Good morning, and good afternoon, ladies and gentlemen, and welcome to the Sasol Results Conference Call. Today's call will be hosted by Stephen Cornell and Bongani Nqwababa, Joint Presidents and Chief Executive Officers; and Paul Victor, Chief Financial Officer. Following the presentations, an interactive Q&A session will take place. I would now like to hand the call over to Stephen Cornell. Please go ahead, sir.

Thank you, operator. Good day, everyone. This is Steve Cornell. Thank you for joining us on this call. Paul and I will discuss Sasol's 2018 annual results. And then Paul, Bongani and I along with other members of our management team will take Q&As. We have published the slide presentation of our results, which you can download from the Investor Centre on the Sasol website. In the interest of time, we're not going to strictly follow this presentation on the call, as we'd like to make more time available for your questions. Before I begin, I would like to refer you to the Safe Harbor note on forward-looking statements contained on Slide 2 of the presentation. Moving to Slide 4. You'll see a summary of our key messages. Notwithstanding a volatile Rand environment on which average Rand was 6% stronger than the comparable period last year, we still delivered a resilience set of results in the financial year 2018. We did experience unplanned outages at our Secunda Synfuels Operations, we consider these another operational challenges as isolated issues and remain confident that we have a robust asset management strategy to keep our plans running safely, efficiently and reliably. We continue to record steady progress in delivering the LCCP. The steam utility system, which is a critical component and a key enabler for the startup of the other units was safely and successfully commissioned earlier this month. Finally, as we continue to maximize value from our existing portfolio of assets, and drive our growth in our chosen areas, we'll provide you with a high level update on our strategy. Paul will, of course, go into more detail on our financial and operational performance for the year. And after that, we will open the session for any questions you may have. I…

Thank you, Steve. I am on Slide 17 of your slide deck. Good morning and good afternoon ladies and gentlemen. It is my pleasure to present the 2018 financial results to you today. Our results at the midpoint of the earnings range provided in our recent trading statement. As stated to you during our Capital Markets Day over last year, our drive towards gaining shareholder value sustainably is guided by our continuous focus on firstly, a sustainable delivery of operations and capital efficiencies, secondly, continuously improving our cost competitive position, thirdly, to manage our balance sheet risk prudently by means of our financial risk mitigation strategy, and lastly, to growing the value of the business as unfold [ph] by our focused strategy and disciplined capital allocation. With this in mind, I will now turn to our 2018 financial results, and how this contributed in delivering on our value-based strategy. First, improvement - improving oil prices had a significant positive impact on our results. This was further complemented by very stellar cost performance during the second half of the financial year, resulting us delivering a normalized cash fixed cost increase in line with market guidance. The stronger average and volatile closing rental [ph] exchange rate had some negative impact on our results in terms of the income statement and balance sheet. Lastly, as a result of the stronger rent, the net present value of future cash flows of [indiscernible] cash-generating unit have been adversely impacted, resulting in a ZAR5.2 billion impairment. Looking forward and based on the successes at Business Performance Enhancement Programme and low oil price Response Plan, we also view [ph] and are well-positioned, and actively working on sustainably improving our cost competitive prices, driving further operational and capital efficiencies in an environment are pursuing zero home [ph]. This…

Thank you, Paul. Operator, we are ready for the question-and-answer session.

Thank you. [Operator Instructions] We can now take our first question from Chris Nicholson of RMB Morgan Stanley. Please go ahead. Your line is open.

Good afternoon, guys. My question relates to your lowering of EBITDA, sustainable EBITDA guidance to Lake Charles Chemicals Project by around $100 million. I have three questions from this regard. The first one is I understood previously that you had contracted in the vast majority of your ethane supply in terms of quantity, may be could you just elaborate on how the contracting on actual supply impacts the flowing of EBITDA guidance, specifically given your comments in relation to sourcing ethane from the Gulf or outside the Gulf Coast? And the second question in this regard is really you're still guiding EBITDA to quite a tight range of $1.2 billion to $1.3 billion, but you provided quite a wide range of IRR guidance there just to marry up those two, depending on where you saw the ethane from. And then just finally, have you adjusted any of your product price assumptions and not the feedstock cost, but any of the prices of the products that you expect to sell? Thank you.

I'll take the first part. And Paul, can you take the second too?

Yes.

Thanks, Chris, for the question. As you correctly stated, we have contracted the vast majority of ethane volume that we'll need, which is 100,000 barrels a day. We have a number of different contracts with different suppliers, those were generally 4 to 5 year contracts on volume, each company having a different volume amount that we've contracted in a different range of volumes that we'll pull from them. All of the contracts are tied to a marker, be it, natural gas or an ethane marker in the Gulf. So the price will float on what the contract marker or price marker is. So what you've done - and this is how it's done in the industry for Gulf Coast supply. As you lockup security of supply but the pricing will be determined basis the pricing of the month, either the month previous or some sort of average that you're having in contract on the price marker.

Chris, to answer your - the second part of your question and underlying and what I take is, what caused the $100 million in EBITDA to reduce. Let me address that quickly. Most of - when I look in terms of the price assumptions or underlying price assumptions that drove the $400 million versus the $250 million to $300 million, the biggest change is really the spread between LLDPE and ethane. So we did see in terms of the price marker for LLDPE that there was some contraction in margins since the half year until the year end. It's not significant, but it does make that impact on the EBITDA. And also in addition to that, we did see some higher ethane prices compared to what we've taken into account from half year to year-end. It's not significant changes in terms of ethane, I will say, it's pretty much more kind of the split between ethane and LLDPE that really boost this shift. If I'm looking in terms of financial year '20, '21 and '22, as I said, it's not a significant shift. We do see those spreads to normalize at and still supporting our 1.2 to 1.3 run rate, ultimately in terms of EBITDA. To your second point is, how do you marry effectively these different views to the $1.2 billion to $1.3 billion EBITDA? And the long short of it is to say your assumption on ethane prices. What we've seen thus far is that in the [indiscernible] from these various economists [indiscernible] would say that despite the divergent view in terms of where do you think will be sourced and that's really the key difference between the lower IRR and the higher IRR. Our view is that mostly that ethane will be sourced from the Gulf, especially in the next 10 to 15 years and that supposed a $1.2 billion to $1.3 billion per annual run rate, which is very much in line to the IHS view. Looking at - is actually more of the view that the Marsalis [ph] and other more expensive place will come into play and [indiscernible] rise to the IRR. If it translates a run rate IRR of the 5.5%, with my case, then ultimately, the $1.2 billion to $1.3 billions will on be average $200 million per year lower, so effectively, $1.1 billion. So it's not a significant difference compared to what you see in the IRR that that's really causing it. The last part of your question, are there any changes to any other product prices? In terms of our modeling and the answer is, no. On the contrary we actually see and some of the product lines specifically on the Performance Chemicals business that there's some slight upticks in terms of our dollar base and pricing.

That’s great. Thanks, guys.

Thank you Chris. Operator, next question?

Thank you. We can now take our next question from Johann Steyn of Citi.

I guess that's me. Hi, guys it's Johann Steyn, you also mentioned in the presentation that the ZAR1.3 billion achieved in FY '21, if I heard you correctly. So first one, is that correct? Did I hear that correctly, Steve?

Johann, that's correct. Basis is our modeling, we show that in FY '21, we should achieve about 1.26, 1.27 and in FY '22, 1.3, 1.31. So depending upon the ramp up rate, depending upon what happens it's going to be either FY '21 or FY '22.

Okay. So that's a little bit better and quicker than I think it won't would've expected previously. And does that mainly the volume profile or pricing expectations?

Johann, we haven't really changed this profile since we adjusted it a couple of years ago. But Paul, let me turn over to you.

Yes, Johann, so ultimately, our anticipation is that not so much the volume pricing, but more in terms of the margin uplift, in terms of some of our assumptions. Again, I think it's quite important to say that there are very moving parts. If your view is that China will over bought, there will be some pressure may be in the next couple of years, if your view is that the U.S. will grow quicker into - it's sort of a transition of merchant ethylene, then ultimately, it also will kind of support these assumptions. So we have taken kind of mid-route approach when it comes to merchant ethylene that of a digestion in the U.S. as well also some mid-route approach with regards to the risk of over bought in China. We don't believe it's going to be other too strong or too weeks on either side and hence that is the only difference compared to our previous assumptions and supporting this 1.27 that Steve referred to in 2021.

Okay. Thanks, Paul. And then in terms of the previous dividend profile, if I remember correctly, you said that by 2022, they're about to you'd like to be at 45% payout. And I think by 2020, they're about 35% - sorry, 40% payout. Current pricing that where we are today with more than Rand. Do you see that profile coming sooner, effectively allowing you to ramp up the dividend payout rates quicker than previous expected or not?

Yes, Johann, I think the first big moving part for us was to gauge finality on the Sasol is all refinancing. So ultimately one thing that we do know for financial year '19, even at these higher rand to barrel oil prices and let's assume for now the 1,000 rand a barrel will continue. We don't really envisage by some board's approval kind of a step-up, meaning an improvement also 36% payout ratio for financially '19. However, I think you quite just in your assumption that in financially '19, we haven't really built in a significant uptake of growth capital and hence the balance sheet deleveraging is a key priority. Assuming that the balance sheet does leverage - deleverage according to our anticipation and these macroeconomic assumptions that prevail going forward, this is more than high probable chance or let's say, a high probable chance that we will have the opportunity to step-up our dividends as the first priority, which is consistent to what we message at the Capital Markets Day. What follows the 40% thing in - let's say, assuming that happens in financial year '20, will then be to say what will be the balance approach towards stepping it further up to 45%? Or what are the different capital investments available at that point in time? So we need to weight those two things up post-2020, but still with the objective of stepping up the dividend to 45%. I think it's just a matter of sensitivity, stepping your dividend up on this year's number from 2.8 to 2.5 times means ZAR1 billion of additional cash. And therefore, 2.5 to 2.2 available. So it's actually ZAR2 billion in this bottom to high end range, which I think on a balance sheet can be quite manageable, going forward.

Thanks, guys.

Thank you, Johann.

We can now take our next question from Gerhard Engelbrecht of Macquarie. Please go ahead. Your line is open.

Good afternoon. Thank you. I've got three questions as well. Considering that the cracker will be - when the cracker starts up at - in Lake Charles that it will be long of ethylene for quite a while. What price assumptions do you have for ethylene and EBITDA - ethylene and ethane baked into your EBITDA guidance of $200 million to $300 million for FY '19. That's the first question. Secondly, I heard that Supreme Court has approved routing against on gas pricings, affect your view on the Mozambique and PSA. If I remember correctly, you were looking at growing local gas markets with a gas in Mozambique. Does that ruling change it at all? Will you appeal this ruling to the higher court? How do you view that? And then lastly, just maybe a question on procurement, referring to the IT contract that you put in place with IO Technologies, can you give us an idea of the scope of that contract and your due diligence on IO, have they dealt - have they done any similar type of contract? Do they have any experience of contracts of this size?

Thank you, Gerhard. Paul can you take the price assumptions on ethylene and ethane?

Yes, Gerhard, I noted there's a need for more detail on this. I would say it's safe to say that ultimately we see ethane prices for the next 12 months if you want to really look at the forward curves to be between anything from $0.27 to $0.35 per gallon, that's what the forward curve sees. We will in that range on ethane. When it comes to ethylene, I guess one has the forward spot pricing in terms of what's available in the market. The spot and the contract prices and hence we are mostly kind of using those assumptions. I think we also don't need to plan ourselves in the corner to provide too specific - to mention specifics on our price assumptions. And we do provide you with the ethane over the merchant ethylene and product space range for year one in terms of EBITDA interpretation. But as I said, the most significant change in the economics and EBITDA is our ethane. And you can work off this ethane range which I have provided.

Thank you, Bongani, can you take the [indiscernible] and the IO?

Yes. I would like to respond to the question on the gas price, we have the intent indeed to appeal to have the – who have the second respondent, the primary respondent is NASA at this ruling. So the next point it's going to is the constitutional court. We strongly believe that the fundamental issues with me is to - by the FCA, which is the Supreme Court of Appeal. So that's where we are and that's where we [indiscernible] so to say. Except to say and that aside our strategy remains base as it was. And then in terms of the pricing on IO, just to make a lot of noise on this. But for those who might be less familiar about it, IO use the company which is in the IT space. They've been secured our - basically it's our networking contract which we had with BT and it's back to back with the British Telecom. In case there – or South. But given all the noise which was around, we then put specific clauses in the contract, some of the clauses we put, was if there was a clause of a misrepresentation or [indiscernible] it's an exit clause to the contract. So it obviously goes back to - it always goes back to BT and [indiscernible] IO technologies has been therefore for over 10 years. In addition to that [indiscernible] has been moved to IO and [indiscernible] some people who were providing services to us and [indiscernible] providing services to us and IO and the key trust is, what does it means for our operations. We have had noticed the difference it said that will it be in place according to a different company. But it detailed due diligence was the - was done. And we then put some built in places in the contract just in case.

Okay. Thank you.

We can now take our next question from Alex Comer of JPMorgan. Please go ahead. Your line is open.

Hi, guys. Few questions. Firstly, the sort of 250 million to 300 million, this year for LCCP, in terms of EBITDA, doest that – is that after all start-up costs, are there any start-up costs that you've not included and are going to be capitalized for instance? Also perhaps I think you at one point said you would give us the likely depreciation and interest charges this year on the product, and particularly in just in interest and how much of that is going to go through the P&L going forward? And then you've entered the market with the sort of toe in terms of hedging your ethane requirement. And obviously as Paul said, the forward curve for ethane is fairly attractive still. Aren't you going to attempt to hedge that more of your ethane, going forward or not? And just one confirmation, the free cash flow target for 2022 of $6 a share, is that including all CapEX or just systems CapEx?

Okay, Alex. I'll give you your question. And ultimately to your point on the $250 to $300 million, we have a very specific process that we follow to assess when a plant is being brought into a beneficial operations. Now in terms of our convention, once a plant has completed its sort of beneficial operations then all costs get expensed. So ultimately, when you're looking in terms of our income statement all start-up cost as part of beneficial operations have reached that point to suppose commissioning and startup, effectively forms part of operational costs. We have just recently completed our work again and the review of that. So I can confirm that's all included in the $250 million to $300 million. In terms of your second question in terms of interest GAAP I do promise that, and I do want to refer you to our fact sheet and you'll see on the fact sheet for the LCCP, we do list the interest capitalization for the restricted years. I think it's quite important. I will - in more detail, maybe tomorrow, on the Analyst Call, share with you, how we're going to treat interest after we've actually completed construction specifically on the bank term loan, or the $4 billion, IFRS requires us not to extend and rather capitalize it other projects in the grip, but I'll talk more about that. The - our exposure to with regards to ethane and the impact of ethane on the future cash flows of the company really becomes quite elevated going forward. So as part of our hedging strategy, you're 100% right that hedging is a part of ethane, not only on the current tracker but also in terms of the Lake Charles new tracker, ultimately will be within the scope. Our current focus is…

Thanks, Paul. Can I just -- with regard to the interest charge going to the P&L. You're actually saying that you won't be able to offset those through more capitalization elsewhere. And therefore there'll be - maybe a higher interest charge than was anticipated when you...

No. So basically what I'm saying is, until the point that you achieved a beneficial operations or you've finished construction, so to say. All interest specifically on the ZAR4 billion bank facility on asset based finance over the Lake Charles project will be capitalized against the Lake Charles plants. One of - thereafter that interest charge will be reallocated to other projects in the group if such projects are available and capitalized against those that will be expensed.

Okay. So no change really from the pervious expectations?

Yes.

Thanks.

Thank you. We can now take the next question from Adrian Hammond from SBG Securities. Please go ahead. Your line is open.

Thanks. Three questions for me, please. Two on the crack and one on your fuel business. Firstly, assuming like LCCP is commissioned, when do you expect the official operation? And how would you define that in terms of percentage utilization? And secondly, have you secured any bias for your polymer product from the LCCP? And where are these buyers located? And how does that compare to the envisaged guidance you put out some time ago? And then lastly, just on the fuels business in South Africa. Have you realized any gains or efficiency gains on the margins from the fuel distribution business? And if so, is this - are they more to be made? Thanks.

Adrian, can I just ask on that last question. I wasn't really clear what the question was. Can you explain it to us what you're looking for?

So in your distribution of fuels, both in the commercial and retail sectors in South Africa, have you made any efficiency gains on the margins that our available to you in the regulated pricing, all those fuels and in the distribution of those fuels? And I'm speaking more to you broader retail strategy? Thanks.

Okay. Adrian, I’ll start on the first one and I may need some help from Stephen or from Bernard, but let me give it a go. Then Fleetwood could you take the chemical products and Paul, can you take the one on the energy, I need some assistance. So I think your question is, what determines beneficial operation, is that kind of the question? So the dates that we have been putting out are beneficial operations dates. So all the dates that we talk to you about are beneficial operation. So before that, we have finished the mechanical work or what we call the mechanical completion then we have commissioning and ramp up. And we finally get to beneficial operation behavior at a point at which the operations are steady. We are on product, we are confident that the unit can maintain - without unforeseen incidents happen, but maintain a kind of levels of performance. And we have a very detailed process we go through to say we have now achieved beneficial operation. And it will be the operations guys who basically tell us that they have done so. So the dates that we've given is that we expect to reach beneficial operation on the first polymer unit before the end of this calendar year on the polyethylene unit that, LLDPE, we expect to reach beneficial operation on the cracker and we hope to reach beneficial operation on the ethylene oxide e.g. before the end of the year. Again, we said that might push out over into the next calendar year into January, but all the dates that we talked to you about are beneficial operations dates.

You want to talk about products.

Yes, thank you. So Adrian, the whole approach with the polymers into our global and sales network hasn't changed. The one impact that we did consider now recently was the tariff announcements in China and in the counter position from the Chinese. We have appointed all our distributor channel partners globally. We've got a very moderate placement in each region of the globe. And in essence, those have not changed. What we have - in the contracts included was to give us flexibility, to scale in each region. So our distribution partners will have the flexibility, should we increase allocation to that specific region? Or take away and reallocate to other regions, we've got really good flexibility in those type of agreements. And therefore, the impact even now with the tariffs between U.S. and China, we feel that we can mitigate that because there is also a very low percentage of exposure that we have into China as direct placement of our polymer, just to give you a flavor, it's less that than 5% on the HDPE and it's less than 10% of our annual LL volumes that we will be placing them all. Also that the LD volumes have been taken off the tariff list. So there is no exposure that we have this. So it remains in the low double-digits exposure that we've got in terms of the total impact in China if have not any mitigation plans, but we believe we can redirect some of that product. And therefore mitigate the impact would...

And then to your last comment in terms of retail strategy, we believe that we've been quite successful over the numbers of years to increase the volume pump side of our focus, which talks about not only promoting our brand but also the offering to customers. You will also notice that we sold 10stations during the year. And as part of our organic strategies, it's not only to grow new sites but also to redeem or sell the ones that's really not adding the value according to our strategy. And we do believe that ultimately through building our brand and promoting and enhancing the offering to customers, we do see a higher uptake of customers actually visiting our site. Very important that the GDP in South Africa is unfortunately a stumbling block because most liquid fuel manufacturers and marketers find it difficult to grow at pace as a result of that inherent limitation. Even we do believe going forward as part of our digital transformation that using technology, specifically in our focus will significantly increase further value enhancement and efficiencies for us, not only in terms of the customer experience but reducing working capital, watching stock and ultimately how much fuel inventory to carry. So we are busy with those processes and we do believe digital will be a significant value enhancer for us in our retail strategy going forward.

I think we have time for one more question.

Thank you. We can now take our last question from Herbert Turabi of Investec. Please go ahead. Your line is open.

Good afternoon. I've got two questions. And the first question is -- the first one is, what is the plant utilization rate that end up (background noise) And the second one is, is the (background noise) bottleneck for the background noise? And I say this - and I say this given that I noticed that the formation of the different product groups exceeds as 1755 kilotons per annum? Thank you.

Thank you, for the question. Let me take the second one, first. So our current focus obviously is on completing the existing project, getting it up and running and getting the cash flows. That being said, we will be putting about 200,000 tons annually of ethylene onto the merchant market. And so, there exists the opportunity to either bottleneck some of the downstream units or build something in the future, all of that will be determined as we go forward. But we are currently not active and really trying to address future expansion, we're currently looking at trying to give the existing plant up and running. In terms of the utilization, that we have in our numbers, we look at about a 95% overall utilization on the site. Yes, when we get up and running, steady state.

All right. Thank you.

Okay, let me just close and saying thanks to you all for participating. We really appreciate your interest and we will talk to you again soon. Thank you, operator. You can close it now.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.