Measuring the delivery of our strategy
We have defined a number of targets to measure our performance. We continually monitor our performance against these targets and when necessary, revise them to take into account changes in the strategic outlook. Our targets are aligned to the strategic targets and are employed across the Group. They encompass both financial and non-financial indicators as well as quantitative and qualitative factors.
SUSTAINING BUSINESS OPERATIONS
Nothing matters more than everyone returning home safely and, as such, improving safety in our operations is of the utmost importance and we remain focused on further improving our safety performance across the business, the group recordable case rate (RCR) has improved to 0,27 from 0,28, our lowest level yet, however regrettably four fatalities during the year.
With the introduction of revised B-BBEE codes in 2015, Sasol’s contributor status re-rated from level 4 to level 8 in April 2016. Since then we launched a number of initiatives to improve this, aiming to achieve at least level 4 by 2020. By September 2017, we had moved up to level 6.
MANAGING OUR ENVIRONMENTAL MATTERS
Total energy used*
Sasol is committed to responding to our climate change risks, including promoting energy efficiency within our operations. The Sasol Group Energy Intensity index (EIi) improved from the 2015 baseline by 6,03% against our internal target of 3% (1% per year). Our South African Operation’s EIi for FY18 is 6,62% and has essentially remained unchanged from the previous year mainly due to unplanned electricity supply outages resulting in frequent plant interruptions at our South African operations.
Total water use
One of the focus areas of the CEO Water Mandate is to assist companies in contributing to Goal 6 of the 2030 SDGs. The SDGs are incorporated in Sasol’s strategy, Sasol is committed to improving our water use efficiency and pollution prevention initiatives whilst partnering with host governments to resolve water related challenges.
We generated 338kt of hazardous waste, down from 348kt in 2017. The decrease is mainly due to lower solar pond effluent disposal at Natref and waste reduction initiatives at Sasolburg Operations. We generated 257kt of non-hazardous waste, up from 154kt in 2017. The increase is mainly due to improved waste reporting at Secunda Synfuels Operations, the inclusion of an additional waste stream as well as increased production at Sasolburg Operations.
GHG intensity (CO2 equivalent/ton product - external sale)*
Our GHG emission intensity (tons CO2e per ton of product – external sale) increased to 3,78 in 2018 from 3,66 in 2017, due to the decrease in external sales as a result of external electrical infrastructure failure.
GROWING AND DEVELOPING OUR PEOPLE
To secure and develop a pipeline of future talent, we continued awarding bursaries to top performing undergraduate and postgraduate students globally. During 2018, the size of our corporate bursary pool# reduced to 462 from 473 in 2017. As a result, our 2018 investment in the bursary scheme was R50,5 million.
Gender diversity (%)
Enhancing diversity and inclusion remains essential and forms part of our strategic priorities. We achieved our targets under our 10-Point Plan which provides a set of quantitative measures designed to enable the achievement of our diversity objectives, including the recruitment, development and retention of candidates from underrepresented groups, as well as measures to enhance gender equity.
FINANCIAL RISK AND BALANCE SHEET MANAGEMENT
Return on invested capital
All new growth-related capital projects are required to provide a return exceeding our investment WACC. In South Africa, our investment WACC is 13,5%. In the US, our investment WACC is 8,0%. In 2018, we did not achieve our target. This was mainly due to the lower earnings after significant impairments, the implementation of the Sasol Khanyisa transaction, and the impact of significant capital investments (LCCP project in the US and PSA project in Mozambique). We expect the return on invested capital ratio to remain under pressure in the short term.
Quality-based earnings growth % (EBIT)
The sharp drop in global oil prices since 2015 negatively impacted earnings. This resulted in us not delivering on our target. The impact of the macroeconomic environment was, however, partially mitigated by our Business Performance Enhancement Programme and Response Plan initiatives. Sasol’s cash generative foundation business and growth prospects should enable us to achieve sustainable compound US dollar earnings growth of 8% per annum.
Net debt-to-EBITDA (1,84 times, within threshold) Our target takes into account our capital investment programme as well as our exposure to external market factors such as crude oil prices, commodity chemical prices and exchange rates. We expect our net debt-to-EBITDA to reduce substantially once the LCCP is operational.
10% increase EBITDA in 2018 is due to the notable improvement in Brent crude oil and product prices during the year, partially offset by a stronger exchange rate and lower sales volumes.
Core HEPS decreased 6% mainly as a result of lower sales volumes from production interruptions and higher share-based payments due to the marked improvement in the Sasol share price at year end.
Cash available from operating activities
Cash available from operating activities decreased by 8% in 2018 due to higher finance costs paid on borrowing for our growth projects and an increase in working capital for business growth.
|*||Reasonable level of assurance|
|**||Earnings before Interest tax depreciation and amortisation (EBITDA).|
|***||Production – external sales restated for 2015 due to further refinement in the methodology and alignment with the operating model, reduced from 20 855 kilotons. This has a direct effect on the GHG intensity also restated for 2015|
|#||Excludes Sasol Foundation Inzalo bursaries|