Good morning and good afternoon, ladies and gentlemen, and welcome to the Sasol Interim Financial Results Conference Call. Today's call will be hosted by Stephen Cornell, and Bongani Nqwababa, Joint President and Chief Executive Officers, and Paul Victor, Chief Financial Officer.

Following the formal presentation by Sasol management an interactive Q&A session will take place. A copy of today's slide presentation is available on www.sasol.com. Today's conference is being recorded. I would now like to turn the call over to Stephen Cornell. Please go ahead, sir..

Thank you, operator. Good day everyone, and thank you for joining us for Sasol’s 2017 half-year results presentation. Before we begin, I would like to refer you to the Safe Harbor note on forward-looking statements contained on Slide 2 of the presentation.

Today, we are pleased to be announcing another resilient performance for Sasol, notwithstanding ongoing market volatility. We believe our performance is attributable to the discipline we have displayed in keeping our costs in check, conserving cash and being astute in how we allocate capital.

This is while running reliable, efficient and safe operations and continuing to sharpen our focus on business and capital excellence. Let us now turn to the key messages you’ll hear from Bongani and I today.

Despite continued market volatility during the reporting period, we delivered strong results and progressed the execution of our key capital projects. For the six months to December 2016, we recorded a resilient business performance across most of the Sasol value chain, reflected by notable gains in production volumes across key assets.

We continued to improve our approach to capital allocation in order to drive total shareholder return. Here our goal is to optimize how we allocate capital across the Group to ensure we deliver maximum sustainable value to our shareholders.

As you would know, our near-to medium-term strategy encompasses a largely dual-regional focus on Southern Africa and North America. To this end, we continue to strategically position ourselves to advance our gas-biased growth programs.

This is specifically through the Lake Charles Chemicals Project in North America and the field development plan for the Production Sharing Agreement license area in Mozambique. Both these value-based growth projects are progressing well, and we look forward to them coming on line in the not-too-distant future.

Paul will, of course, go into more detail on our financial and operational performance for the year. After that we will open the session for any questions you may have..

Thank you for that introduction, Steve, and good afternoon; and good day to you whenever you're calling from. Our revised operating model introduced on 1 July 2014, transitioned Sasol from a product-based operating model to one premised on our value chain. Since then, we continue to derive benefits from the new operating model.

This is through streamlined management structures, business processes and systems. You would also be aware that we continue to drive a strong focus on maintaining and enhancing our existing asset base across the world. This has ensured that our foundation businesses are safe and running both reliably and efficiently.

Operations excellence is engrained in how we manage our facilities. Given the unpredictable nature of the current macroeconomic environment, we have taken proactive risk management measures to protect and strengthen our balance sheet.

Here, you may recall that we have entered into hedges against the downside risk in the crude oil price, while not capping upside potential in the price. Furthermore, we will ensure our diverse and integrated portfolio of chemicals and energy businesses remains profitable throughout the cycle.

Looking ahead, and in line with specific attention being paid to refine our long-term strategy, we will continue to identify value based growth opportunities..

Looking at our operational and financial performance for the half-year, our Group safety recordable case rate, excluding illnesses, remained solid at 0.27. We did, however, experience a most unfortunate start to the new financial year as we tragically lost three Sasol colleagues, in two separate incidents.

Overall, Sasol delivered a strong business performance across most of the value chain. Secunda Synfuels’ production volumes increased by 1% and our Eurasian operations increased production volumes by 5%. Normalized sales volumes increased by 11% for our Base Chemicals business and 2% for our Performance Chemicals business.

This was mainly on the back of stronger demand and improved plant stability. Liquid fuels sales volumes decreased by 2% due to the Natref planned shutdown, and more volumes from Secunda Synfuels Operations being allocated to the higher margin yielding chemical businesses.

We continued to drive our cost containment program and managed cash fixed costs well below inflation in nominal terms. Excluding the impact of inflation, our cash fixed costs, including the mining strike costs, reduced by 1% in real terms.

Our strong cost performance was achieved by sustainable delivery of our Business Performance Enhancement Program or BPEP and also the Response Plan. Paul will provide more specific details on these two critical interventions. Over the period, headline earnings per share were down by 38% to ZAR15.12 per share.

Our earnings per share were up 19% to ZAR14.21. Taking into account the current volatile macroeconomic environment, our capital investment plans and the current strength of our balance sheet, the Board declared a gross interim dividend of ZAR4.80 per share..

Let us now unpack our drive to optimize capital allocation across the Group, to ensure we deliver maximum sustainable value to our shareholders. For the period up to 2020, we have a clear focus on Southern Africa and North America. Here the Mozambican PSA and U.S.-based LCCP are the major capital projects being executed.

For the longer-term, we are further refining our strategy. This is to ensure that we have a robust set of principles to drive our future growth and investments, irrespective of the macro-economic environment. We will share our refined long-term strategy with the market later this year.

As part of this work, we will also entrench a robust capital allocation approach. In essence, our goal is to optimize capital allocation, so we are able to generate as much sustainable value for our shareholders as possible. This is a topic that Paul will provide more color on.

We are also driving specific interventions to close the current company valuation gap. Company valuations are influenced by a wide variety of factors. These include the performance of a company, but also the broader macro-economic and socio-political environment.

It is our considered view that Sasol’s current trading multiples, relative to our peers, do not reflect the Company’s intrinsic value. To address this, specific interventions will be implemented. These include sharing the Group’s refined long-term strategy and improving our focus on capital allocation.

In terms of our balance sheet, we maintain a pipeline of opportunities that provide us with strategic flexibility. We also manage our capital portfolio to remain within our capital budget and gearing range..

Turning our attention to North America, overall construction on the LCCP continues on all fronts, with most engineering and procurement activities nearing completion. As of 31 December 2016, capital expenditure amounted to $6 billion.

Overall, project completion was 64%, with start-up of the first units forecasted in the second half of 2018, still on track. The modular approach we are following to build the various plants has ensured that overall construction is progressing well and site utilization has been optimized.

Large lay down areas that can accommodate procured material and equipment have been established and this is positively influencing synchronized workface planning. Fabrication of the modules and piping spool pieces is well advanced, with critical site, civil and concrete work nearing completion. Overall construction progress is now around 25% complete.

This, together with the detailed ongoing assurance processes, results in a high degree of certainty for achieving end-of-job cost and schedule targets. The total forecasted capital cost for the project remains within the approved $11 billion budget.

The project’s contingency, measured against industry norms for this stage of completion is still considered sufficient to effectively complete the project to beneficial operation within the approved budget. As we still have approximately 18-months of construction ahead of us, unplanned event-driven risks may still impact the execution of the project.

We are, however, confident that the remaining execution and business readiness risks can be managed within the approved schedule and budget. We consider the LCCP a value-based investment that will return sustainable value to our shareholders for many years into the future.

The project returns are still forecast to be above the weighted average cost of capital..

In Mozambique, we remain committed to our growth plans. This is despite the current financial challenges the country is facing. We will therefore continue to partner with the Mozambican government, and other institutions, on projects that will help stimulate growth to improve the quality of life of Mozambicans.

Despite these recent challenges, we are confident that the economics to develop the PSA remains positive. We are pleased to report that progress on the PSA development is on track, and within our approved budget and schedule. Four wells were been drilled and completed for the reporting period.

Specifically, we drilled two gas wells in the Temane reservoir and two oil wells in the Inhassoro reservoir. The tests conducted thus far have produced encouraging results. During the course of drilling the second well, we encountered previously unknown accumulations of hydrocarbons within the development and production area.

This indicates the presence of both gas and oil. We have issued a Notice of Discovery to the Mozambican authorities and will continue our evaluation of the data. We expect to complete our 13-well drilling program by the end of next year.

Since 2004, at the time of the initial investment made by Sasol and our partners in Mozambique, over $2 billion has been invested in developing the country’s hydrocarbon industry. This included wells, the Central Processing Facility and pipeline, as well as investments in expansion, sustenance and growth projects.

Phase 1 tranche 1 of the PSA license area development will see Sasol invest a further $1.4 billion. Between 2004 when the gas project first came on stream, and 2016, more than $1 billion was delivered to the government of Mozambique.

This includes corporate taxes, royalties and social investments, as well as profit share and dividends paid out to state-owned entities. During the same period, goods and services to the value of $831 million were procured from Mozambican suppliers.

Our ongoing investment affirms that Mozambique is critical for Sasol’s 2050 strategic focus for Southern Africa, given the importance of securing gas feedstock for our integrated value chain. A related project, Loop Line 2 on the Mozambique-to-Secunda pipeline, reached beneficial operation ahead of schedule in November 2016.

The project came in at a cost of at least 25% lower than estimated, which is a significant achievement. The Loop Line 2 project also delivered a commendable safety recordable case rate of zero. Paul will now take you through the detail of our financial and operational performance. We will then open up the session for questions. Thank you..

Thank you, Steve and Bongani, and good day ladies and gentlemen. It is my pleasure to present our 2017 interim results to you today. Our results are slightly above the mid-point of the earnings range provided in our recent trading statement.

Moving to Slide 11, strong business performances across our global value chain set the base for our resilient results, despite what has been a continuation of global market volatility and uncertainty. The strength of the rand to levels below ZAR13.80 to the U.S.

dollar since November 2016 negatively impacted our half year earnings, and will continue to do so at its current levels. Our continued focus on factors within our control resulted in another stellar cost performance with operational stability and high volumes throughput remaining key deliverables.

Our cost and cash savings initiatives have allowed us to protect the balance sheet and ensure sufficient liquidity headroom as we drive our value based growth strategy. As mentioned by the JCEOs, we are increasing our focus on improving Sasol’s capital allocation principles and processes as a catalyst to enhance higher total shareholder returns.

I will unpack this in greater detail later on in my presentation. Turning to Slide 12, we have seen a steady and continued recovery in global oil and product prices, more especially during the second quarter of the 2017 financial year. Oil prices have moved up to the mid $50 per barrel range, following the December OPEC decision to cut production.

This will positively impact our second half results. Unfortunately, refining margins were down 32% and despite the recovery in margins since November, it still had a significant impact on our earnings.

The latest strength and volatility of the exchange rate had an adverse impact on our half year results and the continued strengthening of the Rand is a concern with regards to earnings performance during the second half of the financial year.

Financial risk mitigation strategies will enable us to continue to protect and strengthen the balance sheet in a strong rand environment. The Sasol business remains highly sensitive to significant movement in the rand/dollar exchange rate and oil prices.

We estimate that a $0.10 change in the annual average rand/dollar exchange rate will affect our profit from global operations by approximately ZAR740 million, while a $1 dollar change in the crude oil price, will have an impact of approximately ZAR730 million.

Base chemical prices remained soft during the first half of the financial year; however, we have seen a steady increase in demand with margins remaining resilient in certain key markets. We expect the recent increase in oil prices to drive Base chemical prices higher.

Our Performance chemicals margins remained flat, and continue to demonstrate the resilience of this business segment. The PC basket price was pulled down by the lower ammonia price due to oversupply in global markets.

We are however encouraged by the recent upward trends in prices for our Chemicals and Energy businesses and anticipate a better second half price / margin performance.

Turning to Slide 13, overall, we delivered a strong operational performance across most of the value chain with higher production volumes being achieved in Secunda Synfuels and from our European assets.

Profit from operations of ZAR13.7 billion was down 8%, largely as a result of the stronger closing exchange rate, weaker product differentials and refining margins, the impact of the prolonged mining strike, and softer Base chemical prices.

This decrease was partially negated by the results delivered by our cost and cash reduction program and operational excellence initiatives. Headline earnings per share decreased by 38% to ZAR15.12 per share whilst earnings per share increased by 19% to ZAR14.21 per share.

An interim dividend of ZAR4.80 has been declared in line with our annual dividend cover of 2.2 times to 2.8 times headline earnings per share. This equates to a 36% annualized pay-out ratio. Capital expenditure dominated by spent on the LCCP, decreased to ZAR30.2 billion due to the strengthening of the rand.

Turning to Slide 14, I will now take you through the items impacting the change in operating profit compared to the previous reporting period. The translation impact of the stronger closing rand/dollar exchange rate at half year end contributed 15% to the reduction in operating profit.

Lower crude oil and product prices experienced during the first half adversely affected profit by a further 16%. Operating profit was positively impacted by the following once-off items and period-end adjustments.

First, a net ZAR5 billion positive variance due to the partial impairment of our Canadian shale gas assets as relative reversal of the Nigerian tax provision all accounted for during the first half of 2016 financial year.

This was partly negated by a net ZAR2 billion cost of once-off items accounted for in the first half of 2017 financial year and consist mainly of a ZAR1 billion cost impact associated with the mining strike as well as increased rehabilitation expenses related to our Sasolburg operation.

Contributions from our cost and cash saving initiatives positively impacted profit, the continued focus on operational excellence and volume.

Turning to Slide 15, our cost and cash containment program continue to deliver against stretched targets, which is underpinned by an entrenched culture of delivering high performance results and sustained value to our shareholders and stakeholders.

Normalized cash fixed costs were down 1% in real terms for the period despite the increased costs from the mining strike action in Secunda. Our Business Performance Enhancement Program as well as our Local Response Plan targets have been exceeded also resulted in a 2.7% reduction in our cash fixed cost base.

The mining strike increased fixed costs by approximately 2.1%. Restructuring and other once-off costs were 0.9% lower compared to prior period. On a macro level, South African producer price inflation increased costs by 7%. The impact of the slightly weaker average exchange rate during the period had a rather muted impact on costs.

Moving onto Slide 16, delivery against our low oil price Response Plan is forecast to achieve the upper end of the ZAR65 billion to ZAR75 billion range. The program until now has delivered cash and cost savings totaling ZAR54.9 billion.

We have therefore banked approximately 75% of our maximum target over the last 24 months and still have 18 months to go. We have increased our savings target for financial year 17 to realized savings of between ZAR22 billion and ZAR26 billion.

Turning to our BPEP program, sustainable savings, during the period, amounted to ZAR4.9 billion, and we are now on track to deliver financial year savings of ZAR5 billion representing an exit run rate of ZAR5.4 billion. Turning to Slide 17, let us now focus on the Operating Business Units.

Mining’s operating profit decreased by 35% to ZAR1.5 billion, mainly as a result of the increased costs associated with the 3 month strike at our mines in Secunda as well as improving operations stability at our Sigma mine. Increased coal purchases, although at higher prices, ensured uninterrupted that supply to our downstream units.

We are refocusing our efforts to ensure that an increase in cost of this magnitude does not reoccur. Stockpiles are in the process of being restored to ensure uninterrupted supply to Synfuels.

Our export coal business benefitted from higher international coal prices and as part of the financial risk mitigation strategy which I referred to earlier, we have hedged our export coal prices for the remainder of the financial year at an average of $82 per ton.

Exploration and Production International recorded an operating profit of ZAR204 million, through focused management interventions to return this business to sustained profitability. Our Mozambican operations recorded a profit of ZAR1 billion compared to ZAR437 million in the prior year.

The increase was mainly as a result of a 3% increase in production volumes and positive translation effects. We continue to de-risk our Canadian shale gas assets and focused on completing already drilled wells. We currently have no drilling activity and our drilling campaign will only commence once we see sustainable increase in gas prices.

The performance of our Gabon assets improved significantly, reducing their loss to ZAR41 million as a result of several management interventions taken.

Moving onto Slide 18, the chemical businesses continue to provide resilience to the overall group’s earnings in a low oil price environment, with a combined contribution of 47% to Group's profitability. The average dollar basket price of base chemicals was 6% lower.

Average margins for Performance chemicals remained resilient across product lines despite global market volatility and depressed ammonia prices. On a normalized basis, the PC operating profit increased by 9%. This strong performance is largely as a result of resilient margins in our European organics business as well as increased U.S.

ethylene sales prices. Our Eurasian operations reported another exceptional performance with a 5% improvement in production volumes following on from their record performance last year. Normalized operating profit in Base Chemicals remained flat, despite the 6% lower product basket price.

Sales volumes were up 11% as a result of improved production stability and delivery of additional C3 volumes after the commissioning of the C3 expansion project. The strong closing exchange rate had a significant impact on the business year on year resulting in negative translation effects of approximately ZAR900 million.

And as a result of the strong rand/dollar exchange rate, we are forecasting normalized operating profit for the full year to be between ZAR4.5 billion and ZAR5.5 billion.

We will now move to Slide 19, our Energy business delivered a fair set of results, relative to the current macroeconomic environment, as evidenced by the 38% and 12% decline in petrol and diesel differentials.

Liquid fuels sales volumes from our Secunda operations were 2% lower following a decision by management to move more molecules towards our higher yielding chemical businesses. The Southern Africa Energy portfolio was further impacted by a stronger closing rand/dollar exchange rate.

However, management’s focus on factors within their control resulted in a 2% reduction in nominal cash fixed costs. Our ORYX GTL venture contributed ZAR344 million to the Energy business.

The plant achieved an average utilization rate of 95% over the period, and we are confident that at this trend we will be able to deliver an average utilization of above 90% for the full year.

In Nigeria, the maintenance turnaround at the EGTL plant is expected to be completed in the first quarter of the 2017 calendar year followed by a planned ramp up towards design capacity and stable operation.

Moving onto Slide 20, we are increasing our focus to improve Sasol’s capital allocation principles in pursuit of delivering maximum sustainable value for our shareholders and stakeholders.

Our aim is to drive a process that is disciplined in the way it is executed whilst being transparent so that internal and external stakeholders are clear as to how we allocate capital. The two key overarching objectives are to firstly, protect and strengthen the balance sheet and then to focus on value based capital allocation.

Protecting our license to operate and ensuring the integrity and reliability of our assets is our first priority. Following this, we remain committed to a dividend payment of at least 2.8 time headline earnings per share cover or 36% payout ratio, provided that we can maintain our investment grade credit rating.

Our next priority will be a trade-off between value levers which can derive the most value for our shareholders and they include. First, value based growth delivered from our portfolio of projects which may include merger, acquisitions and disposable transactions.

Second, value returned to shareholders through targeted and increased dividend payout ratios, however, still remaining within our 2.2 times to 2.8 times range. And lastly, value returned to our shareholders through special dividends and/or focused share buy-back programs, important to note that these levers will be competing equally for capital.

As we consider these trade-offs between the value levers, we are guided by the key financial risk and return metrics such as our gearing and liquidity levels and the return on invested capital in making this decision with the ultimate objective to deliver maximum sustainable return to shareholders.

More details of this process will be shared during our Investor Strategy day later this year. Turning to Slide 21, our capital expenditure for the period was ZAR30.2 billion. This includes capital expenditure for LCCP amounting to ZAR17.4 billion or $1.2 billion.

Our 2017 CapEx estimate has decreased by ZAR9 billion to ZAR66 billion and our 2018 forecast remains at ZAR60 billion, largely due to the impact of the stronger rand refinements to the LCCP spend profile. I would just like to reiterate that the revised estimates do not impact the current cost and schedule delivery of the LCCP project.

We estimate the capital expenditure at LCCP to be approximately $2.9 billion for financial year 17 and $2/4 billion for financial year 18. We have based our forecast of a ZAR14.15 to the dollar exchange rate for financial year 17 and ZAR14.50 for financial year 18.

Further rand strength will have a positive impact on these estimates as the bulk of our expenditure over the next two years is dollar based relating to the LCCP and the PSA in Mozambique. I would like to remind you that the LCCP is a dollar-based project funded by dollars generated by our offshore operations and dollar debt facilities.

No ZAR funds will therefore be used to fund the LCCP. While we continue the execution of these projects, our other projects such as the FT wax expansion project and our Gemini high density polyethylene joint venture with Ineos, only to name a few, are currently nearing the end of construction or will reach beneficial operations shortly.

These projects will add further value to earning and returns prior to the start-up of the LCCP. We're moving onto Slide 22, the current market volatility and stage of execution of our growth program requires from us to proactively protect our balance sheet, and to ensure that we have sufficient liquidity available.

This will be achieved through the continued contribution of our cash and cost savings program, the sustained performance of our diversified global assets, the implementation of several financial risk mitigation strategies, such as our oil and currency hedging programs, and putting facilities in place to ensure that we have got sufficient liquidity headroom.

Since quarter two, financial year 2017, the management team guided by our current hedging policy put hedges in place to mitigate the risks associated with lower crude and a stronger rand/dollar exchange rate in addition to the coal swaps, which I referred to earlier.

We have entered into crude oil put options for a further 22.4 million barrels at an average net floor price of approximately $47 to the barrel. This represents a 75% hedging cover ratio of our production for the six months ending June 2017.

Our current net debt to equity ratio, which increased to 25%, is towards the bottom end of our 25 to 35% guided range. This provides us with additional headroom compared to our estimates. We remain confident that we will not exceed our self-imposed gearing ceiling of 44% and will manage net debt to EBITDA to below 2 times.

Our credit ratings remain a critical focus area and we will strive to maintain them at the current investment grade levels.

We remain confident that the interventions already in place will ensure that we navigate a volatile environment safely, while continuing to deliver value to our shareholders by paying dividends in line with our current dividend policy.

Moving onto Slide 23, even though we anticipate continued oil price and exchange rate volatility, we expect a solid second half performance leading to an overall strong business performance for the 2017 financial year.

However, I need to stress that a stronger rand, may negate some of the improved fundamental performances of the Company during this period. We expect our Mining business to return to full production with a strong focus on production costs.

We project South African liquid fuels sales volumes to be approximately 61 million barrels with ORYX GTL’s utilization rate averaging above 90%. Base Chemicals sales volumes are expected to be between 4% and 6% higher with dollar product prices recovering.

We are confident that our Gemini project will reach mechanical completion by the middle of this calendar year, Performance Chemical’s sales volumes to be higher with margins remaining resilient. We expect to see the full benefit of our wax expansion project in the 2019 financial year.

We expect cost and cash savings contributions to continue to track towards our revised targets. We expect our balance sheet to reach gearing levels of between 30 to 35% and net debt to EBITDA to be below two times.

In closing, we continue to drive operational and capital excellence to ensure a strong Business performance despite the volatile macroeconomic environment.

Maintaining our focus on the factors within our control is a key imperative as we sharpen our focus on driving disciplined and transparent capital allocation in pursuit of delivering maximum sustainable value. And on that note, I’ll hand back to Steve who will open the floor for questions and answers section. Thank you very much..

Thank you, operator. We'll open floor for questions now. [Operator Instructions].

[Operator Instructions] And we'll take our first question, Gerhard Engelbrecht from Macquarie..

I've got a couple of questions. Firstly, you talked about prioritizing the capital spending and it looks like you're shifting CapEx at the LCCP to later years. Can you impact that a little bit more detail why doesn't it impact the schedule, firstly, and just got to do some more of this? That's number one.

Two, can you maybe give some detail on the 20% cost capital, cost escalation at Gemini? It sounds like you're citing the same reasons that Chemical reasons recently cited for the capital over runs of their project. And my worries and questions are around the read through for the LCCP.

So, if you have the same problems at the LCCP you have Gemini will your contingencies be sufficient? And then maybe just lastly, we see some trade literature opposed that fatty oil crude prices in Europe and the U.S. have increased quite significantly, but hasn’t come through in your numbers yet.

Is there a leg -- have seen prices rise for those products in the beginning of this year? And how do you see the outlook for these products?.

We’ll start with the capital spend on the LCCP, Paul, if you want to take that?.

Thank you, Stephen. We all see in current [indiscernible] we have, we want our capital instruments as uptick [indiscernible] instrument do not change the change the season of out-performance of the LCCP. To simply give you a value base, our LCCP will be about $300 million per month.

So in LCCP what we have done since the agreement, we have completed only $350 and then ultimately will result in a -- we also optimize capital accretive profile. And then as it's being resulted in LCCP capital across all numbers, but still it hasn’t changed the performance of the past and potential of the program.

Even on later, we've also provided more details in terms of engineering depreciation how far we put to some [indiscernible] and doing from construction. The Group exchange rates [indiscernible] and giving one those has specific reduced cost to the asset at the Mozambique of which we have received complete assurance provided.

The capital profile possible the execution of across [indiscernible] that we received in the market..

Thank you. We will move next to Gemini statement..

The reason that we have the overrun on the Gemini spending at this point in time is because of poor weather and adverse weather conditions similar to what we had in Lake Charles on the LCCP, as we communicated to the market in September of last year.

The biggest two areas that impacted us was poor craft in productivity and of course the extension of time also led us to incur additional owner cost as we were really for this one to start to have on our owners preparations in terms of rolling cost etcetera was really earlier than now where it's delayed.

It gives us additional owners cost also ramps up in terms of this additional capital. With respect to the oil crude prices and the outlook, if I might say the peak oil prices was over $600 a ton and coming back quite a bit over the last week. Our statistical to processes are not directly tied in the market to the prices of natural oil crude prices.

There is earlier certain percentage of our oil crude price that is directly tied and therefore this outlook is really playing out in the market, but it's not impacting us in the majority of our oil crude mortgage that we sell into the market..

Thank you.

Just sorry -- just one part of the question, if you have the same problems at the LCCP as you have added Gemini, will your contingencies be sufficient?.

This is Stephen Cornell. I think we need to distinguish between the two projects in the same set that there were significant changes that we made after learning some lessons on LCCP.

We also have a great degree of modularization on LCCP and its going better that expected there, as well as some of the current productivities that we see are as anticipated in our CBU. So, there are many structural differences that we implemented on the LCCP, and similar to example you saw at earlier year.

Those projects were structurally different and interrupt at the end of the project size now with the complication of productivity.

So, I think of course if we have significant issues on LCCP, the contingency will not be sufficient, but that is definitely not anticipate that also seen currently in what we are achieving in actual fact was about ground..

And we will move on the next question from Sean Ungerer from Arqaam Capital..

Just three questions please. Just in terms of you commentary around intrinsic value not being reflected really as appeared. Do you mind sort of just commenting a little bit more on that? And then just on your pre-capital allocation strategy.

There is mentioned of M&A, could you comment whether you have actively looked at any deals over the last six to nine months? And then just linked to that whether Sasol will be paid lift the gearing feeling of 44% and debt to EBITDA allotment of 2 tons? And then just on the Performance Chemicals, could you comment a little bit more about profit and margins.

I know that slide back there was a commentary on margins being resilient. Maybe you could just tell a bit more about that across organics from [indiscernible]? Thanks.

Thanks, Sean. Let me take the first one on the value gap. What we look at generally is the enterprise value divide by EBITDA; and if you compare a broad range of chemical companies, mid-cap companies, oil companies and look at the range of their trading and what we see is something roughly in the six to eight times multiple.

And we are currently at five or below, and so the point being we believe that there is upside in terms of the multiples especially with the additional chemical production coming on with the LCCP. So, that was the comment that we highlighted and just wanted to point that out in terms of our view of the market..

Thank you. I can talk to the issue of capital allocation, M&A and their gearing.

In terms of what we are looking at we are obviously evaluating our options because as we believe previously that our gearing will peak to a maximum amount 44% in FY18, but thereafter when the LCCP comes on stream, our gearing will start that coming down quite significantly.

So, at the moment the forecast is a spending our imagination, not spending of cash, as my collogue reimbursement would call it.

So, we are forecasting on making sure that we develop our options, so that there can't be opportunities we expect through those options that haven’t done, a lot of thinking in the analysis instead of as we have discussed over the period because we have not analyzed the matter in detail.

And to where we evaluated the opportunities in M&A, yes, we did consider the shareholder assets where they would put on stream during our valuation with different to what the thoughts. So, as a result, we're not part of that process, and other parties they're part of that process. So, we'll continue to watch that space.

Finally, as far as gearing is concerned -- sorry….

Just driving that just on that and I should actually mention, have guys took of any M&A in U.S.

specifically?.

Not, not, definitely not. As I said, we're working on options, not action yet. Because you would not add any -- we're constrained on capital yet, and we're not in any attitude such as these issues, but as long as strategically we're clear with what our direction.

Finally, on gearing, we have no intention whatsoever to breach the 44% gear limit because operational flexibility is important; and as I mentioned earlier could LCCP, we start getting a lot of flexibility. In the event, there are some very good options.

Some of them might pass because I think disciplines important that you do not end up overpaying and not sticking to your principles..

According to principles.

No, not according to principles..

Paul, you have had one last question on our PC margins and the resilience there with any response?.

Yes, sure. So in the PC business, we've indicated that if we built large for the one profit base and impact on our ammonia part of the business then our performance has really increased 9% year-on-year and.

That is primarily driven by our all coal alkaline alumina, the ethylene business really performing well without going into further details, those were the products groupings that really would resilient and cost savings are negative that we've seen on the ammonia and the phenolics part of the business..

And we'll move to the next question from Chris Nicholson from Morgan Stanley..

I've got two questions for you. And the first question is really around the mining and cost inflation which we saw come through in this half. Two questions in that, well, two sub questions, am I to understand that this is looks like a once-off re-basement higher, as you're now guiding towards retaining to kind of normalized cost inflation levels.

Are kind of one-off costs in here? And the second thing, how would you explain this in light of I guess some new mines that have come on that I think we were maybe expecting to see improved productivity on the cost fronts? That's the first question.

And then just the second question is around I saw some comments coming out of [indiscernible] where we were looking at and talking about growth options potentially within China again, and I see that you've authorized a new project evolving some expansion of the oxalate capacity in China.

Is this the first step, how should we view this in context of your plans there?.

Paul, you want to address the main..

Thank you, Bon. First the question on the mining cost, we haven't seen a substantial increase in our mining cost complete through striking -- and we've been used on across two years.

I think there was also some sustained during the last contingent of the increased whether it related to the mine strike or whether it related to operations included that sigma. That was really one-off and we've done since approaching it again, but that cost for those financial years.

And once the team currently is currently making sure that specifically for next year and for the remainder of this month into the year, we began productivity levels through the aftermarket. The productivity market should be and ultimately you cannot achieve the unit cost at most efficient level.

We have positive interest environment [indiscernible] the result of the cross cut. We actually feel quite comfortable with the very strong management team, unfortunately we had to do with [indiscernible] for six months and without focus is through back to normal operation.

[indiscernible] but we need to make sure onward that we read that, if we need to [indiscernible] to be back in line on following inflation.

And also the latter part of the equation was relating to old mines and new mines hence we have to [indiscernible] efficiently the fact of the stronger [indiscernible] efficient as the new mine [indiscernible] also called as efficient.

[indiscernible] So we believe that it's really time [indiscernible] and working is available and this we believe we can get across of the production as for the next year..

And Chris, I think your third question was around the China and really a follow onto interview and dialogues. The interview and dialogues to question was related specifically to the feasibility project we had for coals and liquids in China.

And I am making clear the time that we don’t have any plans to pursue coal to liquids outside of Southern Africa. And that’s due to a number of assets it's due to the greenhouse gas impact that comes along with coal to liquid.

Also, it'd be efficiency of which both capital and operating to build on a success for gas to liquids that we currently have around the world. So, our plan is going forward in this space would be gas to liquid, not coal to liquids.

The other part of that question was around do we plan to expand in China just in general; And yes, given the size of the market in China given the chemicals demand China, we are very much are looking at China and all of Asia as to how we go forward.

The recent decision around a new plant in China is related to an existing its oxalate plan that we have at a bit order technology and have some issues in which was we are going to do is expand by building a new oxalate plant basically to replace the majority of that the older plant.

So, that’s currently what's in the work and we have continued to evaluate how to address our plants in greater Asia..

And we will go to the next question Alex Comer of JPMorgan..

I've got a couple of questions. Firstly on the basic Chemicals business regarding this 4.5 billion to 5.5 billion corporate loads, and then previously, what petrochemical prices or basket prices have you assumed for the second half bearing in mind prices moved up a lot. Just on the Gemini, you talked about the mechanical completion.

I wonder when we might see the plant actually reach beneficial completion or start up.

Just back to this point on the performance Chemicals business, if your prices are not tied to benchmark by all coal prices, do you have some form of ethylene plus contracts within the business, I'm just trying to work how we might model that? And then just extending the license to your plant in the U.S.

to double, maybe could you can comment on the impact that has on depreciation and also on return on the capital on the project and whether or not those accounting changes are included or not included in your remuneration targets?.

Thank you, Alex. Good to hear from you again. In terms of chemical prices, peak chemical prices and also Gemini beneficial operationally.

Bongani, can you take those?.

So, the Gemini beneficial operations banks target and it's just in the positive, so and next we can see on the beneficial operations. In terms of performance chemicals and also [indiscernible] you're right, we had a mix funnel rate.

Some of that it was related to PKO market and that is not the majority of our business, its case would be a bit presented. We have this brilliant [indiscernible] and I think we've got some recent participations [indiscernible] on that in terms of [indiscernible] houses [indiscernible] we see the market is going..

The depreciation on SCCP?.

Basically as far as [indiscernible] we have to evaluate initial all of the assets NAV and also the half year results.

Now we need to find [indiscernible] we are enthusiastic based on our accounted procedures, we have [indiscernible] deployments so we look at markets each of the right strategy and also we are currently looking at current [indiscernible] and when you look at 25 years, it seems very short comparing to the benchmarking that we've done.

And when we are looking at some of peers the last of these plants can be anything between 50 and even 100 years, and now experience of some of our proceeds facility, it's actually there you can operate much longer than 25 years.

We are truly, I'll ask you the fact that it can -- if you extend for longer period of time, it can impact the return and I'll get to that just now. So from accounting, from origin perspective, we look at each factor.

We are engage with a lot of technical environments on this and basically both on outcomes you said there's no restriction for baking us to operate these plants safely and continuously for 50 year period. You can go longer than that, but we expect that, actually at that level.

So, also the investigation and that we're quite comfortable that the principle that we applied, it's actually consistent in terms of what we've done before, also in terms of market practice and also in terms of IRF rate and in terms of signed off all that really important to the Board.

It won't have impact in terms of low depreciation on our earnings. Even we're actually quite sensitive to that fact that really both [indiscernible] into the market, we will strictly focus still on the 25 year period. The NPV doesn't seem that much affected by [indiscernible] beyond 25 years in terms of its value contribution.

However, we're still going to be from a prudent perspective going to limit our return communication magnitude to 25 years. And then ultimately, in terms of our return on invested capital measure, it does follow the earnings over the invested capital. So, the change in depreciation policy will definitely focus through in that measure in itself..

Alex, you've one more question I think regarding the basket of prices for the second half '17?.

Yes..

I will have Paul to comment on it, but I'll caution as it's a forward-looking statement, so please be cautious in your response..

So, basically, Alex in terms of principle on the base chemical commodity prices, what we normally see in part is that if you look at the OPEC index, there is normally a 50% correlation between with base chemical prices moved relative to oil prices.

So, you need to have a view on oil prices, and we did issue our guidance which we see oil prices moving to between $50 and $55 to the barrel. And normally with base chemical prices what we've seen from history is following that 50% recovery either on up or down side when oil prices start to move.

We also need to officially look in terms of supply and demand, and we must say in terms of the polymer, we still see in terms of our propylene business still healthy. We still see our solvents picking up in terms of demand globally, and these are published numbers in terms of the Asian, European and North American markets, and South African markets.

So, we believe that higher oil prices will definitely be a catalyst for the base chemicals. We can't give you the exact price, but we can give you the guidance of 50% either on the upside or the downside because that's what we've seen in history panning out in terms of the commodity pricing in this sector..

[Operator Instructions] We'll take the next question from Adrian Hammond, Standard Bank..

Couple of questions on two aspects. First on Mozambique and then just briefly on the cracker.

In Mozambique, when do you think you'll be in the position to declare reserve on the PSA? And perhaps could you just remind what tranche 1 phase 1 is in terms of production or is there under review? And then on the cracker for our modeling purposes, is it fair to assume that you will be straight-line depreciating the first 11 billion over the 50 years or could you may be perhaps give us a quantum of depreciation which would make more sense? And then, on the CapEx guidance that we have provided on Page 14, but doesn’t a bit contradict what Paul said for the guidance of FY '17 and '18.

2.9 billion to 2.5 billion, doesn’t that up then? Could confirm whether that includes the working capital amounting, not because I sum it to 11.5, can you just clear that up for us? Thanks..

Yes, quick answer just on the working capital, that doesn’t -- we do not include working capital in our -- and remember that we put. Let me start on the Mozambique and then I probably ask to Riaan to follow up. So, the peer base phase I tranche 1 transform is to deliver 1,200 project wells that it build the appraisal and developed well.

We have drilled four; two gas, two oil. We are currently drilling the fifth. So, it's both appraising and Nigel [ph] will tell you for the development base from here. Riaan, can you take it that..

So, that’s exactly. Good afternoon. Yes, we're on the right amount and so, yes, that is exactly correct. We hope to be completed with a lot of the assessing work in the next six month or so.

And then hope what turns to we would like to go a little bit more in early 2018 as a matter of attractive Board has approved some fund for further home working tranche 2. We believe we have done enough far in terms of tranche1 specially growth specifically to start with the homework on tranche 2.

So, we will be ready for tranche 2 with the FYD to go to the Board in early 2018..

Thank you, Riaan.

And Paul, can you answer the LCCP depreciation?.

So, basically Adrian, LCCP [indiscernible] including over a straight-line operating [indiscernible], this is not following the mine model of view of production and it's consistent with our other [indiscernible] over a strong base.

As we give you the things of how much that is in quite, it will be $230 million per annum of depreciation starting from day 1 of reproduction..

Yes, just to follow up on that.

Is that true that you depreciate different aspects of weak project over the plant in the different timeframes?.

Yes, you can. What we normally do is when we look at the assets and we can also maybe take off line, we are looking obviously in terms of parts of asset that has different useful lives.

So, if you would see with a different component that can only last four years or five years, definitely shift that but at on your asset register, but for the larger component of this asset anticipation is that it will operate 50 years.

And for that larger component, it will definitely write it off over 50 year period than ultimately dominating to a number of $20 million to $50 million per annum. But I can -- every single time as you'd expect the detail into a complete, but that’s as you know really can't yet..

That now concludes today's question and answer session. Mr. Cornell, at this time, I'll turn the conference back to you for any closing remarks..

So, again thank you all for joining us for the review of our 2017 first half results. And we look forward to talking to you more in the future. Thank you for your time..

And now that concludes today's conference. We appreciate your participation. You may now disconnect..