Sasol Limited (SOL) Earnings Call Transcript & Summary

A very warm welcome to all joining this call today. With me here today also, I have our CFO, Paul Victor; and Brad Griffith, Executive Vice President, Chemicals business. By now, I'm sure you would have read and had a chance to go through this morning's announcement relating to our proposed U.S.-based Chemicals business joint venture with LyondellBasell. This is a really important step for us, both strategically and financially. Financially, the USD 2 billion of upfront proceeds that we will receive are a meaningful set, bringing leverage down. We will be a 50% joint venture partner going forward, and so we will also participate equally in the upside in the event that macro conditions recover. More than this, however, this is also a very positive strategic step. The transaction contributes to shifting the profile of the Chemicals business away from commodity to Specialty Chemicals. This is aligned with our strategy and consistent with our objective for the future Sasol business that will assist in improving profitability through the cycle. This is significantly helped by the fact that we will maintain value chain integration to help protect the profitability of the performance Chemicals business. This is a win-win process. This morning's announcement set up much of the information, but we wanted to use this call to lay out some terms of the transaction, the scope, the pathway forward and answer any questions that you may have. Let me start by walking through the key terms of the transaction. By way of background, I think it's important to say that we got you after an extensive competitive process through which we explored a number of different transaction constructs with different partners. It was this proposal that offered us the best mix of upfront and long-term value whilst helping us accelerate delivery of our strategy. The partnership is with LyondellBasell. I'm sure that many on the call will be familiar with it, but for those that are not, they are one of the largest global producers of plastics, chemicals and refined products. They are currently the third largest producer of ethylene in North America as well as being the leading producer in Europe. LyondellBasell, therefore, have a breadth of operating expertise in commodity chemicals that few can match. The U.S. headquarters is -- and the U.S. headquarters and executive leadership are based in Houston, close to Lake Charles. Therefore, I believe we have a very strong partner, and the Sasol team is excited to work with them going forward. LyondellBasell will pay us USD 2 billion for the 50% of the JV at completion, subject to any closing adjustments. The new JV is to be called Louisiana Integrated Polyethylene and LyondellBasell will be the operator on behalf of the JV. Each JV partner will provide their pro rata share of ethylene feedstocks and will also grow out the share of ethylene and polyethylene products at cost. The transaction will be subject to a few key conditions precedent, which I will talk to you later, but we are hoping to close these out before the end of 2020. It's important to clarify that Sasol will retain the U.S. Performance Chemicals business in its entirety. That includes the new Ziegler alcohol plant, the ethylene oxide and derivative plants and the Guerbet alcohol plant. The transaction will, therefore, have the effect of rapidly shifting our portfolio towards Specialty Chemicals, which is in line with our strategy shared during our Capital Markets Day in 2017 and reaffirmed in June this year. We will also, however, protect our integrated value chain by retaining access to our share of the low-cost, on-site ethylene produced as well as ethylene from the existing plant. And this will help protect the profitability of our U.S. Performance Chemicals business through the cycle. It's exactly this through the cycle, quality of earnings that we are pushing for in the move away from commodity chemicals. Sasol's remaining 50% base chemicals exposure bodes well for participating in the commodity chemicals market recovery over the next few years. The next slide aims to outline the Sasol transaction and the remaining business which Sasol will retain in the U.S. The assets that will go into the joint venture, including the recently constructed 1.5 billion ton per annum ethane cracker, the low-density polyethylene and linear low-density polyethylene plants with a combined capacity of approximately 900 kilotons per annum and associated utilities and infrastructure relating to these units. The land on which those assets are based will also be part of the JV. For the avoidance of doubt, the original ethylene cracker, together with the Gemini joint venture for high-density polyethylene and phenolics business are excluded from the transaction as well as the U.S. Performance Chemicals business. As a reminder, the Performance Chemicals business consists of the ethylene oxide and derivative units, the Ziegler alcohol unit, the alumina unit and the Guerbet alcohol unit. Other legacy Performance Chemicals units are also excluded. As I mentioned before, LyondellBasell will operate the JV assets. There will be a tolling agreement in place for the conversion of ethane into ethylene and ethylene conversion into polyethylene. The intention is, therefore, for the relevant employees to be transferred to LyondellBasell when the JV has controlled. The JV will underline on which it operates, but Sasol retains ownership of the remainder of the property and therefore, able to use vacant land for any potential growth opportunities in future. Profitability of our integrated value chain will be preserved by retaining access to our share of the low-cost on-site produced ethylene as well as ethylene from the regional plant. Steady-state volumes for the LCCP cracker remains at 1.5 million tons per annum and approximately 0.9 million tons collectively of polyethylene capacity once fully ramped up. Sasol will, therefore, own 50% of these volumes after completion of the transaction. Full ownership of our existing crackers is retained with around 460 kilotons per annum ethylene capacity. The transaction is subject to several conditions precedent. The key ones being the approval by Sasol shareholders and relevant regulatory clearances. A circular will be made available to Sasol shareholders in October, containing full details of the transaction, and we are hoping to obtain the relevant shareholder approval at our Annual General Meeting, which is due to be held on November 22. As I said earlier, we are aiming to close the transaction before the end of 2020, but that's obviously subject to receiving the various regulatory clearances here. We are not anticipating any particular concerns, but in the current situation, we are aware that some regulatory processes are taking longer than they normally would do. So there is, of course, some risk that it may fall into early 2021. This transaction represents a meaningful step forward in our deleveraging path, which I talked about in August when we announced our financial year 2020 results. Proceeds from asset disposals, together with cash unlocked from our self-out measures are significant contributors towards reducing our net debt. For financial year '21, we will continue to execute against our response plan objectives to keep liquidity strong and further bring our leverage down. The final major step on our deleveraging pathway is the rights issue to be executed in the second half of financial year 2021. We want to implement this when the amount required is well defined, and we can also do so on the basis of a key clearer and stronger financial position. The amount to be raised remains subject to prevailing operating and market conditions as well as any further asset disposals. In addition, we are progressing our Sasol 2.0 initiative to support the reset of the organization to be sustainably profitable in a low oil price environment. More information on this will be shared at our investor update to be held later in this year. In conclusion, this transaction really is a big step forward for us. It's an integral part of the deleveraging pathway to get us back to a sustainable balance sheet, and it also accelerates delivery of our strategy. Thank you, and we can now open the conference call for questions.

The first question is on the financials. Do you expect further impairments in the U.S.-based Chemicals business post the LCCP stake sale today? And that's from Sashank Lanka.

Thank you, Sashank. Good afternoon, everybody. Good afternoon, Sashank. When we released our financial results, we did give you indication that the fair valuation of the bid range that we received from bidents informed our impairment write-down. Based on that, we don't envisage any impairments. Of course, one needs to assess the macroeconomic situation as at the 31st of December and outlook at that point in time. If that deteriorates, of course, there will be pressure. But if it improves, there is a possibility of a reversal of impairment. Our take at this point in time is the level at which we think valued the asset in the U.S. is very much sufficiently valued. And given today's macroeconomic outlook, no further impairments will be required. On the contrary, previous impairment write-downs that were made on the Performance Chemicals had indicated a vast improvement since June in terms of long-term forecast, and that may result in the reversal of the impairment on the PC side of the business, but like I said, that's what we know today. Three months is a long time in the world economy, and things can change. But what we know today, local impairments involve a -- kind of a virtual impairments may be [indiscernible].

The next question, thank you, Paul, is from [ Gerhard ]. If you are pushing away from commodity chemicals, why not sell 100% of the polyethylene plants?

Thanks, [ Gerhard ], for that question. I think we have said that the commodity cycle currently is at the low end. And therefore, we believe that the construct, as I've explained earlier, that this proposal of selling at this point or JV, 50% offered us the best mix of upfront and long-term value because we would participate in the upside as the commodity cycle recovers. And therefore, when we exit the last 50% or the remainder 50%, we believe the fair market value would look different to what it could be today. And therefore, this approach for us in a stepwise manner is the best value that we could derive for shareholders.

Okay. Thank you, Fleetwood. Maybe another question on the financials from Adrian Hammond. How has [indiscernible] influenced your views on EBITDA expectations for LCCP? Are your last steady-state EBITDA estimates of $1 billion still in place? Or has this changed following the sale?

I will deal with that. Thanks for the question, Adrian. Of course, our thinking on [indiscernible] thinking on the margins and pricing is [indiscernible] thinking on margin and pricing. We have to do a valuation based on what we believe the pricing is. My sense is that both of the parties, ourselves and themselves, do pay a lot of attention in terms of the economic tests such as IHS and Wood Mac in terms of pricing. But then, of course, you need to do your only netback calculations. We do believe based on our assessment of the EBITDA ranges, which I will give you just now is that we've got a market related and fit value for the 50%, given where pricing sits in the commodity chemicals price. Having said that, we did say that -- in the same announcement that as soon as we issue those circular and also to take into the full impact of Laura when we issue that at the end -- late in October, we will then host a conference call to provide you with a further update on what the final impact of Laura is specifically on the EBITDAs for financial year '21 for the Charles asset. And then more importantly, we will also need to then provide the sense of what the outlook is and especially, the ultimate $1 billion run rate up before. One of that run rate will be in 100% ownership. And then what it will look like after we have sold our 50% portion of the commodity chemicals. So that's scheduled for late in October. And the only reason why we don't release it today is really as a result of the overall developments. We just want to kind of get our minds around that. So we create a very accurate and clear target and outlook out for financial '21, but we'll also give you an update on the steady-state EBITDA rate for our portion going forward there.

Okay. Thanks, Paul. The next question is, when will the LDPE plant begin BO? Is that still targeted for the end of October? And can you give us an update of the impact of the hurricane on the plant on LCCP, particularly?

Yes. Thanks, Alex. So the current plans to start up after the impact of Hurricane Laura is driven by the utility provider of electricity into the site. There a reliable supply of high-voltage power into the site has been communicated to the market and also to us, and we stay in very close contact with them on a daily basis virtually. And that is that by early to mid-October, all of that would be restored. Now as we speak, we have commenced with some commissioning activities of many units over the site. Suffice to say, the linear low and the LD units are also in that mode of early commissioning activities. And the delivery of reliable power remains as predicated by the service provider. We will still have beneficial operations of the LD unit target for October. So that is still in play. And with the risk of reliable energy or electricity supply into the site. That's the only provider. I think then with respect to the other impacts of Laura, as Paul has mentioned, we will provide an update later in the year, but specifically, not later than our metrics to the market in October.

Thank you, Fleetwood. There is a question from Chris Nicholson. Could you provide further detail on the synergies or upside you expect arising from access to Lyondell's customer base or supply chain? And will it accelerate or increase the targeted 60% of volumes to be placed in the U.S. contract market?

So I'm going to ask Brad to give us a feedback on this question. Brad, if you wish.

Yes. Thanks, Fleetwood. Sorry, there's an echo there. You'll probably have to mute there in your commentary. I think, Chris, for the question, we will be putting in place a marketing agreement for the JV with our partner, LyondellBasell. We are still working through those arrangements. Those would only take place after closing. So it's too early for me to be able to comment on what we would expect around the customer base. But as Fleetwood described in the presentation, we're very pleased to have LyondellBasell as our partner. They're well positioned in the marketplace, and we'll be able to communicate more on that as the JV is formed.

Thank you, Brad.

Thank you, Brad. I think the next question we have from [ Gerhard ], which is related to marketing is, are there still -- are there or will there be joint marketing agreements in place to sell -- in place between Lyondell and Sasol? Or will each company market and sell its own share of production?

Yes. I think, [ Gerhard ], as Brad just explained, we are in discussions to finalize that marketing agreement by LyondellBasell. That would happen once the deal is closed to that point in time. Of course, Sasol market and sell its own polyethylene products to the market.

One more question with regard to the ethylene supply. For the ethylene that you'll get from the joint venture, LIP, do you need to pay market prices? That question is from Alexandre [ Samaji ].

Alexandre, as I've indicated, this is a manufacturing joint venture that means each partner get its producer economics. So we would get our ethylene based on our ethane input at costs from the cracker. And therefore, we will not pay market prices for the ethylene that we consume in any other downstream derivative plant.

Thank you. The next question is from [ Wade Napier ]. Wade's next question is does selling 50% of the cracker not reduce the attractiveness of brownfield expansions? If we run the ethylene mass balance, 50% of the LCCP's cracker plus the legacy cracker matches current feedstock demand from LCCP's Performance Chemicals. 50% of LCCP's base chemicals, 50% of Project Gemini and other legacy needs. Have you, in fact, discussed future ethylene offtake agreements with LyondellBasell for when you inevitably undertake brownfield expansion and don't have enough ethylene?

Thank you. That's a very good question, and we have made provision for that. So we have agreed with our partner that future cracker expansions will be such that Sasol could participate in such expansions for the needs and growth of our Performance Chemicals business. So yes, we have made provision for that. And it's basically, on the condominium cracker concept, where each partner will contribute the capital for the relevant portion of offtake. And of course, Sasol would be requested to have access, and we can then elect to participate or not participate, depending on the time of when this comes to play.

Thank you, Fleetwood. We have a question on the rights issue. Can you please be specific what are you exactly targeting in your decision to do the rights issue and the size of the rights issue? Is it the debt covenant? Do you want to get net debt down to $4 billion? Or do you want to reduce your net debt by $6 billion? Do you include the lease liabilities when you think about net debt? That's a question from Gerhard Engelbrecht.

Thank you, Gerhard. We've been -- I think what comes first, we have said that in Sasol 2.0, we want to lead ourselves and design an organization that can be sustainable in a 45 modeling world, meaning that it has the right to deliver a system return on assets as well as having a certain level of uptake on the balance sheet in that specific environment. In that environment, a big label of $4 billion is ultimately needed to ensure that it matches the kind of cash flow generating ability in a pretty fast-moving world. Is there an exact science for a specific outcome of the target? No, it's not. We will, as part of Sasol 2.0, look at various scenarios and various outcomes and the debt may fluctuate around the $4 billion absolute. It might be higher, depending on kind of what we envisage will be sustainable in the business. However, what is very kind of critical is a targeted net debt-to-EBITDA level. I think not only from a rating agencies perspective, we want to back to investment grade, maintaining a certain level of net debt-to-EBITDA debt ratio is quite critical. And that's the reason have certain thresholds in place. Typically, Moody's will have 2.5x negative EBITDA as a criteria for you to become investment grade. You have to show that you can do it on a sustainable basis. So that metric in itself is actually very important. Now we want to come to the other part of the question to say, so what will the thinking be ultimately in deciding on a right issue. And the thinking is exactly the same as what we've discussed with you during the road show. We are targeting quite heavily at the [ self-out ] measures, the [ $1 ] billion of [indiscernible], which we achieved and we are targeting another $1 billion. But we might still achieve this year's $1 billion. So far so good. The results for the first 2 months have been quite promising, and we do have a reason to believe that at this rate, we will be able to deliver on the $1 billion target. Well, if we overachieve the market, it's volatile to tell in terms of exactly how we -- where we find ourselves, and we have seen with the macroeconomics, it can change quite quickly either up or down. So we have to be quite cautious about that. So that was the first step that we said to you we will monitor and watch closely. We are not behind that number, but we're not super ahead of that number either, but we're on our run rate in terms of the performance. Then secondly is, we did say that we want to see how much of our asset disposals we can deliver, and we started at $2 billion to $4 billion. Now ultimately, with this deal, we are obviously moving towards the -- moving to the higher end of that range, which is quite positive. Shareholders will still approve this transaction, but it's very positive that we made good progress with the asset disposals. Thirdly, we did say that we will need to position ourselves for 2.0 to you as investors in November so that you can give a sense of what are we targeting as a sustainable business and how far are we from it and what decisions are needed to get us there. And the rights issue might not be required in terms of that. We will only make this final decision as we communicated to you in terms of the ticket size of the rights issue in February. We are still committed to say, it is a smallish amount needed to reset the balance sheet, meaning below $1 billion. I think the need for a rights issue is probably not there, and one will probably want to see if you can't deal with it in other ways, potentially selling more assets and below weighted average cost of capital. We'll try to see what other levers you can pull. But if a more sizable rights issue is needed, then we should do that as well, but we shouldn't be scared of doing that. But we cannot today tell you whether it's not going to go into what the ticket size is. I've seen a lot of the commentary that the sell-side did push in the market today was commenting on this deal should put -- take the pressure off of a higher rights issue, and likely so. But it is an important deal for us. And if the cash flows, it will make a significant difference on the net debt-to-EBITDA. It will help us to get to those -- below those capital target of 3x that's currently the government level -- target as at the 30th of June of next year. So we've done it very carefully. Consider all of this, ultimately, the shareholders have to vote on it. And shareholders will not vote if they think it's not needed. Our shareholders will also be able reminded, we believe, that if it is needed for the sustainability of the business that, that rights issue will pass in what -- in which shape or form. So this is where we find ourselves. It's too early to say, but definitely, the pressure is starting to improve and swinging more towards a more improved balance sheet risk, and hence, we can make more careful decisions on rights when we get there. Hopefully, it answers your questions.

Thank you. The next question is by Adrian Hammond. Are you concerned about covenants if the deal does not close by the end of December? And then linked to that, the termination of the underwriting agreement, is that perhaps hinting at a significantly lower amount that may not warrant the underwriting is a question by Herbert.

I think it's two very good questions that Herbert asked. So ultimately, the deal is still subject to shareholders' approval. And if the shareholders don't approve the deal, then obviously, it will -- it can put those covenants at all times under risk. That can definitely be the case. But then ultimately, if shareholders do approve and the fact that we have a [indiscernible], we do believe that we have a reasonable prospect to negotiate with banks away to pass-through on the half year end, even with cash flows not flowing. So usually what banks will consider is if you've got these terms buttoned up and the risk is really below the cash model flow, then ultimately, the banks will allow the company to make other [indiscernible] as if the cash did flow at half year end, and hence, we will be able to navigate and pass the test effectively with those providers and now by the banks. We will effectively engage quite actively now with our lender group, now that we have kind of the key terms buttoned up. And we do believe that it really gives the banks also the comfort that, ultimately, we are making good progress here. And this is what they want to see, and the cash will be coming to service the balance sheet. To the other part of your question that -- sorry, can you repeat the question again? I think the other part is on the underwriting. So underwriting does come at a cost. And we made a decision with the involvement of our major shareholders to stop the underwriting because we know that the rights issue we seek there is only due in February. Why do you want to pay underwriting fees for something that may require certain variables to play out on a rights issue if we issue that? So it means we made a decision in collaboration with our shareholders to stop the softer underwriting. And only once we get better clarity on the potential rights issue, we will then consider to be introduce it. If it's going to be small in a scenario where the issuance of the right issues to the smaller side, then probably the need for soft underwriting is not necessary where it becomes bigger than, of course, you need it. But I think it's quite important, shareholders also have the right to participate and soft underwrite the shares. And if the shareholders wishes to do so, some shareholders did give indications that they may be keen to do that rather than to get the lender group involved, we will also consider it, which is quite usual for a process like this. So at this point in time, I think it makes good sense not to have it in place. It's [indiscernible] of not having it. Shareholders have been informed and will watch this space in terms of how we want to position the stock and how we want [indiscernible].

Thank you, Paul. The next question is from Faisal at Goldman Sachs. It's at what point would you consider saying the remaining 50%? And does your partner have the option to increase its share to 100% at a certain point in time?

Thank you, Faisal. I think we're very clear on this that the future sale of the remaining 50% is not on a fixed manner. It's at a fair market value. Lyondell can make us an offer. We can offer them to exit. There is no put or call at all in the agreement. Therefore, it will be assessed at a future point in time, and we've also agreed with our partner that, that future point in time would be at least 2 years from now that we will assess the next step.

Thank you, Fleetwood. A question from [ Mike Townsend ] is, can Sasol continue to hedge ethane inputs into the cracker? Or will this be managed within the JV? And have you made any further progress on hedging?

Yes. Well, the question is, do you want to hedge your exposure? We still have a 50% exposure of ethane ultimately to the EBITDA just on the commodity chemical business, and you've still got that full exposure on the current legacy assets as well as your PC business or your specialty chemical business. As part of our '18 strategy, we will definitely consider, what the exposure is post the 50% sale of the commodity chemical business. And what is the capital ratio we plan to put in place because it's our balance sheet that still needs to be managed from the remainder of EBITDA, so it'll be coming from the remainder assets. So they can keep part of future [indiscernible] for us. And our 50% portion is definitely kind of up for hedging. It's one decision that you need to make in collaboration with a partner. It's your transaction, it's your decision, and it's your [ business ]. So those things are really being left to each partner to decide how they want to cover their process on that.

There's a question, I think, from Herbert. Are we able to provide any update on other asset disposals at this point in time?

I think, Herbert, as far as the other asset disposal program is going, yes, we're working those agendas in terms of the prospects. We haven't got any further details we could share with you today. Suffice to say that once we're in a position to share such details, we will communicate to market. But the processes are still running, and we will update when we're in a position.

Okay. Thank you, Fleetwood. There is a question around after the sale is completed and the proceeds received, what do we expect the interest cost to decline by in half 2 FY '21?

Thanks. A very specific question. We will also provide you with an updated guidance on interest. I don't think it will make such a big difference. We have -- I think we can really get the forecast that we gave was around about ZAR 8 billion in terms of interest. So depending on where the cash flows and what -- and when it flows, ultimately that $2 billion will make a dent in the interest charge for financial year '21. I think at this point in time, jumping at what 6 months of interest may be at $2 billion for financial '21, I think that would be a good derivative fund investment. How we do that [indiscernible] to a quick sum. But I think the more important thing is to say, what big balance do we lead ourselves towards the end of June and what is the interest charge going forward for financial year '21. I think that's the one that we will provide update on as we progress with these asset disposals, but we're making good progress in terms of that. And then I would also like to say that we've been quite successful in our tax structure in terms of our U.S. assets. And typically, flows like this will help us to delever the U.S. balance sheet quite significantly, which makes that interest component that's currently ineffective, the treated ethanol tax reconciliation, that will make it actually effective because your ratio of debt to equity are then effectively -- significantly improves and hence there's more debt capacity in that entity, and hence, you can get the tax deductibility of most of the interest, which also is quite positive. I don't think we have spoken too much about that, but we can focus on it when we have [indiscernible], also shed a little bit more color to say how much more effective do we become if there's...

Thanks, Paul. There is a question just related to tax. Can we confirm that there are no material adverse tax consequences, given that you are selling the 50% for well below what it cost? Question from Chris.

Chris, yes, when we take the [indiscernible], I think tax incentives were a significant part of the MPV of the product -- project. We feel comfortable that all the tax credits that we've got until now, none of that will be full [indiscernible]. So ultimately, most of those tax benefits will still remain. The other portion on tax, though, looking forward from now, going forward, if one then excludes tax expense, which is still very much coming to Sasol, the forward-looking tax benefits were more in the -- in terms of lower profit and taxes, and that made the large share up of the tax benefits. Those won't be coming [indiscernible] between our portion as well as the demand of our portion. Ultimately, it needs [indiscernible] from the Louisiana governance tax, governance of [indiscernible]. We have submitted those applications already. We feel quite positive that there will not be any adverse impact. So we will obviously [indiscernible] based on the kind of the disposal of our portion, but the lion's share will still be coming our way, and we'll still have impact -- positive impact on our MPVs going forward. So there is no loss of previous tax losses either on our future -- sitting against our future revenues. So our tax position is still very much protected as a result of this as well.

Thank you, Paul. There is a question from Mark Thomas from Chemical Week. Is Sasol in any talks with other previously interested parties for other performance assets, Performance Chemicals assets at Lake Charles? And is it possible to have a construct of other JVs in that instance?

Yes. Thank you for the question. I think we've been very clear from the outset, and it is underpinned by our strategy that we would see partnering options for the Base Chemicals assets in Lake Charles. So our Performance Chemicals assets are core to our strategy, and we've got no need or compelling reason, neither a strategic intent, to partner at this stage with any of our Performance Chemicals assets in Lake Charles. So the answer is a definite no.

Thank you. In terms of -- a question from Catherine Stronach from Columbia Threadneedle Investments. What is the time line you are targeting for deleveraging to achieve an IG rating again?

I think that's also a very good question. So there is a few sides to this point, Catherine. The first one being is the methodology of your rating agencies. So the rating agencies, because most of our income is still derived from South African mines and because we still domicile South Africa. The rating agencies will allow you to decouple effectively from the South African sovereign only limited to certain levels. So you've got 5 levels for [indiscernible]. But you can't be 5 levels higher than the sovereign in that methodology. So we also have to remember that in South Africa is at least more than 2 levels below investment grade. I think Sasol as a whole will find it difficult to be rated as investment-grade regardless. So that's the first thing. I think the reason why I mentioned that is, we have been asked by our shareholders, will we drive investment-grade at all costs. And the answer is, in this instance, you cannot like investment-grade at all cost because it doesn't make sense. But then, let's say, things with South African sovereign is less than 2 levels below investment-grade, and your credit rating has improved to the point that it's sustainably incorrect that you can actually improve below 2.5x net debt to EBITDA and that your forecast also indicates clearly in that direction. Obviously, there are many other factors that the rating agencies do look at in terms of risk, governance and so on and so forth. But I can use a very key criteria for that one, then ultimately, the rating agencies hopefully will technically consider our rating back to investment-grade. So those are really the 2 things. So the third part of your question is how quick. So ultimately, if all goes well, we plan to be below 2.5x by 30th of June. And as the debt comes down, the trajectory of letting EBITDA continuously improving, even in a $25 down the road with Sasol 2.0 assisting the vehicle. Then ultimately, rating agencies will consider. I will say that we're probably the best of 18 to 24 months away from a re-rating back to investment-grade. I will say best case, that will be my bet. But I can't answer for the rating agencies, I'm just giving you my view.

Thank you, Paul. There is a question from [ Tobela Biksa ]. Could you please just clarify your time lines with regards to the new LCCP EBITDA guidance, the LDPE reaching beneficial operation and the investor update conference?

Thanks, Feroza. So [ Tobela ], I think we've covered one already. So the beneficial operation of the LDPE is [indiscernible] in October as we've covered right at the outset. Our Investor Day, we are planning just after our Annual General Meeting. So that would be the first couple of days of December. We will fix the date still, but it's probably just after the U.S. Thanksgiving, and the first time, we've got a solid business audience. So it's probably the first days of December. And then with respect to our outlook and EBITDA guidance, we would do that also latest at the time when we issue our business performance metrics, which is then also later in October. So I think that would address in the various time lines. So the LDPE beneficial operation would be in October, as we've indicated. So that's the target.

Thank you. Then just in terms of the question we had about this -- sorry, will Sasol 2.0 cost savings influence your thinking around the rights issue, which is a question from Adrian Hammond.

I think it's got to be quite critical. The thing is Sasol 2.0 will be focused on 1 type of cash flow generation. Can the company generate enough returns on capital in an impoverished part of the world? I think we said that a couple of times. That cash flow generation is going towards [indiscernible], and it will also allow them to grow the company in terms of future disciplines and value distribution to shareholders. So for sure, that is definitely what -- exactly my thinking, and that's exactly why we want to talk to you about that before we make a final decision on the rights issue to [indiscernible].

All right. Thank you, Paul. There is a question from [ Bekin Tetra ]. It says, in terms of the employees that will transfer upon completion of the JV deal, what is the approximate cost savings we can expect relative to the FY '19 cost base?

Thank you. Thank you, [ Bekin ]. We are not at this point in time in a position to give you that level of detail. We are still finalizing the carve-out, the transfer of employees, the exact numbers and what is the approach to that. We will follow due communication and engagement with their employees. So therefore, we're not in a position to share any of that detail today.

All right. Maybe just the last question then that we have on the system is [ Wade Napier ]. What are your expectations for annual CapEx savings following the disposal?

Right. Very much so, we will ultimately work all of this out. During the Sasol 2.0 presentation to investors, our undertaking was to also provide you with an update in terms of what our capital forecast will be for the next couple of years, meaning '21 -- financial '21 to '25. So ultimately, we were also going to make it clear what asset disposals as a whole will work to our -- Sasol's capital layout going forward. So watch the space for that one.

Okay. Feroza, I think we have dealt with the major and pressing questions that we received. So I think there are any residual questions that are still coming through, please engage with our IR team. We would respond and deal with that, and we would continue to engage. So please feel free to make use of that. I do want to thank you for your attention and participation and questions this afternoon. And we look forward to give you more details as promised in our next engagement around the circular and our business performance metrics that is due then in October and looking forward to engage with you then again. So thank you very much for your attendance. Operator, we can conclude the call. Thank you very much.