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positive energy |
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We celebrated the fifth anniversary of Sasol’s listing on the world’s leading
bourse, the New York Stock Exchange (NYSE), in April 2008. This milestone
provided an opportunity to reflect on our development and performance
since the listing. |
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Several challenges confronted Sasol in this period, notably relating to technology,
project execution and transformation in South Africa. I am impressed by the deep
introspection and substantial and sensible action undertaken by the Sasol group
in response to each of these challenges.
In a world grappling with spiralling energy demand, specifically in emerging
markets, and persistent supply concerns, Sasol’s progress in the last five years has
been gratifying. Advances in our technological lead, built up over more than five
decades, and our strengthening competitive position as a provider of alternative
energy solutions, also refined over many years, have provided a springboard for
the significant opportunities available to the group at home and abroad.
Sasol’s energy businesses, however, are not the full extent of our growth story.
Our chemical businesses have become integral to our strategy and sustainability,
making a record 25% contribution to profit in the year ended 30 June 2008, with
compound annual growth of 37% since the 2004 financial year.
Our safety performance has improved markedly in this time with 394 fewer people
injured in our facilities in 2008, compared with 2004.
We continue to work towards world-class standards of safety, alongside the
many other advances we have made in conducting our business as a responsible
international organisation. Since the NYSE listing we have also made a clear
commitment to reducing our environmental footprint and have pledged publicly
to a greenhouse gas policy that sets out energy efficiency and emissions
reduction targets.
In South Africa, we have contributed meaningfully to the country’s transformation,
both within Sasol and externally. This has included initiatives to advance
employment equity, management diversity and preferential procurement from
black suppliers. The establishment of black economic empowerment (BEE)
partnerships in several of our businesses has been a feature of the last two years,
notably in Sasol Mining, Sasol Gas and Sasol Oil.
Our commitment to reach new frontiers in transformation was exemplified in the
year with the launch of our ground-breaking broad-based BEE transaction at group
level, Sasol Inzalo – a word associated with birth, the creation of life and new
beginnings. Unparalleled in size and reach, several hundred thousand of ordinary |
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| Sasol Inzalo has given ordinary black
South Africans the opportunity to share
in our future growth |
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Our strong cash flows support sustainable
growth throughout the value chain
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2008 dividend increased by 44% to
1 300 cents
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| Sasol Inzalo will result in an effective
10% black ownership in the group |
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| Sasol continues to contribute
significantly to South Africa’s
socioeconomic progress |
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| Achieving strength through diversity is
a cornerstone of our success as a truly
South African company |
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| Our sponsorships aim to support
nation building |
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| Innovation remains Sasol’s calling card |
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| We have committed to ambitious
targets to reduce our impact on
the environment |
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| Many of the group’s achievements
have been the result of prudent
management action |
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| We continue to find inspiration for
excellence in our relationships with
all our stakeholders |
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South Africans were given the opportunity to access Sasol shares at preferential
prices and to benefit in the longer term from Sasol’s local and international growth,
alongside some 24 500 of our South African employees.
In the past five years, we have made considerable advances in our endeavours to
achieve operations excellence across the group. This ongoing initiative has resulted
in notable improvements at many facilities. In the 2008 financial year, record
production rates were reached at our natural gas and crude oil production sites,
several of our chemical plants, as well as higher throughput at the Natref refinery.
I believe it is the energy of Sasol’s people that drives the positive and progressive
contribution that the group is making in many different areas. We have introduced
a number of measures in recent years to offer a more rewarding and caring work
environment and continue to do so to ensure we attract and retain a diverse base
of motivated and talented people. Substantial resources are devoted to training
and employee education with R345 million spent in 2008. |
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Delivering to all our stakeholders |
The financial performance of the Sasol group has been particularly pleasing over
the period since the NYSE listing, with operating profit growing 187% in this time,
a compound annual growth of 24%. In the year ended 30 June 2008, attributable
earnings per share grew 36% to R37,30 and headline earnings per share rose 50%
to R38,09. Higher profits in 2008 were mainly the result of higher product prices,
a weakening in the rand/dollar exchange rate and a strong contribution from our
chemical businesses despite high feedstock costs. Other contributing factors
included the ramp-up of production and profitability at our Oryx gas-to-liquids
(GTL) joint venture and the benefits of the turnaround at Sasol Olefins &
Surfactants beginning to materialise.
Cash flow remained robust, enabling the return of more cash to shareholders
through our share buyback programme, approved by shareholders at the 2007
annual general meeting. The board declared a final dividend of R9,35 for the 2008
year, an increase of 58%. This brings the total cash payment to shareholders for
each share held to R32,00 over the five years since our NYSE debut.
When Sasol listed in New York on 9 April 2003, its opening price was US$10,90
per share. Five years later on 9 April 2008, the value of the company had increased
nearly five-fold to US$52,14 per share, equating to a market capitalisation of
US$33 billion. In this period Sasol’s USA share ownership increased to 25% from
17% in line with the group’s growing internationalisation.
Just as the NYSE listing allowed a broader base of retail investors around the world
to invest in Sasol, so Sasol Inzalo is giving a broader base of South Africans –
including our employees, the black public and selected suppliers, retail franchisees
and trade union investment companies – a chance to share in Sasol’s international
growth. The transaction, which involves the issue of 63,1 million shares valued
at R24 billion, will result in effective black ownership of 10% of Sasol.
Sasol Inzalo has been widely hailed as a model for broad-based BEE as it will deliver
meaningful long-term benefits to black South Africans, primarily in the lower
income groups and particularly among women, who took up 47% of the offer.
It will also create a legacy of skills development and capacity building through its
long-term focus on enhancing education in combination with existing initiatives. |
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European Commission fine |
At the beginning of October 2008, the European Union found that members of the
European paraffin wax industry, including Sasol Wax GmbH, had formed a cartel
and violated anti-trust laws, and a fine of €318,2 million was imposed on Sasol
Wax GmbH. An appeal against this finding is being considered. The European
Commission found that an infringement of competition law began in 1992 or even
earlier. In 1995, Sasol became a co-shareholder in an existing wax business located
in Hamburg, Germany. In July 2002, Sasol acquired the remaining shares in the
joint venture and became the sole shareholder of the business.
Sasol was totally unaware of these activities. When we became aware of them
in 2005, they were immediately stopped.
We regret that this has occurred in one of Sasol’s subsidiaries and that our due
diligence and compliance programmes failed to identify this anti-competitive
behaviour when we acquired the business 13 years ago and thereafter. We have
rigorous compliance programmes relating to competition law. |
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Supporting South African development |
South African businesses faced numerous domestic challenges during the past
year. These included soaring raw material costs, interest rate increases and Eskom
electric power cutbacks.
National demand for electricity outstripped available supply early in 2008, leading
to rolling blackouts. That the country got into this position is unacceptable given
that the looming shortfall had been widely predicted in the face of accelerating
economic growth. Recent remedial action by government and the national power
utility, Eskom, to rectify the imbalance by stabilising generating capacity and
encouraging a culture of energy saving is bearing fruit and is commended. For its
part, Sasol is contributing constructively by reducing energy consumption through
energy efficiency improvements. In the longer term, natural gas supplies from
Mozambique will be utilised to generate more power at our Secunda site,
substantially reducing Sasol’s offtake of Eskom power.
The change in leadership of the ruling ANC alliance in late 2007 has brought
about an increase in political tension ahead of the country’s next general
elections, due in April 2009. We trust that statesmanship and disciplined
leadership will prevail in the lead up to the new dispensation. This is essential if
the country is to preserve and attract the levels of investment required from local
and foreign institutions to drive growth as well as accelerate job creation and poverty alleviation. In this regard, regional stability is also desirable. The political
conflict and economic insecurity in Zimbabwe has long reached crisis proportions
and must be resolved decisively.
As a truly South African company, we recognise the strength in diversity and
the need to enhance it for the long-term sustainability of the group. It was with
sadness that we witnessed the xenophobic violence towards foreigners in
South Africa in May 2008. Amid the appalling hostility, I took comfort from
the prompt and generous response by Sasol’s people, in their individual capacities,
donating clothing and food to those displaced by the unrest. Sasol also contributed
R1 million towards alleviating the plight of those affected. It is imperative that
the underlying socioeconomic ills which gave rise to the violence be identified
and adequately addressed.
High levels of crime remain one of the main challenges confronting our country.
We are anxious to see greater progress not only in policing but in bringing criminals
to justice. Through our participation in Business Against Crime, we aim to
consolidate the skills and resources business can offer to intensify the fight against
crime. We are also working to strengthen community policing forums, particularly
in Sasolburg and Secunda. Our corporate social investment team has put a number
of programmes in place to support the most vulnerable in society, particularly
women and children, in dealing with the effects of crime. A programme that assists
victims of abuse in accessing the criminal justice system is being supported. We are
also providing our support to government to ensure that the precepts of our
constitution become meaningful to more South Africans. This is necessary
as the respect for basic human rights continues to be flouted in many communities
despite South Africa having one of the world’s most respected constitutions.
Sasol has several national sponsorships in support of nation building. Our
sponsorship of South Africa’s national rugby team probably has the highest profile.
It was with great pride therefore that we watched the Springboks lifting the
William Webb Ellis Trophy to win the Rugby World Cup for the second time since
our return to international competition. The victory in France in October 2007
was a major achievement for the team and the country, which united our people
beyond culture and background, bridging divides and building national spirit.
My congratulations go to the coaching staff, the national team and all those
who played a part in this notable achievement. |
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Extending our record of innovation |
Sasol has, over the years, made major advances in developing its technology and
proving its ability to build and operate large-scale plants, not only in South Africa
but also in remote international locations. As a matter of course, these projects
have involved overcoming complex technological and engineering challenges. Prime
examples include our cleaner fuels and polymers expansion initiative, Project Turbo,
with its extensive scope of work; the development of the world’s first commercial
GTL plant outside South Africa, Oryx GTL in Qatar; and the Arya Sasol Polymers
project in the Middle East. These projects will contribute materially to profit growth
in the years ahead.
Sasol continues to record world firsts in its development of new technologies
and in product innovation. The most recent being the international accreditation
of fully synthetic jet fuel, secured in the past year. This is a major step in introducing
a viable alternative transportation fuel into the global energy mix and demonstrating
the potential of our synthetic fuels in a world seeking energy security.
In the past year Sasol advanced the commercialising of its technological advantage.
The feasibility of constructing a coal-to-liquids (CTL) plant in China has progressed
significantly while we explored opportunities for similar projects in India. Plans to
expand our flagship synthetic fuels plant at Secunda are progressing, as is
preparatory work with the South African government on the feasibility of
developing another CTL facility, in the country’s inland region. We also continue
to scour the world for suitable natural gas reserves on which to base additional
GTL facilities.
Environmental considerations have become key to all our activities. We are
committed to upholding international standards and are working to lower our
emissions and improve energy efficiency. As efforts accelerate across the world
for nations to agree a successor to the 1997 Kyoto treaty on climate change,
so Sasol too is working to find tenable solutions to moderate our carbon footprint.
We recognise that our success in developing technological energy innovations is
dependent on substantive advances in our environmental performance. We will
continue to focus on finding practical solutions to reduce the environmental
impacts of our CTL and GTL facilities. |
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Acknowledgements |
Sasol’s ability to comply with the NYSE’s stringent listing obligations has confirmed
our reputation as a world-class company striving to maintain the highest standards
in everything we do. This is particularly true with regard to corporate governance.
In recent years there has been a concerted effort to improve our disclosure and
transparency in reporting to our stakeholders. In recognition of this effort, Sasol
has again been honoured with a number of awards. For the fourth year running,
we were placed first in the 2008 Ernst & Young Excellence in Corporate Reporting
Survey. The Investment Analysts’ Society of Southern Africa also presented Sasol
with the award for Best Chairman’s Statement for the fourth time in the past five
years, as well as for Best Annual Report in our sector. Recently, our annual report
was rated ninth in the world among the top 500 global companies by respected
international agency, ReportWatch. My thanks go to the teams involved in
continually improving our reporting and consistently achieving excellence.
I commend Pat Davies and his executive management team for raising the bar
once again in the past year. I appreciate the courage and consistency with which
they continue to fulfil their mandate to harness opportunities and deliver on
Sasol’s strategy in a volatile world. Although favourable macroeconomic conditions
have played a part in the group’s success in recent years, many of the group’s
achievements have been the result of prudent management action.
I extend my appreciation to the non-executive directors of the board for their
depth of knowledge and wise counsel. Sam Montsi retired as an independent
non-executive director in August 2008. On behalf of the board, I offer our thanks
to Sam for his contribution to the board and many of our board committees over
11 years and wish him well.
I recognise that Sasol’s accomplishments over the last five years could not have
been attained without the dedication of our employees. I thank you for your
focus, dedication and hard work. In increasingly difficult economic conditions,
our customers worldwide remain supportive and for that we are grateful. I would
also like to note my appreciation for the role played by our suppliers and business
partners, as well as the trust shown in Sasol by the governments with whom
we engage.
In closing my last statement, I wish to record the immense pride and humble
appreciation I feel at having been given the opportunity to contribute to the
development of the exceptional South African growth story that is Sasol.
I congratulate Hixonia Nyasulu on her appointment as chairman and wish her
well in providing leadership to the Sasol board in the years ahead. I shall watch
Sasol’s progress with keen interest and unwavering support. |
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Pieter Cox
Chairman |
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In June 2008, Sasol Limited held a board meeting in Beijing to show its support for and commitment to Sasol’s CTL growth ambitions in China. |
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