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Sasol - distributes AFS, notice of AGM,
Annual Report Suite
Sasol's 2019 suite of annual reports, comprising our annual financial statements, Integrated Report, annual report on Form 20-F, Climate Change Report and Sustainability Report, has been published on the Sasol website, at http://www.sasol.com/
Annual Financial Statements
Shareholders of Sasol (Shareholders) are advised that the Company's audited summarised financial statements for the year ended 30 June 2019 were distributed to Shareholders on 29 October 2019. There were no changes to the audited summarised financial statements, and the independent audit report, released on the Stock Exchange News Service on 28 October 2019.
The AFS were audited by PricewaterhouseCoopers Inc, who expressed an unmodified opinion with a reportable irregularity thereon. The aforementioned audit opinion is also available for inspection at the Company's registered offices together with the AFS identified therein. The AFS contain a disclosure of directors' beneficial holding in Sasol securities on page 45. Shareholders are advised that there have been no changes to the directors' beneficial holding in Sasol securities since the end of financial year, 30 June 2019, and the AFS signature date, 28 October 2019.
Annual report on Form 20-F
Sasol's annual report on Form 20-F, which includes the AFS, was filed with the United States Securities and Exchange Commission (SEC) on 28 October 2019 and is available on the SEC's website at www.sec.gov and the Sasol website at http://www.sasol.com/investor-centre/financial-reporting
Notice of AGM
Notice is hereby given that the fortieth AGM of the Shareholders will be held at 10:00 on Wednesday, 27 November 2019 at The Forum, The Campus, Wanderers Building, 57 Sloane Street, Bryanston, Johannesburg, South Africa to transact the business as stated in the Notice of AGM. The Notice of AGM was distributed to shareholders together with the summarised AFS on 29 October 2019, and is also available on Sasol's website http://www.sasol.com/investor-centre/annual-general- meeting.
The record date by when persons must be recorded as Shareholders in the securities register of the Company in order to be entitled to receive the Notice of the AGM, was Friday, 18 October 2019. The record date in order to be recorded in the securities register as Shareholder to be able to attend, participate in and vote at the AGM, is Friday, 15 November 2019. The last date to trade in order to be able to be recorded in the securities register as a Shareholder on the aforementioned record date is Tuesday, 12 November 2019.
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Sasol - executive, company secretary appointment
Further to the director and management changes referred to in the financial results announcement, the board announced the appointment of Mr V D Kahla as an executive director of Sasol with effect from 1 November 2019.
Pursuant to his appointment as an executive director, Mr Kahla resigned as company secretary of Sasol with effect from 1 November 2019.Ms M M L Mokoka, currently Senior Vice President: Governance, Compliance and Ethics of Sasol and company secretary of Sasol South Africa Ltd., has been appointed as acting company secretary of Sasol with effect from 1 November 2019, until the board fills this vacancy.
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Sasol - production and sales metrics
Sasol has published its production and sales metrics for the three months ended 30 September 2019 on the Company's website at www.sasol.com, under the Investor Centre section or via this URL: http://www.sasol.com/investor-centre/financial- reporting/business-performance-metrics
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Sasol - outcomes of the independent board review
Following the publication of revised guidance for the Lake Charles Chemicals Project (LCCP) on 22 May 2019, the Board of Directors (Board) of the Company commissioned an independent review (the Review), which was conducted by global consulting firms at the direction of external legal counsel.
The Company's announcement on 22 May 2019 set out the principal factors that had resulted in an increase in the LCCP capital cost guidance relative to the previous estimate that was issued on 8 February 2019:
1. Adjustments to the February 2019 cost forecast of approximately USD530 million, comprising:
- Duplication of investment allowances of approximately USD230 million.
- Correction for certain contracts and variation orders of approximately USD180 million.
- Forecast improvements not expected to be realised and adjustments for potential insurance claims and procurement back-charges of approximately USD120 million.
2. Additional events and remaining work impacting the February 2019 cost forecast of approximately USD470 million, comprising:
- Repair and replacement of defective components and related impacts on units such as the Ethane Cracker, Ethylene Oxide / Ethylene Glycol and Utilities of approximately USD210 million; and
- Remaining work and finishing activities, primarily on the Low Density Polyethylene, Ziegler, Alumina and Guerbet units of approximately USD260 million.
3. A contingency amount for items that could impact the cost forecast of USD300 million.
Additionally, throughout the LCCP, there have been adverse weather conditions and related productivity issues, including but not limited to the impacts of Hurricane Harvey in 2017.
Based on remediation measures taken, the Board is confident that the cost to completion estimate for the LCCP, confirmed by the Board's most recent assessment of LCCP management's reporting, is tracking the 22 May 2019 announced cost guidance range of between USD12,6 billion and USD12,9 billion. The Board also remains comfortable that the principal factors for the cost increase as identified in the 22 May 2019 market guidance are sound, and that criminal conduct is not one of those factors.
Outcomes of the Review
The purpose of the Review was to consider the circumstances that may have delayed the prompt identification and reporting of these developments, root causes, and the legal consequences thereof. The Review, which is legally privileged, has now been concluded.
The Board has made the following key conclusions:
- The primary responsibility for shortcomings in relation to LCCP lies with the former leadership of the LCCP's Project Management Team (PMT), which engaged in conduct that was inappropriate, demonstrated a lack of competence, and was not transparent. However, on balance, the Board finds that there is not sufficient evidence to conclude that these individuals acted with an intent to defraud.
- In addition, certain governance shortcomings relating to the LCCP also contributed, including a culture of excess deference within the control environment and governance structures that oversaw the LCCP.
- No earnings, financial position, or cash flow restatements are required.
Some of the driving factors behind the cost and schedule increases are common in projects of the size and nature of the LCCP, but some are shortcomings that may have been avoided.
In light of these findings, the Board has concluded that appropriate steps need to be taken to ensure appropriate accountability, to re-establish trust in the Company and its leadership, and to assist in promoting a culture of "constructive dialogue" across the organisation.
Specific Causal Factors
The Board has identified multiple causal factors that affected the prompt identification and reporting of the errors, omissions, and inaccuracies in the project cost estimate that underpinned the 8 February 2019 market guidance and which were described in the 22 May 2019 announcement. This was based on a substantial amount of independent work and included additional substantive and analytical testing procedures on LCCP capital expenditures, accruals, and associated transactions during the period 1 July 2017 to 30 June 2019.
The causal factors include:
- Competence - Insufficient experience within the LCCP leadership team in executing mega projects.
- Conduct - Inappropriate conduct and an improper tone at the top of the LCCP, including an excessive focus on maintaining cost and schedule estimates at the expense of providing accurate cost and schedule estimation to oversight bodies (including Joint Presidents and Chief Executive Officers (Joint CEOs)) within the Company.
- Segregation of duties - Insufficient segregation of duties of the LCCP project controls environment from the LCCP project execution environment, which prevented the identification of certain potential errors in cost and schedule estimation.
- Control procedures - Inadequate control procedures within the LCCP control environment that allowed erroneous and/or unsupported reporting by the LCCP leadership to go unchallenged without proper escalation of potential red flags.
- Ethics process - Inadequate procedures to ensure that internal ethics complaints as to the LCCP were escalated appropriately.
- Project-related Control Environment - A culture of excess deference within the control environment that oversaw the LCCP caused certain individuals with control responsibilities and in oversight committees, including but not limited to the Steering Committee created to oversee the LCCP, to exhibit insufficient scepticism toward reporting by the LCCP leadership team.
It is the Board's assessment that the former leadership of the LCCP PMT's conduct was inappropriate, demonstrated a lack of competence, and was not transparent. These, coupled with governance shortcomings, were the primary factors in relation to the prompt identification and reporting of developments relating to the LCCP's costs and schedule between 1 January 2019 and 22 May 2019. The Board believes these factors compromised the ability of the various LCCP governance structures, including the Board in relation to LCCP matters, to perform their oversight role effectively on behalf of shareholders.
Remediation
A number of significant remediations and consequence management steps have already been implemented or initiated to hold the responsible individuals to account and to address the shortcomings identified during the Review. These include:
- Reassigned oversight and accountability for the LCCP to a new Executive Vice President as of 1 April 2019 and added additional project management resources to the LCCP.
- Implemented a new LCCP controls structure, independent from the LCCP's execution activities, and redesigned controls on cost reporting regarding the LCCP to ensure segregation of duties, control effectiveness, and appropriate oversight.
- Commissioned additional external assurance work to validate aspects of the Company's estimates regarding the LCCP's cost and schedule.
- Engaged in consequence management, including initiating disciplinary action against the Executive Vice President previously in charge of the LCCP and removing him from all work responsibilities, and effected the negotiated separation from the Company of the three Senior Vice Presidents with roles in the project.
- For FY2019, the Joint CEOs were awarded zero as the value of their short-term incentive.
- For FY2019, all members of the Group Executive Committee (GEC) were awarded zero as the value of their short-term incentive.
- Reduced incentives awards for individuals company-wide based on relation and/or proximity to LCCP.
- Requiring that various employees involved in the LCCP and/or its oversight engage in additional training, including on reporting obligations.
- Re-evaluating the effectiveness of the finance function holistically with a specific focus on parts of the function supporting Sasol's business in the United States, which will be led by the Audit Committee.
- Continuing with the roll-out of the Aspirational Culture programme within the entire Group and reconfirming critical leadership behaviours on a Group-wide basis.
- Revising the Company's procedures regarding the escalation of ethics complaints and internal investigation findings.
The Board believes, however, that further remedial steps are required to embed a new culture at all levels in the Company. At the leadership level, there needs to be more robust challenge of key decision making. At the LCCP, the Company's executive leadership placed too much trust in the PMT leadership. A spirit of "constructive dialogue" which includes empowering challenge and avoiding conformity, needs to extend though the Company so that people always feel able and free to speak up without fear for their prospects.
To address this, in addition to ongoing culture transformation initiatives, the Company intends to focus on promoting leaders who have demonstrated their ability to promote transparency and constructive dialogue.
Further Accountability Measures
With the LCCP now nearing completion, the Board firmly believes that this strategic project will soon start delivering significant strategic and financial benefits to our shareholders and other stakeholders, and will help Sasol to gain a competitive position in a growing international chemicals market.
However, it is a matter of profound regret for the Board that shortcomings in the execution of the LCCP have negatively impacted our overall reputation, led to a serious erosion of confidence in the leadership of the Company and weakened the Company financially. Sadly, the LCCP challenges have tarnished the entire Company, which has world-class assets and teams that have delivered a consistently strong performance.
The Board has resolved to ensure that the Company lives its values and to ensure that there is a culture of accountability and consequence management. It is also the judgment of the Board that, for trust to be restored in the Company, a leadership reset is required.
It is in this light that Mr. Bongani Nqwababa and Mr. Stephen Cornell, Joint CEOs, have agreed to an amicable mutual separation with the Company. Effective 31 October 2019, Bongani and Stephen will step down as Joint CEOs, and as executive directors of Sasol and its subsidiaries. To be clear, the Board has neither identified misconduct nor incompetence on the part of the Joint CEOs.
The Board has appointed Mr. Fleetwood Grobler, EVP: Chemicals, to assume the role of President and CEO and as an executive director, with effect of 1 November 2019.
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Sasol - late submission of AFS
The Johannesburg Stock Exchange ("JSE") advised that Sasol has failed to submit their provisional reports within the three-month period stipulated in the JSE's Listings Requirements.
Accordingly, the company's listing on the JSE trading system has been annotated with an "RE" to indicate that it has failed to submit its provisional reports timeously and that the listing of the company's securities is under threat of suspension and possible removal.
If the company still fails to submit their provisional reports on or before 31 October 2019, then their listings may be suspended.
This announcement has been placed by the JSE in the interest of shareholders.
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Sasol - timetable announcement
Sasol shareholders are referred to the Company's announcements on 16 August 2019 and 6 September 2019 regarding the delay in the release of Sasol's annual results for the year ended 30 June 2019 (2019 financial results) and related year-end publications to allow for the completion of the independent review commissioned by the Sasol board of directors (the Board) in May 2019 (the Board Review).
Board Review
The report from the Board Review is complete and the Board will now consider the findings and determine any appropriate steps arising from these. The Board will make an announcement on these matters in due course.
Release of 2019 financial results and related year-end publications
The Company will release its 2019 financial results as well as its 2019 annual financial statements and other related year-end publications on Monday, 28 October 2019.
The JSE has been informed of Sasol's intention to release its 2019 financial results on 28 October 2019. The JSE will release an announcement, as it is obliged to do in terms of para 3.17(b) of its listings requirements, informing Sasol shareholders that the Company has not released its 2019 provisional financial results and annual financial statements in accordance with the JSE listings requirements and cautioning that Sasol's listing on the JSE is under threat of suspension and possible removal. An annotation to that effect will also be made on the JSE trading system, which will be removed as soon as Sasol's 2019 financial results and annual financial statements are released.
Annual general meeting
The annual general meeting of shareholders of Sasol will be held at 10:00 on Wednesday, 27 November 2019 at The Forum, The Campus, Wanderers Building, 57 Sloane Street, Bryanston, Johannesburg, South Africa, to transact the business stated in the notice of annual general meeting (AGM notice). The AGM notice, incorporating a summary of the 2019 annual financial statements will be published on the Sasol website and distributed to Sasol shareholders by 29 October 2019.
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| Closing price data source: JSE Ltd. All other statistics calculated by ProfileData. |
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