Good morning, and good afternoon, ladies and gentlemen, and welcome to the Sasol Results Conference Call. Today's call will be hosted by Stephen Cornell and Bongani Nqwababa, Joint Presidents and Chief Executive Officers; and Paul Victor, Chief Financial Officer. Following the presentations, an interactive Q&A session will take place.

I would now like to hand the call over to Stephen Cornell. Please go ahead, sir..

Thank you, operator. Good day, everyone. This is Steve Cornell. Thank you for joining us on this call. Paul and I will discuss Sasol's 2018 annual results. And then Paul, Bongani and I along with other members of our management team will take Q&As.

We have published the slide presentation of our results, which you can download from the Investor Centre on the Sasol website. In the interest of time, we're not going to strictly follow this presentation on the call, as we'd like to make more time available for your questions.

Before I begin, I would like to refer you to the Safe Harbor note on forward-looking statements contained on Slide 2 of the presentation. Moving to Slide 4. You'll see a summary of our key messages.

Notwithstanding a volatile Rand environment on which average Rand was 6% stronger than the comparable period last year, we still delivered a resilience set of results in the financial year 2018.

We did experience unplanned outages at our Secunda Synfuels Operations, we consider these another operational challenges as isolated issues and remain confident that we have a robust asset management strategy to keep our plans running safely, efficiently and reliably. We continue to record steady progress in delivering the LCCP.

The steam utility system, which is a critical component and a key enabler for the startup of the other units was safely and successfully commissioned earlier this month. Finally, as we continue to maximize value from our existing portfolio of assets, and drive our growth in our chosen areas, we'll provide you with a high level update on our strategy.

Paul will, of course, go into more detail on our financial and operational performance for the year. And after that, we will open the session for any questions you may have. I will move now onto Slide 6.

As highlighted Sasol experienced isolated challenges with regard to our performance during the year to improve the reliability of Eskom's interface with our Synfuels operation, we have taken various steps. Firstly, we have brought in redundancy into the electrical supply system to improve asset management.

And secondly, we have initiated a longer term capital project to limit any future electricity supply interruptions by creating more flexibility of electricity feed to our plant. We also had two internal outages at Synfuels. The first related to a fire on a transformer, and the second related to a crack on an oxygen line.

The result of these two incidences, I'll say volume loss of around 115 kilotons for the year. These events which occurred mainly in the first half of the year galvanized us to steadfastly improve on our operational processes and plan efficiencies to realize better production yields.

By way of example, our production run rates achieved during May and June of 2018 support a full year production of approximately 7.8 million tones at Synfuels. This substantial improvement and performance augurs well for our anticipated performance in FY '19.

Not withstanding our strict focus on cost, we have kept maintenance spend within industry norms, and this combined with our standardized asset management process, which is delivered by a strong and experienced team ensures that we will not compromise on safety, reliability or sustainability of our operations.

Now let's turn our attention to North America and the LCCP, which is on Slide 7. Calendar year 2019 will be a defining year for Sasol, with the startup of the LCCP in the U.S. which is a catalyst for transforming our earnings profile.

This transformation will be both in terms of geographic spread of our earning streams, as well as the combination - excuse me, the contribution split between our chemicals and energy businesses.

We're making good progress on the project in Lake Charles and indications are that the cost of the project will remain within the previous market guidance of US$11.13 billion. At the end of June 2018, engineering, equipment, fabrication and procurement were complete, and the overall project was 88% complete with field construction at 68% complete.

Capital expenditure amounted to US$9.8 billion. A significant milestone was achieved when the first steam was produced on the 1st of August, which was a few weeks earlier then planned, and the project remains on track to start up first three major production units by the end of December 2018.

These first units are, the first polymer unit, the stream cracker itself and the ethylene oxide unit. Of the remainder of the manufacturing units is in calendar year 2019. Our marketing and distribution channels had been negotiated for affective product placements.

And this hosted by the market demand that is poised for a long-term growth will allow us to deliver a differentiated product mix through the LCCP. We expect to deliver on our per FY '19 EBITDA guidance of US$250 million to US$300 million, as we target LCCP's steady state EBITDA of US$1.3 billion by FY '22 and probably by FY '21.

I'll now provide a strategy update, which is covered on Slide 12 to 15. As you will recall, in November last year, we shared our valued [ph] German strategy, which sets us on a clear path to deliver sustainable growth and accelerated shareholder returns.

As confirmed then, we will deliver value based growth, underpinned by a number of clear choices that drive our focused strategy and enhance our foundation businesses. I'll provide a synopsis of the progress made in executing our strategy.

On Slide 12, we show that our growth areas are in the upstream in energy and the chemicals businesses, and we are advancing opportunities in all three.

In chemicals, we are analyzing growth options in high value specialty chemicals markets, we are doing this, by first, streamlining the Performance Chemicals portfolio with a focus on organics, waxes and advanced materials. Secondly, we are developing incremental growth options in key end market applications for our chemicals.

And thirdly, we're advancing our business readiness for the near term growth from LCCP and the expansion of our China surfactants business. Looking at the upstream, just crucial for the sustainable - sustainability of our integrated Southern African value chain. In here, we are looking to secure long-term our gas feedstock’s to South Africa.

The government in Mozambique continues to be out strategic partner to develop and produce gas to market.

Gas from the PSA and Mozambique is prioritized for the development of a gas-to-power plan in that country, and while the optimal size and capital investment is being determined, surplus gas monetization options will be jointly developed with our partners.

Additional focus expiration will be prioritized in the near term, where development will follow the demand to ensure we maximize shared value to Sasol and our partners.

In the energy business, we've identified options for increasing our margin and liquid fuels marketing, opening 12 new Sasol branded retail convenience centers in FY '18 with a further 15 plan for FY '19.

We are also progressing with value accretive acquisitions of super dealers and continue to evaluate major acquisition opportunities which will be guided by our capital allocation framework. Key to [ph] enhancing our foundation businesses is accelerating efforts to embed continuous improvement.

In this regard, we are actively and continuously managing our portfolio of assets. We will retain or fix those assets that will increase out returns, while exiting those that are not inline with our strategy and/or have lower-than-desired returns.

Approximately 75% of our assets review has been completed with the majority of the assets to be retained, and with some earmark for growth. Assets worth more than US$1 billion and net asset value have been identified for divestment. These include our shareholding in our Malaysian assets, which we sold to Petronas for US$163 million.

We have also commenced active marketing for our Canadian Shell Gas assets, and as we progress with this and other divestments, we will update the market accordingly. In terms of business enhancement, our continues improvement drive is aimed at ensuring competitiveness at an oil price of US$40 per barrel.

Our target to lift ROIC by 2 percentage points by FY '22 with [ph] continuous improvements with gross margin, fixed cost and invested capital being the key value drivers.

We have already identified 50% of the value-enhancing opportunities, focusing on customer engagement solutions, our functions and improving the reliability and margins in our energy value chain. One of our key continuous improvement levers is digitalization, which has been positioned as an enabler across all of our businesses globally.

Paul, will now take you through the details of our financial and operational performance. And then we'll open up the call for questions. Paul, over to you..

Thank you, Steve. I am on Slide 17 of your slide deck. Good morning and good afternoon ladies and gentlemen. It is my pleasure to present the 2018 financial results to you today. Our results at the midpoint of the earnings range provided in our recent trading statement.

As stated to you during our Capital Markets Day over last year, our drive towards gaining shareholder value sustainably is guided by our continuous focus on firstly, a sustainable delivery of operations and capital efficiencies, secondly, continuously improving our cost competitive position, thirdly, to manage our balance sheet risk prudently by means of our financial risk mitigation strategy, and lastly, to growing the value of the business as unfold [ph] by our focused strategy and disciplined capital allocation.

With this in mind, I will now turn to our 2018 financial results, and how this contributed in delivering on our value-based strategy. First, improvement - improving oil prices had a significant positive impact on our results.

This was further complemented by very stellar cost performance during the second half of the financial year, resulting us delivering a normalized cash fixed cost increase in line with market guidance.

The stronger average and volatile closing rental [ph] exchange rate had some negative impact on our results in terms of the income statement and balance sheet.

Lastly, as a result of the stronger rent, the net present value of future cash flows of [indiscernible] cash-generating unit have been adversely impacted, resulting in a ZAR5.2 billion impairment.

Looking forward and based on the successes at Business Performance Enhancement Programme and low oil price Response Plan, we also view [ph] and are well-positioned, and actively working on sustainably improving our cost competitive prices, driving further operational and capital efficiencies in an environment are pursuing zero home [ph].

This is the culture of continuous improvement we've adopted to drive sustainable value for all shareholders and stakeholders.

Our expectation of a robust Rand oil price over the short to medium term, a reduction of capital expenditure on the LCCP, combined with a step-up in incremental earnings from the LCCP will accelerate our free cash flow inflection point towards the second half of financial year '19.

Future maintaining our optimal capital structure is our funding strategy, which concerns to top of that instrument, the maturity profile and the cost of funding. Our strategy is to better expect the maturity profile of debt instruments, which allow us the flexibility to execute our value-based growth strategy.

Finally, I will also share with you management's outlook for financial year '19, which is a defining year for Sasol's compelling investment case. Turning now to Slide 19.

I am pleased to announce that the EBITDA increased by 10% year-on-year, full year headline earning per share, which is headline earnings per share adjusted for the re-measurement in one off items, as well as the impact of period in currency revaluations, amounted to ZAR36 and $0.03 per share, which is 6% lower compared to the previous year, but still reflecting the underlying resilience of our business.

Operating profit of ZAR17.7 billion was down 44%, as the benefits of the higher dollar base, oil and chemical prices were offset by a stronger Rand and the impact of significant re-measurement items and one-off items, which are well impact for you on the next slide.

The final dividend of ZAR7.90 has been declared in line with the company's covered by it's dividend policy, which results in a total dividend per share of ZAR12.90 for the year.

By using core headline earnings per share as the basis for the dividend, and bases [ph] have been protected against the impact of significant non-cash period and adjustments, such as Sasol can use its income statement charges in financial year '18. Our gearing labels increased to 43%, as at 30 June, 2018 and remains below our peak gearing of 44%.

This increase in gearing is mainly as a result of the settlement of the first tranche of Inzalo date in June 2018, and the translation impact of our higher closing and Rand/dollar exchange rate on our balance sheet date.

Today, I'm pleased to announce that the Sasol board approved that we will also settle the second tranche of the Inzalo date by repurchasing the final 16.1 million shares in September 2018.

The balance sheet helped [ph] the sustainment [ph] of our investment grade credit ratings and minimizing the equity dilution for shareholders with key considerations in reaching this decision.

While this decision will result in higher gearing labels for financial year '19, this decision will not translate into a 4% dilution for shareholders and further demonstrates our commitment to predict and grow shareholder value within the context of managing balance sheet labels to risk in investment grade. Turning now to Slide 20.

I will now take you through the key items impacting the change in operating profit compared to the previous year, and please allow me to walk you through the slide from top to bottom.

The stronger average rand/dollar exchange rates negatively impacted operating profit by 7%, higher dollar based fuel and chemical product prices positively affected operating profit by 54%, a number of ones-off and re-measurement adjustments significantly negatively affected our operating profit by 48%. Let me deal with re-measurement items first.

Re-measurement items were ZAR8.3 billion higher compared to the prior year. These items were first, a full impairment of our South African turbines [ph] and PBC business, a ZAR5.2 billion on the back of a stronger long-term rand/dollar exchange rate forecast.

Second, a partial impairment of our Mozambican production sharing agreement of ZAR1.1 billion or $94 million, mostly as a result of lower-than-expected oil volumes. The [indiscernible] investment case still remains very much comparable to board approved FID returning levels.

Lastly, as previously communicated during our interim results, we have recorded a partial impairment of our Canadian Shell Gas assets, as well as of the scrapping [ph] of our U.S. GTL assets. Focusing now on ones-off items and you will see that these items had mostly been reported as part of group functions under the segmental reporting.

These items can be summarized as follows.

First, and as also previously communicated, the ZAR3 billion [indiscernible] impairment charge relating to the Sasol share [ph] scheme, and secondly, unrealized losses of ZAR1.9 billion on the valuation of open hedges as at 30th of June, 2018 and mainly result to put option charges rate [ph] to protect the balance sheet as oil prices or below $53to the barrel.

Moving on, operating profit was negatively impacted by 16% due to cost inflation, normalized cash fixed cost increased by 5% or remained flat in real terms, which is within the guidance provided at our interim results presentation.

Sales volumes were mostly affected by production interruptions which Steve alluded to in the South African value chain, as well as the impact of Hurricane Harvey on our Performance Chemicals business in USA.

Very important to note, as in our production run rates recovered significantly from April 2018, and positions us very well for a much improved sales contribution in financial year '19. Let's move to Slide 21.

As mentioned before, we are firmly invaded to very strong cost culture at Sasol and we are continuously looking for areas to sustainability reduce our cost in pursuit of protecting and improving our cost competitive position. We delivered a very strong and stellar second cost - second half cost performance.

This resulted in our normalized cash fixed cost remaining flat in real terms. Now turning you through the slides from top to bottom, we have normalized our cash fixed cost for the following items. First, growth cost increased our cash fixed cost by 1.1%, and many relates to cost incurred on our capital projects in the USA.

These growth projects will, however, significantly improve future earnings for the company.

Second, business establishment cost and ones-off items contributed to further 2.4% to the group's overall cash fixed cost increase and many relates to the pre-investment cost associated with our digital transformation program and at further improving our future cost competitiveness, as well as ones-off transaction cost associated to the Sasol Khanyisa transaction and the loss and benefit as a result of the termination of the Power Purchase Agreement with Eskom since April 2017.

SAPPI [ph] remains below 5% and the exchange rate change had a rather muted impact on our cash fixed cost basis. Very important to note that delivering normalized cash fixed cost performance in line with the 6% inflation target remains one of the key business priorities.

Moving on to Slide 25, our actual capital expenditure, including accruals, amounted to ZAR53 billion, which is slightly below the previous market guidance provided. This included ZAR30 billion or $2.3 billion relating to the LCCP.

Our capital expenditure forecast of ZAR38 billion for financial year '19 supports execution at our strategic projects in North America and Southern Africa, and include approximately $1.1 billion for the LCCP. Our capital forecast has been calculated, taking a ZAR13 exchange rate to the dollar into account.

Rand volatility will have a significant impact on these estimates, as most of the capital expenditure over the next 2 years will be dollar-based. Our capital forecast for financial year '19 and '20 is also based on as managing the Sasol’s [ph] capital to ZAR20 billion or $1.5 billion per year, respectively. Moving on to Slide 26.

Macroeconomic volatility is very much anticipated to continue for financial year '19 and is a really within this context that we do expect the following delivery from our global assets. Mining to ramp active plan and targeted production levels, Performance Chemicals sales volumes, excluding LCCP, to be between 2% and 4% higher, and average U.S.

dollar margins to remain resilient for most of the product lines. Base Chemicals sales volumes, also excluding our U.S. production volumes to be between 2% and 3% higher with U.S. dollar baxter [ph] pricing tracking oil prices. The U.S. HDPE plant is forecast to achieve a utilization rate in excess of 90% for financial year '19.

As a result of a planned full shutdown in securing [ph] in financial year '19, and as of efficient liquid fuel sales volume will now range between 57 million and 58 million barrels and the Secunda Synfuels Operations will achieve production volume of between 7.6 million to 7.7 million tons, on its average utilization rate is expected about 95%.

Lastly, the EBITDA on the LCCP project to range between $250 million and $300 million for financial year '19. Mobilized cash fixed cost, as previously mentioned, are expected to check our full cost and inflation rates of 6%.

We forecasted the rand/dollar exchange rate to trade in a range between ZAR12.50 and ZAR13.50 to the dollar and average break [ph] crude oil price range to remain between $65 and $75 to the barrel. Our balance sheet gearing is expected to be between 40% and 44% and the net to EBITDA to remain below 1.9 times.

Lastly, taking these assumptions into account, we do expect a step-up in our earnings for financial year '19. Moving on to Slide 27. Let’s largely focused on Sasol's compelling investment case, which we have shared this year at the Capital Markets Day. Our overall arching objective is to deliver superior and balanced value to our shareholders.

Our investment case is deeply rooted and our identity as a chemicals and energy company with diversification of earnings and geography. Investing in Sasol provides you exposure to a rather foundation business, which leverages feedstock advantage operations and integrated value chains to produce high-value products at low oil cash breakeven levels.

This competitive position will be further enhanced by the cash inflection of the LCCP, streamlining our portfolio through the very robust and rigorous asset review process and delivering further value on our - from our continues improvement drive.

Our enhanced strategy and disciplined refocused capital allocation will allow us with clear, strategic and specific value-driven choices.

We expect that the strategy will translate into the following value drivers, and [indiscernible] I see an EBIT growth rate, which are aligned with shareholder value creation, increased dividend returns, stepping up our dividend return rates from 36% payout to a targeted future 45% payout ratio, a significant improvement in our free cash flow per share over the following couple of years, a balanced and diversified and asset portfolio will be target smaller to medium-size project, with [indiscernible] as an option for larger projects in an effort to build a robust and diversified assets portfolio for in basis [ph] at the lowest possible risk.

All of this needs to be supported by a faithful purpose capital structure which preserves investment grade and enables access to future capital markets. As we prepare for the first units of LCCP to come online and expected increasing free cash flow, our balance sheet will start to deleverage from financial year '20 and rather quickly.

We are committed to following a disciplined capital allocation framework which will prioritize dividends for our shareholders, as we target maximum sustainable returns and quality growth for our shareholders. We are very well positioned to deliver this comparative value to our shareholders compared to our peers.

That brings me to the end of my section. And on that note, I will hand back to Steve, who'll open the floor for the questions and answer section..

Thank you, Paul. Operator, we are ready for the question-and-answer session..

Thank you. [Operator Instructions] We can now take our first question from Chris Nicholson of RMB Morgan Stanley. Please go ahead. Your line is open..

Good afternoon, guys. My question relates to your lowering of EBITDA, sustainable EBITDA guidance to Lake Charles Chemicals Project by around $100 million. I have three questions from this regard.

The first one is I understood previously that you had contracted in the vast majority of your ethane supply in terms of quantity, may be could you just elaborate on how the contracting on actual supply impacts the flowing of EBITDA guidance, specifically given your comments in relation to sourcing ethane from the Gulf or outside the Gulf Coast? And the second question in this regard is really you're still guiding EBITDA to quite a tight range of $1.2 billion to $1.3 billion, but you provided quite a wide range of IRR guidance there just to marry up those two, depending on where you saw the ethane from.

And then just finally, have you adjusted any of your product price assumptions and not the feedstock cost, but any of the prices of the products that you expect to sell? Thank you..

I'll take the first part.

And Paul, can you take the second too?.

Yes..

Thanks, Chris, for the question. As you correctly stated, we have contracted the vast majority of ethane volume that we'll need, which is 100,000 barrels a day.

We have a number of different contracts with different suppliers, those were generally 4 to 5 year contracts on volume, each company having a different volume amount that we've contracted in a different range of volumes that we'll pull from them. All of the contracts are tied to a marker, be it, natural gas or an ethane marker in the Gulf.

So the price will float on what the contract marker or price marker is. So what you've done - and this is how it's done in the industry for Gulf Coast supply.

As you lockup security of supply but the pricing will be determined basis the pricing of the month, either the month previous or some sort of average that you're having in contract on the price marker..

Chris, to answer your - the second part of your question and underlying and what I take is, what caused the $100 million in EBITDA to reduce. Let me address that quickly.

Most of - when I look in terms of the price assumptions or underlying price assumptions that drove the $400 million versus the $250 million to $300 million, the biggest change is really the spread between LLDPE and ethane.

So we did see in terms of the price marker for LLDPE that there was some contraction in margins since the half year until the year end. It's not significant, but it does make that impact on the EBITDA. And also in addition to that, we did see some higher ethane prices compared to what we've taken into account from half year to year-end.

It's not significant changes in terms of ethane, I will say, it's pretty much more kind of the split between ethane and LLDPE that really boost this shift. If I'm looking in terms of financial year '20, '21 and '22, as I said, it's not a significant shift.

We do see those spreads to normalize at and still supporting our 1.2 to 1.3 run rate, ultimately in terms of EBITDA. To your second point is, how do you marry effectively these different views to the $1.2 billion to $1.3 billion EBITDA? And the long short of it is to say your assumption on ethane prices.

What we've seen thus far is that in the [indiscernible] from these various economists [indiscernible] would say that despite the divergent view in terms of where do you think will be sourced and that's really the key difference between the lower IRR and the higher IRR.

Our view is that mostly that ethane will be sourced from the Gulf, especially in the next 10 to 15 years and that supposed a $1.2 billion to $1.3 billion per annual run rate, which is very much in line to the IHS view.

Looking at - is actually more of the view that the Marsalis [ph] and other more expensive place will come into play and [indiscernible] rise to the IRR. If it translates a run rate IRR of the 5.5%, with my case, then ultimately, the $1.2 billion to $1.3 billions will on be average $200 million per year lower, so effectively, $1.1 billion.

So it's not a significant difference compared to what you see in the IRR that that's really causing it. The last part of your question, are there any changes to any other product prices? In terms of our modeling and the answer is, no.

On the contrary we actually see and some of the product lines specifically on the Performance Chemicals business that there's some slight upticks in terms of our dollar base and pricing..

That’s great. Thanks, guys..

Thank you Chris.

Operator, next question?.

Thank you. We can now take our next question from Johann Steyn of Citi..

I guess that's me. Hi, guys it's Johann Steyn, you also mentioned in the presentation that the ZAR1.3 billion achieved in FY '21, if I heard you correctly.

So first one, is that correct? Did I hear that correctly, Steve?.

Johann, that's correct. Basis is our modeling, we show that in FY '21, we should achieve about 1.26, 1.27 and in FY '22, 1.3, 1.31. So depending upon the ramp up rate, depending upon what happens it's going to be either FY '21 or FY '22..

Okay. So that's a little bit better and quicker than I think it won't would've expected previously.

And does that mainly the volume profile or pricing expectations?.

Johann, we haven't really changed this profile since we adjusted it a couple of years ago. But Paul, let me turn over to you..

Yes, Johann, so ultimately, our anticipation is that not so much the volume pricing, but more in terms of the margin uplift, in terms of some of our assumptions. Again, I think it's quite important to say that there are very moving parts.

If your view is that China will over bought, there will be some pressure may be in the next couple of years, if your view is that the U.S. will grow quicker into - it's sort of a transition of merchant ethylene, then ultimately, it also will kind of support these assumptions.

So we have taken kind of mid-route approach when it comes to merchant ethylene that of a digestion in the U.S. as well also some mid-route approach with regards to the risk of over bought in China.

We don't believe it's going to be other too strong or too weeks on either side and hence that is the only difference compared to our previous assumptions and supporting this 1.27 that Steve referred to in 2021..

Okay. Thanks, Paul. And then in terms of the previous dividend profile, if I remember correctly, you said that by 2022, they're about to you'd like to be at 45% payout. And I think by 2020, they're about 35% - sorry, 40% payout. Current pricing that where we are today with more than Rand.

Do you see that profile coming sooner, effectively allowing you to ramp up the dividend payout rates quicker than previous expected or not?.

Yes, Johann, I think the first big moving part for us was to gauge finality on the Sasol is all refinancing. So ultimately one thing that we do know for financial year '19, even at these higher rand to barrel oil prices and let's assume for now the 1,000 rand a barrel will continue.

We don't really envisage by some board's approval kind of a step-up, meaning an improvement also 36% payout ratio for financially '19. However, I think you quite just in your assumption that in financially '19, we haven't really built in a significant uptake of growth capital and hence the balance sheet deleveraging is a key priority.

Assuming that the balance sheet does leverage - deleverage according to our anticipation and these macroeconomic assumptions that prevail going forward, this is more than high probable chance or let's say, a high probable chance that we will have the opportunity to step-up our dividends as the first priority, which is consistent to what we message at the Capital Markets Day.

What follows the 40% thing in - let's say, assuming that happens in financial year '20, will then be to say what will be the balance approach towards stepping it further up to 45%? Or what are the different capital investments available at that point in time? So we need to weight those two things up post-2020, but still with the objective of stepping up the dividend to 45%.

I think it's just a matter of sensitivity, stepping your dividend up on this year's number from 2.8 to 2.5 times means ZAR1 billion of additional cash. And therefore, 2.5 to 2.2 available. So it's actually ZAR2 billion in this bottom to high end range, which I think on a balance sheet can be quite manageable, going forward..

Thanks, guys..

Thank you, Johann..

We can now take our next question from Gerhard Engelbrecht of Macquarie. Please go ahead. Your line is open..

Good afternoon. Thank you. I've got three questions as well. Considering that the cracker will be - when the cracker starts up at - in Lake Charles that it will be long of ethylene for quite a while.

What price assumptions do you have for ethylene and EBITDA - ethylene and ethane baked into your EBITDA guidance of $200 million to $300 million for FY '19. That's the first question. Secondly, I heard that Supreme Court has approved routing against on gas pricings, affect your view on the Mozambique and PSA.

If I remember correctly, you were looking at growing local gas markets with a gas in Mozambique.

Does that ruling change it at all? Will you appeal this ruling to the higher court? How do you view that? And then lastly, just maybe a question on procurement, referring to the IT contract that you put in place with IO Technologies, can you give us an idea of the scope of that contract and your due diligence on IO, have they dealt - have they done any similar type of contract? Do they have any experience of contracts of this size?.

Thank you, Gerhard.

Paul can you take the price assumptions on ethylene and ethane?.

Yes, Gerhard, I noted there's a need for more detail on this. I would say it's safe to say that ultimately we see ethane prices for the next 12 months if you want to really look at the forward curves to be between anything from $0.27 to $0.35 per gallon, that's what the forward curve sees. We will in that range on ethane.

When it comes to ethylene, I guess one has the forward spot pricing in terms of what's available in the market. The spot and the contract prices and hence we are mostly kind of using those assumptions. I think we also don't need to plan ourselves in the corner to provide too specific - to mention specifics on our price assumptions.

And we do provide you with the ethane over the merchant ethylene and product space range for year one in terms of EBITDA interpretation. But as I said, the most significant change in the economics and EBITDA is our ethane. And you can work off this ethane range which I have provided..

Thank you, Bongani, can you take the [indiscernible] and the IO?.

Yes. I would like to respond to the question on the gas price, we have the intent indeed to appeal to have the – who have the second respondent, the primary respondent is NASA at this ruling. So the next point it's going to is the constitutional court.

We strongly believe that the fundamental issues with me is to - by the FCA, which is the Supreme Court of Appeal. So that's where we are and that's where we [indiscernible] so to say. Except to say and that aside our strategy remains base as it was. And then in terms of the pricing on IO, just to make a lot of noise on this.

But for those who might be less familiar about it, IO use the company which is in the IT space. They've been secured our - basically it's our networking contract which we had with BT and it's back to back with the British Telecom. In case there – or South.

But given all the noise which was around, we then put specific clauses in the contract, some of the clauses we put, was if there was a clause of a misrepresentation or [indiscernible] it's an exit clause to the contract. So it obviously goes back to - it always goes back to BT and [indiscernible] IO technologies has been therefore for over 10 years.

In addition to that [indiscernible] has been moved to IO and [indiscernible] some people who were providing services to us and [indiscernible] providing services to us and IO and the key trust is, what does it means for our operations. We have had noticed the difference it said that will it be in place according to a different company.

But it detailed due diligence was the - was done. And we then put some built in places in the contract just in case..

Okay. Thank you..

We can now take our next question from Alex Comer of JPMorgan. Please go ahead. Your line is open..

Hi, guys. Few questions.

Firstly, the sort of 250 million to 300 million, this year for LCCP, in terms of EBITDA, doest that – is that after all start-up costs, are there any start-up costs that you've not included and are going to be capitalized for instance? Also perhaps I think you at one point said you would give us the likely depreciation and interest charges this year on the product, and particularly in just in interest and how much of that is going to go through the P&L going forward? And then you've entered the market with the sort of toe in terms of hedging your ethane requirement.

And obviously as Paul said, the forward curve for ethane is fairly attractive still.

Aren't you going to attempt to hedge that more of your ethane, going forward or not? And just one confirmation, the free cash flow target for 2022 of $6 a share, is that including all CapEX or just systems CapEx?.

Okay, Alex. I'll give you your question. And ultimately to your point on the $250 to $300 million, we have a very specific process that we follow to assess when a plant is being brought into a beneficial operations. Now in terms of our convention, once a plant has completed its sort of beneficial operations then all costs get expensed.

So ultimately, when you're looking in terms of our income statement all start-up cost as part of beneficial operations have reached that point to suppose commissioning and startup, effectively forms part of operational costs. We have just recently completed our work again and the review of that.

So I can confirm that's all included in the $250 million to $300 million. In terms of your second question in terms of interest GAAP I do promise that, and I do want to refer you to our fact sheet and you'll see on the fact sheet for the LCCP, we do list the interest capitalization for the restricted years. I think it's quite important.

I will - in more detail, maybe tomorrow, on the Analyst Call, share with you, how we're going to treat interest after we've actually completed construction specifically on the bank term loan, or the $4 billion, IFRS requires us not to extend and rather capitalize it other projects in the grip, but I'll talk more about that.

The - our exposure to with regards to ethane and the impact of ethane on the future cash flows of the company really becomes quite elevated going forward.

So as part of our hedging strategy, you're 100% right that hedging is a part of ethane, not only on the current tracker but also in terms of the Lake Charles new tracker, ultimately will be within the scope. Our current focus is only to hedge, roundabout 70% to 80% of the volumes of the current cracker and we're building the process of doing that.

At these levels that the forward curve indicating 100% right, it's still kind of very flat.

So it makes sense to each of that, but you'll only start considering hedging of the ethane volumes under like Lake Charles cracker once the plant starts, you need to underline and we cannot take that risk at this stage to start the hedging before the plant is really started to produce the volumes.

Once that's produced, we've got it underlined and hence reaching on the new volumes will also be considered. What are the hedging labels will be? Well certainly being not 70% to 80%. So once we've confirmed those numbers, like obtain a mandate from our board, you'll come back to the market and give you a sense.

In terms of the free cash flow per share, what we shared at the Capital Markets Day, that's the free cash flow. So effectively cash repayments from the business, less substance capital.

So it doesn't include any growth capital because what we did say is, all free cash flow needs to be allocated with the most valued for the company following a balanced approach. The free cash flow in construction capital of $1.5 billion per year into account..

Thanks, Paul. Can I just -- with regard to the interest charge going to the P&L. You're actually saying that you won't be able to offset those through more capitalization elsewhere. And therefore there'll be - maybe a higher interest charge than was anticipated when you....

No. So basically what I'm saying is, until the point that you achieved a beneficial operations or you've finished construction, so to say. All interest specifically on the ZAR4 billion bank facility on asset based finance over the Lake Charles project will be capitalized against the Lake Charles plants.

One of - thereafter that interest charge will be reallocated to other projects in the group if such projects are available and capitalized against those that will be expensed..

Okay.

So no change really from the pervious expectations?.

Yes..

Thanks..

Thank you. We can now take the next question from Adrian Hammond from SBG Securities. Please go ahead. Your line is open..

Thanks. Three questions for me, please. Two on the crack and one on your fuel business.

Firstly, assuming like LCCP is commissioned, when do you expect the official operation? And how would you define that in terms of percentage utilization? And secondly, have you secured any bias for your polymer product from the LCCP? And where are these buyers located? And how does that compare to the envisaged guidance you put out some time ago? And then lastly, just on the fuels business in South Africa.

Have you realized any gains or efficiency gains on the margins from the fuel distribution business? And if so, is this - are they more to be made? Thanks..

Adrian, can I just ask on that last question. I wasn't really clear what the question was.

Can you explain it to us what you're looking for?.

So in your distribution of fuels, both in the commercial and retail sectors in South Africa, have you made any efficiency gains on the margins that our available to you in the regulated pricing, all those fuels and in the distribution of those fuels? And I'm speaking more to you broader retail strategy? Thanks..

Okay. Adrian, I’ll start on the first one and I may need some help from Stephen or from Bernard, but let me give it a go. Then Fleetwood could you take the chemical products and Paul, can you take the one on the energy, I need some assistance.

So I think your question is, what determines beneficial operation, is that kind of the question? So the dates that we have been putting out are beneficial operations dates. So all the dates that we talk to you about are beneficial operation.

So before that, we have finished the mechanical work or what we call the mechanical completion then we have commissioning and ramp up. And we finally get to beneficial operation behavior at a point at which the operations are steady.

We are on product, we are confident that the unit can maintain - without unforeseen incidents happen, but maintain a kind of levels of performance. And we have a very detailed process we go through to say we have now achieved beneficial operation. And it will be the operations guys who basically tell us that they have done so.

So the dates that we've given is that we expect to reach beneficial operation on the first polymer unit before the end of this calendar year on the polyethylene unit that, LLDPE, we expect to reach beneficial operation on the cracker and we hope to reach beneficial operation on the ethylene oxide e.g. before the end of the year.

Again, we said that might push out over into the next calendar year into January, but all the dates that we talked to you about are beneficial operations dates..

You want to talk about products..

Yes, thank you. So Adrian, the whole approach with the polymers into our global and sales network hasn't changed. The one impact that we did consider now recently was the tariff announcements in China and in the counter position from the Chinese. We have appointed all our distributor channel partners globally.

We've got a very moderate placement in each region of the globe. And in essence, those have not changed. What we have - in the contracts included was to give us flexibility, to scale in each region.

So our distribution partners will have the flexibility, should we increase allocation to that specific region? Or take away and reallocate to other regions, we've got really good flexibility in those type of agreements. And therefore, the impact even now with the tariffs between U.S.

and China, we feel that we can mitigate that because there is also a very low percentage of exposure that we have into China as direct placement of our polymer, just to give you a flavor, it's less that than 5% on the HDPE and it's less than 10% of our annual LL volumes that we will be placing them all.

Also that the LD volumes have been taken off the tariff list. So there is no exposure that we have this. So it remains in the low double-digits exposure that we've got in terms of the total impact in China if have not any mitigation plans, but we believe we can redirect some of that product. And therefore mitigate the impact would....

And then to your last comment in terms of retail strategy, we believe that we've been quite successful over the numbers of years to increase the volume pump side of our focus, which talks about not only promoting our brand but also the offering to customers. You will also notice that we sold 10stations during the year.

And as part of our organic strategies, it's not only to grow new sites but also to redeem or sell the ones that's really not adding the value according to our strategy. And we do believe that ultimately through building our brand and promoting and enhancing the offering to customers, we do see a higher uptake of customers actually visiting our site.

Very important that the GDP in South Africa is unfortunately a stumbling block because most liquid fuel manufacturers and marketers find it difficult to grow at pace as a result of that inherent limitation.

Even we do believe going forward as part of our digital transformation that using technology, specifically in our focus will significantly increase further value enhancement and efficiencies for us, not only in terms of the customer experience but reducing working capital, watching stock and ultimately how much fuel inventory to carry.

So we are busy with those processes and we do believe digital will be a significant value enhancer for us in our retail strategy going forward..

I think we have time for one more question..

Thank you. We can now take our last question from Herbert Turabi of Investec. Please go ahead. Your line is open..

Good afternoon. I've got two questions.

And the first question is -- the first one is, what is the plant utilization rate that end up (background noise) And the second one is, is the (background noise) bottleneck for the background noise? And I say this - and I say this given that I noticed that the formation of the different product groups exceeds as 1755 kilotons per annum? Thank you..

Thank you, for the question. Let me take the second one, first. So our current focus obviously is on completing the existing project, getting it up and running and getting the cash flows. That being said, we will be putting about 200,000 tons annually of ethylene onto the merchant market.

And so, there exists the opportunity to either bottleneck some of the downstream units or build something in the future, all of that will be determined as we go forward. But we are currently not active and really trying to address future expansion, we're currently looking at trying to give the existing plant up and running.

In terms of the utilization, that we have in our numbers, we look at about a 95% overall utilization on the site. Yes, when we get up and running, steady state..

All right. Thank you..

Okay, let me just close and saying thanks to you all for participating. We really appreciate your interest and we will talk to you again soon. Thank you, operator. You can close it now..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..