Sasol Limited — FY2021 Form 20-F summary
Period clarification: The filing is the annual report for the year ended 30 June 2021, filed on 22 September 2021; it is not a 2020 Q4 report. Financial statements are prepared under IFRS and reported in South African rand (R).
Business context and financial performance
Sasol is a global energy and chemicals company, with major operations in South Africa and businesses in the Americas, Europe, Asia and elsewhere. FY2021 results reflect recovering demand and prices after the COVID-19 shock, alongside asset disposals, debt reduction and significant impairment charges.
| Metric | FY2021 | FY2020, revised |
|---|---|---|
| Turnover | R201.9bn | R190.4bn |
| EBIT | R16.6bn | Loss of R111.9bn |
| Earnings for the year | R10.5bn | Loss of R91.9bn |
| Earnings attributable to Sasol owners | R9.0bn | Loss of R91.8bn |
| Basic EPS | R14.57 | Loss per share of R148.49 |
| Net cash retained from operating activities | R34.0bn | R29.7bn |
| Net cash from/(used in) investing activities | R25.1bn | Used R38.6bn |
| Net cash used in financing activities | R58.3bn | Net cash generated R25.1bn |
| Total debt, including leases | R118.6bn | R207.4bn |
| Net debt | R89.2bn | R174.5bn |
Turnover increased 6%, principally on higher product prices. EBIT recovered from the prior-year loss; the filing reports FY2021 EBIT margin of approximately 8% based on turnover. Operating cash generation was R45.1bn before tax and dividends; income tax paid was R5.3bn. Available liquidity headroom exceeded US$1bn at year-end. Net debt/EBITDA was 1.5x, below the original 3.0x covenant limit. The filing states that working capital was sufficient for present requirements.
Material changes and unusual items
- FY2021 included net remeasurement charges of R23.2bn. The auditor reports a net PPE impairment charge of R28.7bn, primarily further impairments in the South African integrated value chain, partly offset by a R4.9bn impairment reversal in the North American EO/EG business.
- The Fuels segment recorded a R24.5bn impairment of the Secunda liquid-fuels refinery cash-generating unit. Chemicals Africa recorded R9bn of impairments, mainly in wax and chlor-vinyls. Chemicals America recorded a net R4.5bn impairment reversal, primarily related to EO/EG.
- Investing cash inflows included R30bn from selling 50% of the Lake Charles Base Chemicals business to form a joint venture with LyondellBasell and R8bn from selling Secunda air separation units to Air Liquide.
- Debt reduction included repayment of R55.4bn on the revolving credit facility and R5.4bn of term loans. Sasol also issued US$1.5bn of bonds in March 2021.
- The LCCP was completed, with its final unit reaching beneficial operation in November 2020. The project’s final cost was US$12.8bn, within the latest communicated guidance but up substantially from the original US$8.9bn estimate.
- Comparative results for 2019 and 2020 were revised for errors in South African value-chain impairment calculations. Reportable segments were also reorganised; the filing says this did not change reported group financial position or results.
Outlook, management commentary and risks
- Sasol 2.0 is intended to stabilise and transform the business through cash conservation, cost and margin improvements, working-capital actions and disciplined capital spending. Benefits are targets, not assurances; management warns that market deterioration or execution issues could limit delivery.
- The Mozambique PSA development received final investment approval in February 2021, with estimated project cost of US$760m. Execution began in calendar Q3 2021; COVID-19 restrictions may affect timing. Management is also assessing options as Pande-Temane gas production is expected to decline from 2024 and may no longer meet contracted supply levels.
- No dividend was declared for FY2021. The board said suspension would continue until further notice to protect liquidity and reduce leverage. The filing provides no formal earnings guidance.
- Financial risks include refinancing substantial debt, covenant compliance under further economic shocks, sub-investment-grade credit ratings, commodity-price and foreign-exchange volatility, and continued access to funding. A weakening rand can support operating results but increase rand-reported foreign-currency debt.
- COVID-19, South African power interruptions, labour disruption, political and social instability, Mozambique security risks, and operational or supply-chain interruptions could affect output and cash flow.
- Climate transition and environmental compliance are material exposures: Sasol targets a 30% reduction in Scope 1 and 2 emissions by 2030 and net zero by 2050, but notes uncertainty over technology, feedstock cost, capital availability, carbon budgets and regulation. It paid R579m in South African carbon tax in FY2021.
- Contingencies include a R1.4bn provision for potential customer claims following NERSA gas-price decisions; a R2.58bn contingent tax exposure relating to SFI; and unresolved US securities litigation for which damages were not specified and the impact could not be reasonably estimated. Environmental obligations accrued were R16.2bn.
- Internal controls remain a significant concern. Management and PwC concluded that internal control over financial reporting was ineffective at 30 June 2021 due to a material weakness in impairment assessments across the South African integrated value chain. Prior-period errors were revised; remediation is ongoing. PwC nevertheless gave an unqualified opinion on the IFRS financial statements.
Investor verification priorities
- Review the impairment-error revisions and assumptions behind FY2021 impairment tests, including commodity prices, exchange rates and discount rates.
- Assess refinancing needs, covenant headroom, liquidity sources and the sustainability of debt reduction after asset-sale proceeds.
- Track execution, total cost and schedule of the Mozambique PSA, and the response to expected gas-supply decline from 2024.
- Monitor remediation and independent testing of the impairment-control weakness, including whether disclosure controls become effective.
- Verify potential exposure from the NERSA gas-price decisions, SFI tax proceedings, securities litigation and environmental obligations.
- Evaluate whether the dividend suspension, Sasol 2.0 targets and emissions commitments change as cash generation, capital needs and regulation evolve.