 66: LCCP photo library
LCCP PHOTO LIBRARY
Slide 67: Construction progress
Construction progress Ethylene cracker and pipe rack 68
Slide 68: Construction progress
Construction progress EO EG reactor structure 69
Slide 69: Construction progress
Construction progress Pipe rack 70
Slide 70: Construction progress
Construction progress Ethylene storage tanks 71
Slide 71: Construction progress
Construction progress Cracker furnaces 72
Slide 72: Construction progress
Construction progress Lake Charles Chemicals Project, Lake Charles, US 73
Slide 73: Construction progress
Construction progress Lake Charles Chemicals Project, Lake Charles, US 74