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| Chairman’s statement | ||
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| Tight supply in energy market continues | |||
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| Sustaining our financial performance | |||
 The global economy grew by 5,2% in the past year, extending the
strongest economic cycle in recent times. In large part due to
China’s and India’s rapid industrialisation, robust global demand has
continued to support commodity prices, including energy. Spurred
by strong demand and supply concerns, dated Brent crude oil prices
averaged US$63,88 a barrel in the year under review, ending
2% up on the prior year.In South Africa, economic growth remained strong. Fixed investment accelerated sharply and consumer spending remained firm despite rising interest rates. This helped the country achieve its longest period of growth in recent history. The South African rand weakened in the year, depreciating by over 12% against the US dollar. Together with high product prices, these factors helped Sasol to another year of record financial results. Turnover of R98 127 million was 19% higher than the R82 395 million recorded in the prior year, and we lifted operating profit by 49% to R25 621 million from R17 212 million. This reflects the effects of the reincorporation in continuing operations in the income statement of Sasol Olefins & Surfactants (O&S), following our decision in March 2007 to halt the planned divestiture. Excluding Sasol O&S, operating profit was 18% higher than the prior year – a more accurate reflection of our profitability. It is pleasing to note that Sasol’s compound annual growth rate in operating profit since 2004 has amounted to an impressive 41%. Notwithstanding capital expenditure of around R12 billion for the year, made up of capital to fund growth of R7 billion and capital to sustain and enhance existing operations of R5 billion, our return on equity for the year was 29,8%, as compared to 21,6% the year before. These strong results were achieved despite two planned maintenance shutdowns at Sasol Synfuels, which also affected some of our other businesses, reducing offtake for Sasol Mining and output of certain of our downstream chemical facilities. Sasol continued to deliver significant economic value as a mainstay of the South African economy, making a direct and indirect contribution of about R55 billion, or 3% of South Africa’s annual GDP in the last year. By supplying 37% of the country’s fuel needs through Sasol Synfuels and our share in the Natref refinery, as well as producing many of the basic chemical building blocks required in a range of industries, we saved the country some R30 billion in foreign exchange. Our contribution to the continent’s economic progress also continues to grow as we expand our investments in other African countries, primarily our natural gas expansion project in Mozambique, our new gas-to-liquids (GTL) partnership in Nigeria and accelerating exploration and development activities in other African countries. Our plans to expand the synthetic fuels capacity at Secunda by 20% over the next nine years will augment this economic value added. Similarly, we are proceeding with a pre-feasibility study into a greenfields coal-to-liquids (CTL) facility in partnership with the South African Government, known as Project Mafutha. The prefeasibility study is expected to be completed during 2008. We note government’s aim to provide clarity and a firm basis for the success of growth projects such as Project Mafutha, which could help to sustainably address our country’s energy needs while affording Sasol and our stakeholders a promising investment opportunity. In July 2007 the National Treasury announced that it would not proceed with a windfall tax on the profits earned by synthetic fuels producers. We appreciate the constructive way in which this decision was made, which resulted in a win-win outcome for all, and we find government’s vision for the growth of the synthetic fuels sector to be highly encouraging. |
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| “Our goal is to operate with zero safety incidents and we are determined to achieve this by entrenching a shift in safety attitudes and behaviours.” | |||
| Entrenching a safety culture | |||
| As one of our six shared values at Sasol, we continue to give top
priority to improving our safety performance. In the year our key
safety measure, the internationally applied recordable case rate
(RCR)*, improved to 0,75 from 0,93 in the prior year. This was
achieved as we broadened the RCR definition to include not only
staff but also service providers working on our sites, as well as
occupational illnesses. The 2006 results have been restated to reflect
this change and to provide a fair comparison with 2007. Our target
remains a RCR of 0,5, considered in line with global best practice,
moving lower to 0,3 by 2015. While the concerted effort made across the group to continue the positive trend in overall safety performance is commendable, it is with deep regret that we report four fatalities. I extend my personal sympathy to the families, friends and colleagues of Isiaha Modise, Johan Wilken, Jozeph Mahlangu and Uwe Cloos who lost their lives in Sasol’s service in the last year. We want to ensure that everyone who works at Sasol’s offices and production facilities around the world gets home safely at the end of every shift and workday. Our aim is to operate with zero safety incidents. |
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| Reducing our environmental footprint | |||
| In the past year global understanding and awareness of the impact
of greenhouse gas (GHG) emissions on our climate has grown
significantly. We recognise that human activity is contributing to
climate change, which places a specific responsibility on us to pursue
ways of reducing our impact on the environment. Sasol Nitro’s GHG abatement programme, announced in July 2007, is the first project of its kind to be registered in South Africa under the Clean Development Mechanism of the Kyoto Protocol. This project is anticipated to reduce nitrous oxide emissions by an amount equivalent to around one million tons of carbon dioxide per year. This project is a first step in demonstrating our ability to apply innovative technologies to shrink our carbon footprint, among other initiatives in development that include investigating carbon capture and storage. In particular, we believe CTL plants lend themselves to this technique as they make it possible to capture the carbon dioxide produced as a by-product of the coal conversion process. We also continue to investigate and promote the production of fuel from renewable energy and raw material sources, such as the gasification of biomass. We are committed to achieving at least a 10% reduction in GHG emissions per ton of product, off a 2005 base, by July 2015. We have also undertaken to reduce the emissions of certain volatile organic compounds by at least 50%, on the 2005 baseline, by July 2015. Sasol is a signatory to the South African Government’s Energy Efficiency Accord. In the period under review we submitted our first annual performance report to the authorities. Under this accord we are committed to reducing energy consumption per unit produced by 15% by 2015, with 2000 as the base year. In Europe, we have set up a team to manage compliance with the extensive requirements of the European Union’s regulations on the Registration, Evaluation and Authorisation of Chemicals (REACH). |
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| Developing and empowering our people | |||
| Guided by our shared value of “winning with people”, we have
accelerated our investments in focused skills development and talent
management initiatives. We know that to build sustainable capacity
and win with people, we need to strengthen our organisational culture.
We want to make sure that Sasol is a fulfilling place to build a career;
that it is recognised as an empowering environment where shared values
bind us, and the efforts of all employees make a real contribution to
realising challenging strategic ambitions. Our Enterprise initiative is a wide-reaching culture change programme that aims to embed a values-driven leadership style across the group, and evolve an ethos suitable for success in today’s business environment. This is one of our most important group initiatives. It challenges us to change our behaviour as leaders and evolve our leadership style to give everyday meaning to our values. I am pleased to note the positive change already evident among Sasol’s top management and the higher awareness of how important values-driven leadership is to Sasol’s future. The shifting demands on leaders in rapidly changing operating environments will mean that this initiative will require ongoing focus. Like many other businesses and institutions worldwide, Sasol faces a shortage of skills. This is particularly acute in South Africa in part due to the skills required to deliver the country’s extensive infrastructure development programme. With skills development of particular importance to the country in achieving higher growth rates, it is worth noting that Sasol has increased learnership and apprentice training twofold since 2004. Further, our comprehensive skills development programme, Project TalentGro, is a multi-pronged approach aimed at improving our internal skills development capability as well as contributing to external skills development initiatives, in partnership with government and other employers. In the year we set up a new division to manage the recruitment and training requirements associated with the accelerated roll-out of initiatives to support our expansion projects. We invested in excess of R84 million in training and development, with more than 25 000 employees undergoing some form of training over the period. In addition to our normal training allotment in the year, we allocated R140 million to an industry-wide artisan training scheme that will enable 830 entry-level learners to qualify as artisans over three years. Another initiative to enhance South Africa’s technical competence is our investment of almost R250 million over the next eight years into teaching and research capacity in chemistry and chemical engineering at selected South African universities. This forms part of our ongoing collaboration with higher education institutions to build national competence in these fields. A major risk to building sustainable capacity is health-related risk, including HIV/Aids. It is pleasing to report that our SHARP initiative, designed in collaboration with relevant stakeholders to respond comprehensively to HIV/Aids, achieved one of the highest uptakes for voluntary counselling and testing in South Africa. By year end, 80% of our employees in South Africa had undergone voluntary testing. To date, 7% of our South African employees have tested HIV-positive, well below our estimated actuarial prevalence rate of 19%. All permanent employees in South Africa were provided with access to medical aid in the year. With all employees having access to health insurance, we were able to move away from providing on-site treatment, giving employees greater choice in health services. We are extending our HIV/Aids services to include on-site service providers, as well as Sasol franchisees. |
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