Sasol Limited (NYSE:SSL) Q4 2025 Earnings Call Transcript

Sasol Limited (NYSE:SSL) Q4 2025 Earnings Call Transcript August 25, 2025

Tiffany Sydow: Good morning, and welcome to Sasol’s Annual Results presentation for financial year ’25. My name is Tiffany Sydow from Investor Relations. And on behalf of the Sasol Executive Management team, we are pleased that you could join us today, both in person and online. With me is Simon Baloyi, our CEO and President; and Walt Bruns, the Chief Financial Officer. The Group Executive is also seated in the front row and joins us today. Before we begin the presentation, I’d like to point out a few safety and housekeeping items. The emergency exits are located at the back of the room where you entered. In the event of an emergency, please exit the room and enter the reception area where the safety marshal will give you further instructions.

The restrooms are also located at the same door to your immediate right. Please ensure that your cell phone is on silent for the duration of this presentation. And lastly, all the materials have been uploaded on to our website and are available for your perusal. The agenda today, Simon will begin the presentation with our business overview, followed by Walt, who will give an overview of the financial performance for this year. Simon will then conclude with a strategic update at the end. Online participants are then welcome to join our Q&A session, which will start immediately after the session. And you are able to then type in your question online or ask it in-person for our in-room participants. Thank you. I will now hand over to Simon.

Simon Baloyi: Thank you, Tiffany. Good day, everyone. Thank you for joining us today, both in person and online. We value your time. At our Capital Markets Day a few months ago, I told you that we have a business with real potential to deliver significant shareholder value. However, we need to navigate a number of challenges to deliver that potential. We outlined focused initiatives that are underway to turn strategic ambition into actionable plans. Three months on, we fully remain committed to those plans. Today, it’s all about the financial year ’25 results. Furthermore, this is an opportunity to talk about how we are tracking against our CMD plans. To summarize the key themes that we’ll cover today, let me begin with safety.

Nothing matters more than making sure that every employee and every service provider goes home safely to their loved ones. Since mid-August 2024, I’m deeply grateful that we have not lost any team members. We know that when we put safety first, strong operations naturally follow. Our strategy is clear: strengthen the foundation, grow and transform the business. In Southern Africa, we are focused on restoring the value chain, and we are resetting international chemicals. I’ll share more detail on the progress of our plans for financial year ’26. We have achieved good momentum that we aim to build on in the next 12 months. Despite a challenging operating and macro environment, we focused on the controllables. As a result, we met most of our financial targets provided in February for the group.

We also saw clear cash improvement performance helping to deleverage the balance sheet. Walt will unpack our financial performance in more detail later. Concluding today’s session, I’ll return to discuss how we are progressing against our broader strategic priorities to grow and transform our business with a focus on the implementation of the emission reduction road map or ERR in short, and in particular, renewable energy. Overall, we remain confident in our plans, and now it is all about execution. We shared specific targets with you in Capital Markets Day in May 2025 and are committed to giving you regular feedback. We have started to implement our action plans, and I can report the following progress. Construction of the destoning plant is completed, and we are busy with start-up activities.

We are on track to meet our commitment. The coal quality and gasifier availability challenges continue to impact Southern Africa value chain. Although we saw improved gasified performance in quarter 4, the Secunda volumes ended marginally below target. Despite these lower volumes, the Southern Africa value chain breakeven price ended at $59 a barrel due to disciplined cost and capital management supported by the receipt of the Transnet legal settlement. This is in line with our previous target of below $60 a barrel. In our international chemicals, adjusted EBITDA increased by more than $120 million despite the prolonged downturn in the chemical market. This is also in line with the targets communicated at half year-end. On the balance sheet, we made progress on our key objective to deleverage and reduce risk.

We closed the year with a net debt of $3.7 billion, excluding leases, achieving our target of staying under $4 billion. On the Grow and Transform front, our optimized ERR implementation, including our target of 2 gigawatts of renewable energy by 2030 is on track. We have secured more than 900 megawatts from power purchase agreements in South Africa, setting the stage for long-term decarbonization and energy resilience. I’ll now highlight more specific detail around our performance for financial year ’25. Starting with safety. In financial year ’25, we had a tragic fatality and one of our colleagues did not go back home; however, we did see some progress in our safety efforts. Financial year ’25 marks the first fatality-free financial year for Sasol Mining, a milestone never achieved before.

We experienced no major process safety incidents during the year. Notwithstanding the higher hospitalization rate, the injury severity rate has decreased, resulting in our employees returning to work sooner. That said, we acknowledge that there is still work to do in meeting our commitment to send everyone home safely. This is aligned with our commitment to drive rigorous safety measures to prevent harm to our people, to our communities, environment and assets. In the last year, we have reinforced personnel and leadership accountability, and we’ve also deepened collaboration with service providers. Looking ahead, we are focused on strengthening risk management and further embedding a safety culture centered on continuous improvement. Our goal remains clear to ensure safety is prioritized, safety is integrated into everyday practices and safety is at the forefront of everything we do.

I will now touch on a few highlights of our financial performance. Notwithstanding our lower production volumes and operational setbacks, we successfully resolved — which we successfully resolved, we continue to navigate the challenging macroeconomic environment. In this context, adjusted EBITDA for the period was down 14% to ZAR 52 billion. Team Sasol delivered good results in areas within our control, particularly margin realization, managing the fixed costs below inflation and optimizing capital spend whilst protecting integrity and reliability. This, together with our continued focus on value over volume, supported an improved free cash flow generation of more than 70% compared to prior year. Restoring the performance of our South African value chain remains a key priority.

In financial year ’25, we strongly focused on feedstock quality and availability. This included stable gas supply from Mozambique and improving the quality of coal supply to Secunda operations. We took a final investment decision on the destoning plant. And as mentioned earlier, construction is complete, and we are busy with start-up activities. We are on track to reach beneficial operation in the first half of financial year ’26. The destoning plant construction did impact coal blending and thus overall coal quality. We had to increase coal purchases to reduce the impact on the gasifiers. As a result, we saw improved gasifier performance in quarter 4 of financial year ’25. We also made progress towards enabling Natref to be Clean Fuels II compliant through the installation of low-carbon boilers.

I can report that we successfully commissioned the first low-carbon boiler. The second one will be commissioned by the end of this month and the last boiler before the end of the calendar year. Our marketing and sales teams focus on higher price realization through enhancing the channel mix. Looking ahead to financial year ’26, as I said previously, our focus is on ramping up the destoning plant. This is expected to reduce the coal sinks to below 14% for the year and improve gasifier availability. Together with improved focus on operations reliability and the absence of a phase shutdown, we expect Secunda to achieve a production target of between 7 million to 7.2 million tonnes. We will continue to optimize our channel mix and manage global market shifts, including the potential impacts of U.S. tariffs.

Delivering across all these critical areas — delivering across all these areas will be critical in making sure that we achieve our financial year ’26 breakeven target of $60 to $55 per barrel. We have announced changes in the executive leadership team recently. The upcoming retirement of Hermann Wenhold and Charlotte Mokoena marks conclusion of long and highly valued tenors on the executive team. And for Hermann, the end of an illustrious 40 years with Sasol. We are grateful for their significant contribution to Sasol’s journey. Going forward, Sandile Siyaya, who is with us here in the room, is the current Senior Vice President, Mining, will assume the role of Executive Vice President, Mining from the 1st of September 2025. Sandile has 18 years of Sasol experience and a deep-rooted understanding of our mining activities, combined with the required strategic acumen and leadership skill.

He is well placed to address both our short- and long-term goals for mining. Thabile Makgala will join Sasol as an Executive Vice President, People, SHE, Risk and Corporate Affairs from the 1st of October 2025. His strategic expertise and executive leadership skills, combined with more than 20 years of global experience will stand in good stead in a new role at Sasol. In International Chemicals, we are starting to see the results of the reset phase of our strategy. This is centered on improving profitability through 3 core strategic initiatives: market focus, asset optimization and cost efficiency. We have made good progress to date with an adjusted EBITDA of $411 million, an improvement in adjusted EBITDA margin from 6% to 9%. Our market focus initiatives — on our market focus initiatives, we continue to drive our value over volume approach, refining our commercial strategy to better align with the customer needs and improve margins.

We will continue rolling out commercial excellence programs and embedded a tailor market model to sharpen customer focus and drive improved margins. On asset optimization, we progressed the previously communicated mothballing and closure of underperforming assets. Asset reviews will remain part of ongoing portfolio management, while we aim to unlock growth by improving utilization of installed capacity. In April 2025, we reached a major milestone with the go-live of the modern enterprise resource planning or ERP program in Italy. We will extend our ERP system across more sites, driving standardization, transparency and greater cost efficiency. These continued efforts are expected to deliver further improvements in profitability. Adjusted EBITDA for financial year ’26 is expected to be between $450 million to $550 million with an adjusted EBITDA margin between 10% and 13%, moving us closer to our peers.

12 months ago, I shared our vision of building a profitable and sustainable business that safely delivers value to our shareholders, value to our customers and value to our communities through inspired people. I now want to reflect on the social value we have created for our people and our communities in the financial year ’25. We have invested ZAR 600 million in social programs across the group. We supported more than 250 students with bursaries through the Sasol Foundation, helping to grow and develop future leaders. Included in this amount is ZAR 150 million invested in community infrastructure projects globally. This comprises of building health facilities and community centers, upgrading roads, water and sanitation services. All of this is geared towards improving the daily living condition of our communities and supporting local economic development.

Our economic contribution has been equally impactful. Globally, we contributed about ZAR 44 billion in direct and indirect taxes. We also invested more than ZAR 100 million, enabling 3,000 jobs and supporting small business growth. These achievements go beyond numbers. They represent life change, opportunities created and communities strengthened. They reflect our unwavering commitment to making a positive difference and being a true force for good. Looking forward to financial year ’26, our priorities are clear. Safety first. We remain committed to ensuring that everyone goes home safely. In support of this commitment, we will also focus on building an empowering culture where safety performance goes hand in hand. Our customers are central to our success, and we will focus on delivering innovative value-adding solutions, benefiting both customers and Sasol.

Strengthening our foundation businesses through resetting international chemicals and restoring South African value chain will continue. We are focused on delivering on the financial year ’26 commitments, especially improving cash generation to accelerate deleveraging. We will also advance our grow and transform agenda while continuing to cultivate strong relationship for shared value creation. With that, I will now hand over to Walt, who will unpack our financial performance.

Walt P. Bruns: Thank you, Simon. Good morning, ladies and gentlemen, and thank you for joining us today. A few months ago at Capital Markets Day, I set out 4 priorities to deliver a robust financial framework for Sasol. These priorities included improve sustainable free cash flow; two, deleverage the balance sheet; three, reinstate dividends when appropriate; and four, disciplined capital allocation. These priorities were underpinned by proactive risk management to ensure that we respond quickly to changes in our operating and macro environment to mitigate risks and accelerate opportunities. Today, I’ll take you through our financial performance for FY ’25, reflect on the first progress made against these priorities and previous targets communicated.

I will also detail our targets for FY ’26 with the aim to build continued credibility in our FY ’28 plans that we communicated at Capital Markets Day. Turning to an overview of our FY ’25 financial performance. We achieved the majority of our key financial targets previously communicated despite lower turnover and adjusted EBITDA as a result of a challenging macro and operating environment. This delivery was achieved with focus in our planning and discipline in our execution. Key highlights include containing cash fixed cost increases to just 1% below the inflation rate of 3% achieving capital expenditure of ZAR 25 billion, 13% lower than our target of ZAR 28 billion to ZAR 29 billion, reducing our net debt to USD 3.7 billion, the lowest levels since 2016 and 8% lower than our target of USD 4 billion.

Lastly, we successfully completed our FY ’26 hedge program ahead of schedule. Only our net working capital as a percentage of turnover on a 12-month rolling basis was slightly above our target of 15.5% to 16.5% and equal to 16.8%. This was mainly due to lower rolling turnover and an increase in inventory to manage supply variability during the year. Net working capital percentage as at 30 June 2025 was, however, 15.4% and slightly below target. This delivery is the first step in translating the plans communicated at half year-end and Capital Markets Day into tangible proof points that build credibility with you, our stakeholders. The macroeconomic environment in which we operated in 2025 was highly volatile, influenced by uncertainty around global tariffs and heightened geopolitical tensions.

These dynamics have had varied impacts across our business segments. In our Fuels business, a 15% lower rand oil price and 68% lower refining margins had a significant negative impact on its results. Meanwhile, our Chemicals segments benefited from stronger U.S. ethylene margins and a 5% uplift in the overall chemicals basket price. Our response to navigate this volatility has been to focus on things within our control, including strict cost and capital discipline, maintaining robust liquidity, proactive hedging and continually optimizing where and how we place our products. This helped us in FY ’25 and will continue to help us in FY ’26, where we anticipate continued volatility as global market sentiment remains sensitive to changes in tariffs, interest rates and geopolitical risks.

Looking at more details in the group financial results, the most important metric is free cash flow, which increased to almost ZAR 12.6 billion, a 75% improvement to the prior year and despite lower adjusted EBITDA. The increase was driven by disciplined capital spend, lower tax payments and the receipt of the Transnet legal settlement. Even after normalizing for the Transnet legal settlement, free cash flow increased by more than 30%, a solid performance considering the headwinds in the macroeconomic environment. Gross margin declined by 12%, mainly due to a 9% reduction in turnover as a result of the aforementioned lower rand oil price and a 3% decrease in sales volumes associated with lower production and weaker market demand. Cash fixed cost performance reflects the impact of our cost-saving initiatives, driven by reduced headcount from operating model changes and a vacancy freeze, better contracting, tighter scope control and other optimization initiatives that are considered sustainable going forward.

Total impairments were ZAR 20.7 billion, 73% lower than the ZAR 74.9 billion in the prior year and contributing significantly to the more than 100% increase in earnings. The largest impairments were ZAR 13 billion related to Secunda and Sasolburg liquid fuel refinery cash-generating units or CGUs, which remain fully impaired. The recoverable amount of these CGUs improved through management actions, but was negatively impacted by lower forecast macroeconomic price assumptions. Additional management initiatives need to be further progressed before their benefits can be incorporated into the impairment calculations. As a reminder, the Secunda complex, including the Secunda Chemical CGUs, continues to have significant headroom when comparing the total recoverable amount to the net book value.

In addition, impairments were recorded on Mozambique and Italy Care Chemicals CGUs, offset by the reversal of impairments for the China Care Chemicals CGU. Capital spend of ZAR 25 billion was 16% lower than the prior year due to a combination of lower feedstock replacement, compliance spend and discretionary sustenance spend, including focused cost-saving initiatives without compromising on safety or asset integrity. Net debt, excluding leases, ended the year at USD 3.7 billion, above our dividend trigger of sustainably below USD 3 billion, which we continue to target for between FY ’27 and FY ’28, in line with our CMD guidance. Shifting our focus to the adjusted EBITDA performance by segment. Our South African business continues to be the primary contributor to group adjusted EBITDA at around 85% with each segment in the value chain playing an important role.

Mining EBITDA increased by 15%, while gas increased by 35%, driven by a combination of higher gas prices and sales volumes. Fuels declined by 38% on the back of the weaker rand oil price, lower Natref refining margins, reduced production volumes and higher feedstock costs. On the positive side, sales volumes in the higher-margin mobility channel increased by 5% despite a broader market decline. In Chemicals Africa, EBITDA declined by 32%, impacted by lower production volumes, a stronger rand-dollar exchange rate and higher feedstock costs. This was partially offset by a higher average basket sales price despite continued weak market conditions. International Chemicals increased its share of group adjusted EBITDA from 9% to 15% with an improvement across both regional segments, driven by a combination of improved U.S. ethylene margins, stronger palm kernel oil pricing and further progress on our strategic reset initiatives.

In summary, our diversified portfolio supported by targeted initiatives is helping to balance earnings across geographies and further improve our resilience in an ever-changing global landscape. We continue to follow the capital allocation framework as outlined at our Capital Markets Day. As a reminder, first order capital — maintained capital is primarily directed towards maintaining safe, reliable and compliant operations with selective growth and transform capital focused on smaller, higher-return projects aligned to our strategy. While the framework is important, it means little without disciplined application. In FY ’25, we made meaningful progress on our deleveraging, which is ahead of the plan communicated at CMD. Net debt reduced by 11% to $3.7 billion.

In addition, gross debt was reduced by 10% as excess cash was deposited into the revolving credit facility to reduce financing costs. We aim to build on this momentum in FY ’26, targeting further reduction in the net debt as we work towards our net debt target of USD 3 billion between FY ’27 and FY ’28. Achieving this target is pivotal. It improves our resilience and in so doing lifts our enterprise value and the associated equity share. It also enables dividend reinstatement with a commitment to return 30% of free cash flow to shareholders once net debt is sustainably below the target. The remaining 70% of free cash will be allocated with discipline to our second order capital in line with our framework. We remain well positioned to navigate ongoing macro volatility, supported by strong liquidity position, a robust hedging program and continued focus on cost and capital discipline.

At the end of June 2025, we have more than USD 4 billion in available liquidity, which includes strong cash reserves, unutilized committed facilities and no immediate debt maturities. In July 2025, we also successfully issued a ZAR 5.3 billion bond and received USD 300 million in exchange, supporting our efforts to diversify the funding base, reduce U.S. dollar debt exposure and financing costs. This issuance, together with our June 2025 liquidity provides the flexibility to address upcoming bond maturities using available liquidity if required. From a risk management perspective, and as I’ve mentioned, we have completed our hedging program for FY ’26. For oil, we achieved a 60% effective hedge cover ratio with an average floor price of USD 60 per barrel.

For the exchange rate, we achieved a 30% hedge cover ratio with a range of ZAR 17.60 to ZAR 21.10 using zero cost collars. We will continue to manage these exposures while preserving optionality to respond to a dynamic external environment. As we look ahead to FY ’26, this slide outlines our key financial metrics that we are guiding on. Our first priority is to deliver on our volume targets that Simon shared, supported by focused interventions and execution across our business. Secondly, we will maintain our cost and capital discipline by keeping cash fixed cost increases below inflation, maintaining first order capital expenditure between ZAR 24 billion and ZAR 26 billion and net working capital percentage between 15.5% to 16.5% as guided at CMD.

Thirdly, our aim is to continue to reduce net debt ahead of the CMD base plan, supported by continued free cash flow generation despite the uncertainties in the macroeconomic environment. Lastly, we will continue to manage risks proactively, including the completion of our FY ’27 hedging program. In summary, FY ’26 is grounded in delivery. Our plan is clear, and we’re focused on the fundamentals to unlock value where it matters most. We are encouraged by our financial performance in FY ’25, but remain humble and determined to build credibility through performance. With that, I will now hand over to Simon for his closing remarks and look forward to engaging with you in the Q&A session later.

Simon Baloyi: Thank you, Walt. Let us now turn to a brief update on our Grow and Transform strategic agenda. Sasol’s approach to transforming our business addresses both value creation and carbon intensity reduction in pace with our customers. We are acutely aware that the pace of the energy transition will not be uniform as it is affected by political shifts, energy and security concerns and inflationary pressures. Looking now at the external landscape, we are starting to see meaningful changes that support the delivery of our strategy. There’s a strong collaboration between government and businesses, enabling open and solution-focused dialogue that will unlock energy transition in South Africa. We are also seeing positive momentum in the policy and regulatory space.

This includes constructive engagement on the carbon tax framework and a positive policy signal for carbon tax recycling. This will enable a faster transition, protect jobs and preserve shareholder value. Importantly, demand for energy and chemicals remains resilient, reinforcing the role of our products well into the future. That said, as mentioned before, the pace of our customer demand for low-carbon solutions remains a key enabler for transition investments. Together, these developments are creating a more supportive environment, reinforcing our confidence to invest with discipline and remain focused on delivering our long-term strategy. Turning now to our optimized ERR. We remain focused on delivering a value-accretive 30% reduction in greenhouse gas emission by 2030.

The optimized road map remains capital efficient, whilst offering economic value and strategic optionality. We made good progress in the past year through the identified 4 key levers. Earlier this year, we turned down the equivalent of 1 boiler at the Secunda facilities. Our group energy efficiency improved by more than 2% from the previous financial year. We also purchased 3.8 million carbon credits, reducing our carbon tax liability and strengthening our climate resilience. Let me unpack the renewable energy lever in more detail. We have achieved several milestones in renewable energy this year, including some new developments since we last spoke at CMD. We secured an additional 160 megawatts, bringing the total renewable energy secured in South Africa to more than 900 megawatts.

At our Lake Charles facility, we signed a virtual PPA for around 90 megawatts of renewable energy. This will support about 50% of the electricity needs by mid-financial year ’27. I’m also happy to report that our third renewable energy facility, the Damlaagte solar plant came online last week. This is a 97 megawatts facility. In financial year ’26, we plan to supply our customers with renewable energy through the Ampli JV launched earlier this year. These efforts will support our target towards the additional 1 gigawatt of renewable energy by financial year ’28. We will also continue to move from pure offtake to selective equity, allowing us to capture developer margins as well as the trading upsides. Our renewable energy projects will keep on unlocking cost savings while reducing carbon intensity across our operations.

This will ensure that our strategy remains value accretive. In closing, we know that there is more to do, but we are clear on the strategic path ahead, strengthen the foundation, unlock value and drive our transition. The action taken this year have laid a good foundation and groundwork with positive momentum across all businesses, and we will continue to build on this in the years ahead. As we deliver on our goals, we will further unlock upside. We will restore dividends and gain the flexibility to accelerate our growth strategy. Our long-term ambition remains unchanged to build a stronger, more sustainable Sasol, a Sasol that creates value for our shareholders, our people and society. It has been a pleasure to present Sasol’s results today.

My executive team and I look forward to further engagement in the Q&A sessions. I’ll now hand back to Tiffany. Thank you.

Tiffany Sydow: Thank you, Simon and Walt, for those presentations. We’ll now begin the Q&A session where you’ll have the opportunity to direct your questions to Simon, Walt as well as the executive team seated in the front row. [Operator Instructions] We’ll take 2 questions at a time. Before you begin Gerhard, if you could please submit your questions online on the Q&A platform to the right-hand side of your screen. Alternatively, you can also dial into Chorus call where you will have the opportunity to voice over your question. We’ll alternate between in-room and online questions to ensure broad participation of all. And I think to kick off, we can start with the questions in the room. Gerhard, if you can begin, please?

Gerhard G. Engelbrecht: Gerhard Engelbrecht, Absa CIB. I’ve got a couple of questions. Firstly, on the CapEx, I wonder the CapEx came in well below guided. I guess that’s a great result, but it also comes with a bit of a question about where did you save CapEx? What — does it postpone maintenance? Is it efficiencies? Can you maybe elaborate on that? And then also, your CapEx guidance for ’26 is now very similar to what you spent in ’25, yet you’ve got no shutdown. So how do we reconcile that? And then just on your volume guidance at Synfuels or at, let’s say, Synfuels, you’re talking about 7 million to 7.2 million tonnes, there’s no shutdown and you’re talking about the destoning being commissioned, I would have anticipated volumes in that environment could be even higher. So can you maybe just unpack how much benefit you see from the destoning in F ’26? How much you see from the shutdown not taking place? Elaborate on that, please.

Tiffany Sydow: Thank you. Can we take another question and then perhaps hand over to Simon and Walt. Chris?

Christopher Nicholson: It’s Chris Nicholson at RMB Morgan Stanley. I’ll just ask one. So I’m interested in what’s happening with the gas and the PSA in particular. So I see this year, you’re guiding gas volumes from Mozambique up, I think 0 to — I forgot the number, 10% or so. But yet for your impairment calculation, I see you’ve actually revised total recoverable gas volumes down a bit. Maybe if you could help reconcile that. I think linked to that, if you could give an update with what’s happening with the power plant in Mozambique because I do know that those Mozambique gas volumes will be determined based on, obviously, when CTT comes online. And then the final one, just again, linked to that as well is I did notice the condensate volumes seem to be increasing relative to gas from Mozambique. Often, that’s a sign that wells are beginning to deplete. If you could just comment on that? Is that in the PPA?

Tiffany Sydow: Thank you, Chris and Gerhard, for your questions. Simon, if I could hand over to you.

Simon Baloyi: Yes. Thank you. I mean Walt can cover the impairments. So Walt, you cover the impairments. I mean, Victor will start, but you can comment on the CTT questions based on the duration and the timing. Then Victor, you also maybe when you’re at it, I mean, start with CapEx for Gerhard. But I’ll cover it, I mean, in a little bit. I think let’s start there, then we can take, I mean, the residual questions. Gerhard, I mean, you spoke about the CapEx. So we did apply, I mean, a rigorous approach to our CapEx. I mean we’re already guiding lower when we met. I think the key drivers is in that is the ERR. You remember now we have a value accretive ERR. So capital debt was, I mean, associated with that, we took out. we also had to — I mean, had a risk-based approach, I mean, on low-risk activities that we could defer into the following year.

And that is why you see the CapEx for the following year, I mean, remaining the same even in the absence of a shutdown. So those low-risk items, we deferred them to the following year. And we also — I mean, based on the — I mean, prevailing conditions and optimization of CapEx, we delayed, I mean, PT5-C. I mean that’s what we’ve done there. So I think all of those actions have helped on the CapEx and also reconcile with the next year’s, I mean, guided CapEx. Victor, you can also cover, I mean, the 7.2 question. I mean, 7 to 7.2 in terms of giving Gerhard the indication of the — I mean, impact of destoning, but suffice to say, Gerhard, that we just finished construction. We’re busy with start-up activities. So that’s where we are, so which means the prevailing coal quality challenges and gasifier are still there.

So we don’t want to delay Victor on that, but I’m sure Victor will confirm that. Let’s start with you first. Let’s deal with the Mozambique, I mean, impairment.

Walt P. Bruns: Yes. So thanks, Chris. I think — so as you rightly point out, the volumes did come down in total on the PSA. I still see — we see a ramp-up going into at least FY ’26. The biggest reason for the impairment was actually just to the change in the WACC rate in Mozambique and linked to a country risk premium that’s independently calculated. We use a professional services firm to calculate that for us. The WACC rate for Mozambique is now north of 18% or around 18%, which does put pressure on that project. But we continue to look for ways to further optimize and increase the NPV. I think just on PT5-C there, we also — as Simon alluded to, we also booked an impairment on that. We’ve just paused exploration activities there for now.

And so it’s not that we’re walking away from that project, but we’re just looking at other opportunities to look at how we allocate the capital and the risk associated, but how do we share in that — some of that risk and the benefit.

Victor Bester: All right. Maybe I’ll start off with CapEx. I think Simon kind of spoke to elements of our capital excellence program. And I think what I want to highlight is the benefits we are seeing on the CapEx portfolio, Gerhard, is really linked to a deliberate program of capital excellence, consisting of quite a few value levers that we’ve deployed and employed in the business in an integrated way. I think, key levers here is really to examine scope and to look for minimum technical solutions. And then, of course, to look for construction efficiencies. This is a program that we kicked off probably 2 years ago, just over 2 years. And we’re starting to see the benefits roll out as we embed the program. In terms of future years, we don’t plan CapEx on a 1-year basis.

We plan CapEx on a rolling capital plan. And the benefits you are seeing are reflected in our rolling capital plan all the way up to 2030. And we continuously review our rolling capital plan twice annually to make sure that it’s stood in line with our plans, and it’s reflective of the risk levels that we want to manage. So it’s a deliberate effort on the part of making sure that capital is efficiently and effectively deployed, and we manage capital within our affordability limits. Then I think when it comes to the volume guidance, I think a Secunda phase shutdown has an impact of about 100 kilotonnes. I think we will see that benefit due to the no shutdown. And I think this came about because we also improved our maintenance strategies for the Secunda facility, where a few years back, we moved from a 4-year turnaround cycle in Secunda to a 5- year cycle, which gives us the benefit of not having a Secunda turnaround in this particular financial year.

Regarding the destoning plant, it will be a slow ramp-up. And what we will see is we will see, as I stated in CMD, an increase in yield, right? But I also indicated that, that goes with a recovery in gasifier availability, which will then be the multiplier in terms of our production volumes. And that’s how we’ve picked it. I think the range that we’ve guided is the same range that we’ve guided during CMD. Moving on to Chris, your question about gas. I think the first thing to state is we’ve achieved ready-for-commissioning on the PSA project, particularly the integrated processing facility. That was achieved in June of this year. We’re busy with commissioning activities on the IPF, and we hope to have beneficial operation of the IPF by the end of this year.

Unfortunately, the CTT is delayed. It’s significantly delayed due to various reasons, I think some of which you may know, a few storms that occurred during the construction time of the CTT, which damaged some equipment. And then, of course, lately, I think challenges with the engineering contractor and having to basically go out on a request for new engineering services from a different engineering contractor. That’s going to require us to basically reassess the balance of scope with a new engineering contractor, estimating what’s required for the work to be done, and that has caused some delays with the CTT. Despite that, our view is to work with our partners in Mozambique to continue operating the IPF, and we’ll find commercial means in which we could enable that gas to flow.

More importantly for Mozambique is really to deliver on the LPG requirements and the condensate that’s required for Mozambique.

Tiffany Sydow: Thank you, Victor. I’m going to switch to some online questions on mostly the financial performance. One question received from — I’ll take — I’ll just voice over 2 questions at a time. From [ Thabo at The Fund ]. Good to note the free cash flow has improved, but how sustainable is the capital spend? And how does it compare to the commitments made at CMD? I think that part was already addressed. But a follow-on to that, given the discrepancy between depreciation and CapEx spend brought by historical impairments, how — does it mean that Sasol is paying more tax than it would have been before? A couple more follow-ons on — from Sashank Lanka at Bank of America. The capital questions, I think, have been addressed already. Follow-on is how are cost savings so far tracking versus your ultimate ’28 guidance? I’ll pause there, Walt, for you.

Walt P. Bruns: Okay, cool. Thank you. I think in terms — so I’ll start with the first one, just how does it impact on our capital commitments made at CMD. So we haven’t changed the ranges that we communicated at CMD. So to Gerard’s point we’ve got the ZAR 24 billion to ZAR 26 billion. We’ve got the absence of the shutdown, but we do have some capital, especially there were some deferrals or delays in Mozambique that because of the political unrest that we saw towards the end of the calendar year. So we’re comfortable with that. The CapEx increases towards the further again when we have then obviously the phase shutdown. But we also have to plan to spend some more money on feedstock, more in the coal space, to be honest, to make sure that we have sufficient coal reserves to support the lower for longer and the higher Secunda volumes.

In terms of the effective tax rate, yes, our effective tax rate is higher this year. It’s closer to the 37%. There are some deductions that were not permissible from a tax point of view, including some derecognition of deferred tax assets, particularly in Italy following the impairments. So we are paying maybe slightly more tax, but we look to see how we optimize that, obviously, across our different jurisdictions from that perspective. Then just in terms of the cost savings, I think, overall, our cash fixed cost, obviously, we guided that we would come in below inflation, which we’ve calculated as a blended average of 3%, we ended up at 1%. Total costs were a little bit higher on the variable cost side, but more because we had to buy in more coal from a mining purchases perspective.

That was a decision we made in the second half of this financial year just to support the blend in terms of the coal quality and to support Secunda production. We do see purchases going down in FY ’26, I think, kind of guiding around the 4 million to 6 million tonnes for coal purchases.

Tiffany Sydow: Thank you. If I could move to Chorus Call, there are 2 questions — 2 callers queued. Operator, you may proceed.

Q&A Session

Operator: The first question we have is from Adrian Hammond of SBG.

Adrian Spencer Hammond: I got a couple of questions for each of you. Simon, firstly, there’s some unplanned outages relating to Eskom and the business in the past 6 months, how do you think about these risks going forward? And do you factor that into your forecast? And also, what should we think about coal purchases going forward? And then for Walt, any ideas on what you intend doing with the ZAR 4 billion from Transnet specifically? Do you intend doing further bond issuances? And are there any risks if you’re not sure if — on the business risk situation [indiscernible]? What are your options there? And then for Antje, perhaps you can just give us your view on the outlook for the chemicals basket.

Tiffany Sydow: Sorry, Adrian. We struggled with the last part of your question. Can you repeat that, please?

Simon Baloyi: Antje, the view on the chemical prices…

Tiffany Sydow: Basket prices. Okay.

Simon Baloyi: Yes, basket. Yes.

Tiffany Sydow: If we could take the next caller as well.

Operator: The next question we have is from Gustavo Campos of Jefferies.

Gustavo Campos: Congrats on the results. Yes, a few questions from my side. I think, first, if you could please elaborate on how you’re planning to unpack your debt reduction? What parts of the capital structure would you prioritize reduction first? And if — sorry, if I understood correctly, I think you mentioned you issued a local bond. What were the use of proceeds of these bonds? If you could elaborate on that, that would be very helpful as well. And then my second question is if you would have an estimate of your oil breakeven estimates after your hedging program. That would be very helpful as well. Do I understand correctly that your oil breakeven $55 to $60 per barrel is before your hedging strategy? Is that correct? Yes, those are my questions.

Tiffany Sydow: Thank you, Gustavo. And Adrian, Walt, perhaps if I could ask that you address the financial questions first.

Walt P. Bruns: Yes, sure. There are a few in there. So I think the first one in terms of the Natref business rescue for PRAX, I think, obviously, we were informed in July about the fact that the parent company was put into administration. Currently, Natref is the local shareholder, which is PRAX South Africa, is continuing to operate, and we are supporting them and their funder group to make sure that they can continue to operate and — but we’ll continue to monitor the situation closely with regards to Natref itself. On the debt reduction plan, I think, our focus is very much around the deleveraging. So you would have seen in the capital allocation, we have the maintained capital, the first portion, which is about ZAR 24 billion to ZAR 26 billion that we’ve guided on.

Included is around ZAR 1 billion for selective growth and transform. So that’s to help with some of the high-return projects. But any excess cash at the moment, we are using to deleverage that balance sheet and just make sure that we can get to that USD 3 billion target as quickly and as soon as possible. And so you would have seen that, as I mentioned in the call, we put almost ZAR 13 billion into the RCF in FY ’25. The proceeds from Transnet, we got on the 30th of June. So those have gone in, in July into the RCF, and we’ll continue to put cash in there to use that to help with some of the upcoming bond maturities. It gives us flexibility. Right now the debt market, the cost of financing for those U.S. bonds would be between 9% and 10%, which is high.

So if we can avoid that and use our cash to help reduce the gross debt number and improve our net debt position, that we’ll do that. I think on the estimate of the oil breakeven, so we achieved $59 a barrel this year in our South African business. And for those of you who haven’t had a chance to see, we’ve also included some more details in the analyst book as to how we calculate that. So I think we took the feedback that we got at CMD just to make that a bit more transparent and to just simplify that calculation. I will say the Transnet did benefit us. I’m not going to sit here today and say that it didn’t. That added around $4 a barrel to the breakeven. So that’s $63 excluding the Transnet. But notwithstanding that, as I mentioned in the speech, our free cash flow was more than 30% up if you normalize for the Transnet.

So we’ll take that benefit. It’s a combination of many years of work with the 2 companies and with remediation to get this result. So we’re very pleased with that. And then on the hedging program, I just need to double check the exact number in terms of how that the estimate changes with regards to the breakeven on the hedging. I’ve got it written down somewhere here, but I just can’t find it right now. So I’ll find that for you, and we can come back to you, Gustavo, on that.

Simon Baloyi: Yes. Thank you, Adrian. Let me start on the outages, then Antje will answer the chemical basket. And Hermann, I mean I’ll start a bit on the coal, and you can expand on that. On the outages that we faced, Adrian, during the year 1 always does an assessment where are you are having a systematic issue or once-off, so we’ve done the root causes of all the major incidents that we faced, whereas the natural fire or other incidents that faced us. And we’ve come to the conclusion that they are not systematic. I mean most of these are once-off. So what’s key for us is to implement the lessons learned from those incidents. But not only those incidents, we will actually, I mean, take almost a walk in memory lane and just go backwards and look at the major incidences that our operations have faced to just make sure that those lessons learned are embedded by the teams.

So we’re confident that, yes, we can mitigate, I mean, those outages. Coal purchases usually, I mean, it’s in 2 forms. We always have to see it like that. There’s coal that we buy because of, I mean, our own productivity challenges or our own decisions to mine better quality sections. There’s also a contract that was a long-standing contract with Anglo and then it became Isibonelo, which was a long-term contract, which is about — I mean, for now, almost, I mean, half the coal, we will buy through that contract and half was for productivity, I mean, challenges that we are facing. So what we will do, the long-term contract will always remain. So that portion of coal, we might move from, I mean, Isibonelo to someone else. But let me allow Hermann to expand on coal purchases, give a comprehensive view and what we really think about it.

Hermann Wenhold: Good. Thank you, Simon. When we think about coal purchases, we always think about the triangle between quality — coal quality, coal volume and then the competitiveness of the cost of coal — of the price that we send through to Secunda operations. So in the last quarter or so, we communicated that we shut down certain sections due to quality, and we increased purchases for that specific reason. Now with the — with us going to commission the destoning plant in this 6-month period, we will start redeploying those sections that we shut down. We’ll redeploy them slowly, but surely in a phased way as the destoning plant is commissioned in the 6 months to ensure that we get to the commitment of 12% sinks that we supply through to the factory.

So we will always primarily check that we supply the right quality of coal to Secunda operations, and we are phasing in more of our own production capacity. We’ve also made good progress with the implementation of our improvements as it relates to increasing our drilling, increasing our stonework capacity, improving on the maintenance of our machines and increasing additional infrastructure that we established. But I would like to just remind that as communicated with the Capital Markets Day, that will be 2 to 3 years before we reap the full benefit of that. Then when we decide what we need to purchase, how many coal we need to purchase, up to now, it was primarily for the last quarter or a bit more based on quality. As we phase in our destoning plant, we believe we will primarily buy, if required, for volume purposes, which then should reduce as we start up more sections.

We are also busy creating that flexibility through the improvements, and we are also ensuring that we can have more capacity, 2 or 3 sections more capacity so that we can reduce the purchases. The final decision for the volume that we are going to buy in will revolve around the competitiveness of coal. If we can purchase coal from selected sources at cheaper rates that we can mine that from our most expensive sources, that will determine the decision that we take regarding the purchases of coal.

Tiffany Sydow: We’ll move to Chorus Call in a minute. If before we hand over to Antje, there is another follow-up question relating to the same topic, if I may add. From Sashank Lanka at Bank of America. Your chemicals EBITDA guidance for the international chemicals is assuming which recovery or what kind of recovery in prices. I think that speaks to the view on the basket price as well. Please, Antje.

Antje G M Gerber: Sashank, for your questions. So the chemical basket price last year has shown an increase due to higher ethylene margin, which we particularly benefited from in the U.S. and also the higher palm kernel oil prices. So all categories in International Chemicals saw higher prices in the market. Only alkylates were — had lower prices seen because of lower kerosene prices. When we did the budget, though, for ’26, we stuck with some assumptions, which showed lower ethylene margin and also lower palm kernel oil prices for fiscal year ’26. And please, for us, the key element of improving our EBITDA margin is also the product mix, so value over volume. And therefore, I mean, in those categories, which I’ve mentioned, particularly if you look at alkylates, we have pass-through prices with our customers.

So we need to kind of include as well a shift in our budget or have included a shift in our budget with more resilient product in the differentiated market versus the base chemical market, and also improved customer contracts; plus obviously, a lot of our self-help measures in terms of asset improvement optimization, more reliable assets as well in fiscal year ’26. I mean, with fiscal year ’25, we had an outage from the fire of our East Cracker until November, then there was an unplanned outage of the West Cracker. So we couldn’t even benefit from the higher ethylene prices throughout the entire year. So for this year, we have planned with more reliable assets and also lower feedstock prices.

Tiffany Sydow: Thank you, Antje. There are a few more on the International Chemicals portfolio. I think let’s address those now as well from online. Jesse Armstrong from Fairtree, and a few more from Sashank as well. Your underlying assumption of the ethylene and ethane prices in the U.S. going forward and volume for the U.S. and Eurasia. That’s one theme. I think secondly, also, are you seeing an increase in demand in Europe in this quarter versus previous quarters and the basket price as well. Historically, there was a close link to palm kernel oil prices, but this seems to have diminished somewhat over the last few quarters. If you can comment on that, please?

Simon Baloyi: Yes. Let me start, Tiffany, and Antje can add on. I mean the downturn, I mean, this is a prolonged downturn in the chemical market. We all think you’ll only have very, very gradual and slow recovery up to the 2030s. And Antje and the team, and she allude to that now is more focused on the self-help measures. So what can we do to make sure that we ride through the downturn. I think, Antje with that, you can take the rest of the questions.

Antje G M Gerber: Yes. Thank you, Simon. Absolutely, we do not factor in any recovery of the market geopolitical. We see that trade flows are changing. For Europe, particularly, the entire region remains under pressure. So we have not seen in the last quarter an uptick of demand in our region. That’s — I mean, the better results are also due to a different mix of products. And, if you like, a different marketing access to certain categories. So the link to PKO is still there. We see also linked to coconut oil and other kind of derivatives, but that has not really diminished over the time. But we try to kind of limit our exposure to those raw material swings in all traded products in the market.

Tiffany Sydow: Okay. Thank you, Antje and Simon, I’m going to ask if there are any questions in the room? Can we give the mic back to Gerhard?

Gerhard G. Engelbrecht: When we spoke at CMD, you spoke about another significant cost reduction program in the South African value chain. And at the time, I guess, you said it was still work in progress. I mean, can you maybe give us some more clarity on what the cost items are that you are targeting? Maybe some examples of how you expect to take this cost out? How is it impacting your staff morale? I mean they’ve been through cost reduction programs for many years now. So maybe a little bit of detail around that. And then maybe a question/comment around the questions asked around volume guidance and prices in the international chemical business. There seems to be — there seems to have been quite a change in your disclosure in the last 12 months around production and volumes in many of your businesses, which I think has impacted the understanding of the business, unfortunately.

What is behind this? I mean, maybe just kind of give us an idea of your thinking around disclosing less rather than more.

Tiffany Sydow: Thanks, Gerhard. Walt, if you could address.

Walt P. Bruns: Yes. So let me start on the change in the disclosure. So I think on the international chemicals side, I think, Gerhard, we’ve taken away, yes, volume guidance disclosure. But in its place, we’ve given you EBITDA guidance disclosure and also EBITDA margin disclosure, which we think is of much more benefit right now in terms of what we think the earnings potential is of that business. We have — we will continue to disclose the volumes and the prices as we’ve done before. So we’re not going to take that away, but we are going to show you the trajectory in terms of how we see the EBITDA delivery happening through the period. We may not put Q1 EBITDA and all of that, but we rather just give the guidance. Are we on track to the $450 million, $550 million, but we’ll — we still need to land that internally in terms of how we show that quarterly.

I think the — so I wouldn’t — it’s less disclosure, but more meaningful in terms of understanding the business as we see it. And it talks nicely to — Antje keeps reminding us it’s value over volume, so we’re now singing from the same hymn sheet with regards to that. In terms of the cost reduction program, I think, Victor, you can maybe allude more to it. I mean I think there’s no — I wouldn’t say it’s — there’s one bucket that we’re looking at. I think the biggest component you will probably see in our — we achieved the 1% on cash fixed cost despite having quite lower internal power generation on the utility side. If you remember last year, we actually produced quite a lot of power ourselves. This year, because of the production interruptions that we had, we had to import more power and that came at a quite — I mean, I think the tariffs, you’ll see it in the analyst book, I mean, the Eskom tariffs were up 12%, 14%.

And so getting more back towards own power generation, we’re putting a lot of pressure on solution to get the renewable energies in quicker. Those electrons come as — are value accretive versus the Eskom alternative. And then I think on the external spend, there, Victor kind of alluded to scope and tightening the knot. We maybe don’t need to gold plate everything, I think, is the term that we’re kind of using internally is what is fit for purpose. We have Sasol specs, we have industry specs, somewhere in the middle may be the right answer with regards to that. And then I think on the labor side, you would have seen a 3% reduction in our labor and that’s not — we obviously have made some changes in the operating model, but also putting in vacancy freezes.

There’s a natural attrition that happens, being much more selective on which positions we filled, which ones we don’t need to fill and slowly working through the different organizational structures that will be required. But Victor, maybe do you want to add a little bit more from…

Simon Baloyi: Let me start first, I mean, just to give context. The — when we embarked on our journey for the breakeven, Gerhard, we had to unify the whole Sasol, so all the teams. Because you asked, I mean, what is the morale? So for me, that’s a key question. I mean all our people are excited to be on this journey with us. They all understand, I mean, there’s clarity in terms of what does it mean if you had breakeven of 50. As the Sasol Group, we also — we all see the impairment of the refinery portion, I mean, of the ops, not the whole refinery portion. So we all know, I mean, all the way from feedstock in terms of making sure that we can stop that impairment. So our people are willing and ready and excited to be in this journey with us.

I mean, Victor already touched on one of the key elements. I mean, there’s capital excellence that we started will continue. Capital excellence, under it has supply chain excellence. We actually already started that. This year, most of the gains we got on the supply chain excellence was on avoidance. Vuyo is in the room, he’s leading that. And we’re going to continue. We started with cost avoidance where people were coming to us with massive increases and we were on inflation or below inflation. And going forward, we are even going to look how we do supply chain. I mean, can we do it differently to start seeing a reduction in cost, not just cost containment. So we have that. We started, you remember, I mean, on the 1st of April, when this management team came, we optimized our organization.

We streamlined the first 3 layers of management and then we designed almost optimum structures. And we’re going into those structures. And to achieve that, we’ve frozen vacancies, we allow natural attrition to help us to do that. So I mean — and as you do that way, you keep the momentum, you keep everyone focused on what we’re trying to do on the value. And when we think about labor as well, we think about the total labor effort into our facilities, not just, I mean, 1% the cost. Because if you think in value, I mean, if you look at a typical Sasol facility, I mean, if you count everyone who’s there, there’s much, much, much more people. And if you think from a value — total labor value input, you can start optimizing it by looking at your scope and how you do work and how you approach it.

So we have this. Victor is leading that. And Victor, I can allow you, I mean, if you want to give, I mean, any closing comments on that.

Victor Bester: No, thank you, Simon. Walt, I think, had sufficiently covered. I think the only thing I would add, though, is I think Gerhard, you spoke about staff morale. And here, we do measure. We measure on a quarterly basis, what we call our pulse survey. And our most recent engagement survey delivered quite promising results, confirming that our employee base is fully engaged in supporting the transformation program that we’ve embarked upon. Then I would guess it’s really about the mindset. I think when it comes to innovation, it’s continuous, it’s perpetual. And we have primed our organization to view our transformation program from an innovation point of view, continuous improvement point of view. And I think that kind of shows in our engagement survey results. I’ll stop there. Back to you, Simon.

Tiffany Sydow: Thank you. If I could switch to Chorus Call. There’s one question queued.

Operator: We have a question from Alex Comer of JPMorgan.

Alex Robert John Comer: Yes. Just a couple of questions, if I may. When I look at the write-downs of Secunda, I mean, you talk about volumes going 7 million tonnes in 2030 and 6.4 million tonnes in ’34. So obviously, we got to above 7.4 million tonnes in ’28 and then we come down to 7 million tonnes and then we go to 6.4 million tonnes. I just wondered, is there any forecast in that — in your model beyond 2034, just what volumes do in 2040, for instance? And then just when I look at the sensitivities you’ve given to oil and refined products, the sensitivity to oil has gone up from $35 million to $40 million per $1 move. But I’m slightly perplexed that sensitivity to refined products has actually gone down in terms of the gearing per 1 barrel move when you’re talking about volumes going up both at Secunda or Synfuels and at Natref. I would have thought if volumes go up, sensitivity to EBIT to refined margins go up. I’m just wondering what I’m missing there.

Tiffany Sydow: Thank you Alex. Are there any more calls on — queued on Chorus Call?

Operator: Yes, so we have a follow-up question from Gustavo Campos of Jefferies.

Gustavo Campos: Yes, just a couple more for me here. I don’t believe I understand when you mentioned on the call, have you already issued a local rand bond? Or is that still like — is that the plan for the next fiscal year 2026? And my other question is, how much of the expected Synfuels production is already hedged for both fiscal year 2026 and fiscal year 2027. How much is that hedged at the moment? Those are my 2 last questions.

Tiffany Sydow: Thank you. If I could ask Walt to start with the financial questions.

Walt P. Bruns: Yes, sure. Thanks. Gustavo, I’ll go. Yes, so we have already issued the ZAR 5.3 million bond. It was a private placement, but it is listed on the Frankfurt Stock Exchange, so we received $300 million in exchange, and it’s a value — you can see it was under Sasol Financing International. The — so that answers that. So that is complete already in July. In terms of the expected SO production already hedged, so it’s effectively around 60% of the SO production. Well, it includes SO and a portion of the ORYX, but the total is about 60% of that. We don’t hedge all of the — as I mentioned in previous calls around the chemical volumes because you can see it this year. I mean, oil prices were down double digits. Chemical basket prices were up 5%, so I know there’s — I get a lot of questions about the correlation between chemical prices and oil prices.

But right now, given the demand-supply dynamics in the chemical market, they’re much more decoupled from the oil prices, so we’re not hedging those volumes itself. On FY ’27, we’ve just opened up that hedging program. The nice thing is we’ve got a mandate from our Audit Committee to hedge full FY ’27. Normally, we kind of do a rolling quarter-by-quarter. They’ve given us a mandate to do the full FY ’27. And we are looking at different kind of instruments because as you can imagine, I mean, oil is currently trading in the mid-60s. We’re trying to target a hedge level around 56 to 57 on a net gross — on a net basis, and so we may not always be able to do it. So you would see in our analyst book, we’ve done some put collar options on that just to start that off in that first quarter.

Do you want me to handle some of the other ones?

Tiffany Sydow: Yes.

Walt P. Bruns: Okay, Cool. I think — so Alex, I think in terms of the SO volumes, you’re right. I mean, I think we see the higher volumes really towards the end of this decade. For the purposes of our impairment, we’ve assumed it goes down to 7 in around FY ’30 and then 6.4, 2035, and kind of stays around that type of level for that period. It’s not a complete like-for-like analysis because there’s also this MRG conversion component, which we can unpack in more detail. But I think that’s kind of the outlook with regards to Secunda volumes. I will say more work needs to be done by us to get the auditors happy around the level of definition with regards to some of our — regards to your question around the cost improvement. So we kind of have this level criteria.

One, it’s level identified; two, it’s defined; three, it’s implemented; four, it’s realized. If you’re not in that kind of defined and starting to realize it, it’s very difficult to bring those in into our payment calculation. So we are targeting to do that now in the second — or second half of this calendar year. But we did see a significant uplift already just from the way we optimize the ERR, the capital spend. And so I know we report [ SUNREF ] and obviously, we’re disappointed to continue to see the impairments, but the oil price assumption was significantly lower than what we had last year. We have that in the financial statements around exactly what assumptions we’ve used. Our nominal price for oil is closer to $74 over the period versus the $84 that we had previously.

And so that does put pressure on that. I think in terms of the sensitivities, yes, the oil price sensitivity has gone up. It’s a combination of, one, the higher volumes, but two, also bringing in there’s an inventory valuation effect that we didn’t necessarily have in our initial sensitivity. So obviously, we have production volumes and then you have the sales. But if you have inventory, you can have the NRV write-down or impact on valuation. So that has impacted on that. I need to just come back to you, Alex, on the refined product question. And let me just — I’m asking the team here just to help me with exactly that.

Tiffany Sydow: Thank you. I’m going to move to the operational questions around our SA operations as the next theme. There are quite a few questions coming through. I’ll maybe just deal with 3 at a time along a similar theme from Jesse Armstrong around mining. The mining production guidance is low despite all the improvements of increased drilling, et cetera, when do you expect to see an increase in mining production? On Destoning, you note it will come online in half 1 ’26, will it be at the end or somewhere in the middle? And then I think on the Secunda operations gasifier refurbishments, where can you provide an update on that in terms of the average number online versus average downtime? I think another comment and question from David Fraser from Peregrine Capital. Great time to buy short-term coal. However, the current market will not last forever. And will you look for some longer-term supply agreements in future?

Simon Baloyi: Yes. Let me start. I mean, Hermann, you can — I mean, I think, again, cover the coal question. The other ones we can — I mean, cover quickly. Destoning, we’re busy with start-up activities. What we’ll do is that, I mean, we have an opportunity soon with the PSM, so we’ll give the updates there because that will be a perfect chance. We just want to give the teams the opportunity to safely start up that plant. The refurbishment as well, that work is going on as planned. We’ve got, I mean, technical authorities and guys helping us there. We want to talk about the long-term, I mean, average of the gasifiers online. So for us, at least now we used to be — when we started talking to you, we’re in the 60s, I mean, mid-60s.

Now we are consistently, I mean, on averaging 70 so so and going up. So we are on track. Remember, all of this is covered in our guidance. So we are on track with the work that’s happening at gasification. And I’m happy to report that, that refurbishment is actually done in a much more cost-effective manner, so it’s not costing us more money. So we’ve done those 2. And Hermann, maybe cover the mining one in terms of, I mean, how we see the up ramp of volumes. Maybe before he does that, let me cover quickly the purchase of coal. Hermann did cover that sufficiently. We will always, I mean, have to purchase coal for — to replace, I mean, the portion that we got from Isibonelo, and our intention is to make sure that we purchase coal on the long term, and we’re working on that.

I mean we’re working on making sure we sign long-term contracts and negotiations are ongoing.

Hermann Wenhold: I think I’m going to most probably repeat what I said earlier just regarding the mining guidance. It stays a balance between quality, volume and the competitiveness of the price of coal that we supply to Secunda operations. So our guidance is to the lower end as we are phasing in destoning, as Simon also alluded to that now. And we will primarily ensure that we supply quality of 12% zinc to Secunda operations. We are busy with more drilling programs. We’re busy with more stonework programs. We’re busy establishing more infrastructure. That will take time to be established as we create that flexibility because that’s what it’s going to allow us is to have more flexibility to deploy more sections. As we make progress with that, we will increase our internal capacity and then be in a position to supply more coal from own sources, but continuously balance that to ensure that we supply the right quality mix at the most competitive price.

Tiffany Sydow: Thank you. There’s a question from Nick Rogers from Harvard House on the materiality of the KAP-Safripol dispute. Simon, I’m going to ask if you can handle that. And then if we can follow on, there is a question on the chemicals business on how tariffs are impacting potentially our high-value chem exports to the U.S. Is it still viable? And conversely, how does this possibly affect special chemicals demand in both the U.S. and Europe based on the fact that we’re a U.S.-based producer from Jesse Armstrong at Fairtree.

Simon Baloyi: Yes, Jesse, let me start with the tariffs, and I’ll allow Christian, to weigh in more. I’ll just give a high-level overview. I mean, you remember, we produce — for what we sell in the U.S., we produce mainly in the U.S. I mean, with a small amount that comes from the EU. So no major threats on our U.S. business, possibly opportunities that we still have to explore as the market settles down. However, what we do sell to South Africa, we do have a portion, which is exposed to the tariffs and the teams are busy with the mitigations. Maybe Christian, let’s go into that first and…

Christian H. Herrmann: Thank you, Simon. So yes, so we are more or less exporting 10% of our volumes produced in South Africa to the U.S. market. And we are certainly also committed to our U.S. customers; however, that 30% tariff increase is very significant. And we estimate, as we also alluded to at the Capital Markets Day, the impact to be in a range of at least $80 million if we do not mitigate that impact. At the moment, we have several levers at hand that we are applying. Number one, we certainly have to discuss with our customers how to share that burden. Number two, we can also achieve regional swaps. Don’t forget that we are really a global exporter to Europe, to Asia, to the U.S. And number two — number three is we can also think about free trade zones and duty clawbacks if the product is not finally used in the U.S., but for example, then exported to other customers outside of the U.S. And certainly, we also have now more clarity about Annex II, which is the list of the exemptions of products that are exempted for the import or export to the U.S. And certainly, we are also taking care of that.

So at the moment, the mitigation amounts to roughly — the risk is still $60 million. That’s what we are expecting right now, net-net.

Simon Baloyi: Yes. Thank you, Christian. There was, I mean, a question from Nick on the KAP-Safripol. I mean I don’t want to comment on materiality because this is now an ongoing dispute. But only to say we aim to make sure, like we said, as we interface with our customers that we create a win-win situation for both Sasol and the customers. So that’s ongoing discussions. We want to enforce a contract, which is there, and we’ll continue, I mean, defending our rights. I think the materiality will be determined by what is the final ruling of the legal system. So I think we’ll leave it there, but only to give you assurance that Christian is actually working on that, that he has got a clear mandate to make sure that we protect the rights of Sasol, but also, I mean, our customers, it has to be a win-win, and that’s what we’re working on.

Tiffany Sydow: I think before I switch to the room, there’s one last question on CapEx from Sashank, again. Just a follow-up from his previous question. You have CapEx increasing from ’27 onwards versus flat CapEx year-on-year in ’26. Why is that increasing from ’27 onwards? If you could shed some light on that, please?

Walt P. Bruns: It’s just we’re bringing back the Secunda phase shutdown. So in ’26, we don’t have the phase shutdown. And in ’27, we do. So as Simon mentioned and Victor mentioned at CMD, we’ve moved to a 5-year kind of shutdown cycle. So this year, we don’t have a phase shutdown.

Tiffany Sydow: Great. I’m going to take any more questions from the participants in the room. Nothing. Are there any more questions online? I think there’s a follow-up question on — from Jesse Armstrong on the SA cost portion. How much of the possible cost savings from centralization of procurement and other management incentives for the fixed cost control in SA, would you say have been completed as a percentage so far?

Simon Baloyi: If you — I mean, you remember when — at CMD, we gave — I mean, the cost — I mean, our guidance, we set for the whole group we want to save, I mean, around ZAR 10 billion to ZAR 15 billion and with 2/3 of that being in the SA value chain. So I mean, if you ask me how far we are on the journey, we probably — I mean, and this is an estimation between 10% and 30%. So we’re not where we need to be. We’re still, I mean, at the beginning of this journey, but we’re confident that when we reach FY ’28 by what we promised, we will. And the breakeven price will show and indicate as we move in that journey.

Tiffany Sydow: Great. Thank you, Simon. I think one final question from Erica Ive at MetLife. Free cash flow to be applied towards debt reduction, what is the timing of this? We’ve asked — we’ve already addressed.

Simon Baloyi: Yes, we’ve shown that graph, which shows that by ’27, ’28, we should be in that less than $3 billion, so we’ll do it. I mean our free cash flow, we will — I mean, once even when we reach that $3 billion, you’ll then have to then use that flexibility because you don’t want to just take the 70% and invest all of it. It’s what Walt always keeps on talking about discipline. We will be disciplined with the cash. And if we need to further delever, we will do that. But for now, for the next 2 years, 2 years, 2.5 as promised in CMD, our focus is on reducing the risk on our balance sheet, and we’re encouraged by the progress that we’ve seen.

Tiffany Sydow: Great. Just to check with Chorus Call, if there are any more questions or queues online.

Operator: We have no other questions on the call.

Tiffany Sydow: Thank you. Simon, would you like to conclude with any remarks before we wrap up the session?

Simon Baloyi: Yes. No, I will. I mean, for everyone online and those of you who have joined us in the room, we’re very, yes, I mean, thankful. I mean, team Sasol, notwithstanding everything that comes our way, we’ve got a highly motivated team of individuals across the globe who are unified on our CMD promises and targets. And as we always say, for us, it’s absolutely key to focus on the execution of those plans to meet our commitments. And thank you for your continued support.

Tiffany Sydow: Thank you. With that, we’ll wrap up the session. For our in-room participants, we invite you to a cup of coffee and a snack outside — in the outside area after this call is closed. Thank you, everybody. Good day.