Sasol Limited (SOL) Earnings Call Transcript & Summary

Good morning, good afternoon, everyone. Welcome to this conference call on the BPM results we've published earlier today, South African time. So what we would like to do is to cover a couple of themes that has been put out in our business performance metrics on the website and in the SENS. So I will cover by starting off the operational environment and specifically, just give you context on the COVID-19 impact in general. So the largest impact we have seen are on 2 major areas of our business first. We had a COVID impact on our mining operations in terms of productivity that was impacted in the month, specifically the month of August to early September. At this point in time, I'm pleased to report we have worked through that impact. The situation has normalized in our mining operations, and we don't have any impact on employees not being able to work in the mining environment affecting any output or shifts. So whilst in Q1, the month of August did have that impact. But we're pleased we could work through that. Of course, the other area that we are still experiencing COVID-related impacts are on the key market areas. And therefore, you would also note that some of the areas in our Q1 performance have been highlighted where we've experienced some market softness. When I reflect a bit later on the chemicals area and on Energy business, I will highlight some of those. We are also, in terms of looking forward into the next quarter or the next part of the financial year, we are very cognizant of how the second wave is picking up, and we are cautious in terms of the outlook because of the second wave and the impact. As we see currently in Europe, we are concerned about the numbers are much higher than it was on a daily basis on the first wave of reporting of cases. And the main areas where we look at in terms of operations as well as markets, France, Germany, Netherlands, U.K., Spain is starting to move. So with that caution, we will continue to look at the business impacts and how it will unfold. So if I move on then to the other big event in the last quarter was the hurricane impacts in Lake Charles. We had 2 large hurricanes. I'm not going to reemphasize that. But Hurricane Laura was the biggest, most severe hurricane in the last 150 years in that region. And that impacted our operations already from the last week in August as we started to prepare to safely shutdown our operations. Then later on in October, as we were just getting back into start-up modes of some of the plants, we -- at that stage, when Hurricane Delta made landfall, we already had 3 plants up and running. But we had to shut them down 2, 3 days later because of the preparations for Hurricane Delta. We are pleased to report that all our employees have safely resumed their duties, and that no one was hurt throughout that severe impact in the region of Hurricane Laura and subsequently less impact but still severe, Hurricane Delta. We now move on to outlook on our pricing situation. If I compare the fact that oil prices fell 31% compared to the prior comparable period, given the context of oil prices being impacted by COVID and other forces in the macro environment, that had a big impact also on demand. And relative to Q4 of 2020, that means the last financial year last quarter, we have seen a 47% increase since the ease of lockdown restrictions and also the lower production due to OPEC cuts and reduced activity in the U.S. like all arenas. So quarter-on-quarter, reprieved oil prices moving back into the 40s. So quarter-on-quarter, 40% -- 47% increase that we observed. Our commodity chemical pricing also increased, supported by some higher oil feedstock costs globally. And then also, there was quite a stronger recovery in China as we saw that unfold in the last months. Polymer's basket price improved by 23% in the last quarter compared to the previous financial year Q4. And we are seeing markets -- we expect them to remain in oversupply with lower demand compared to pre-COVID and mostly driven by new capacities coming online in China, in particular. However, I believe that we have seen the turning point in terms of global markets, specifically in the polyolefins arena. Furthermore, the South African rand-U.S. dollar strengthened to ZAR 16.90 to the U.S. dollar in Q1 of this financial year that we report on compared to ZAR 17.95 in the previous quarter of the last financial year as well as the COVID-related global risk has eased, but with the proviso, as I've cautioned in my opening statements, of the COVID impact wave 2 emerging. In terms of our various regions, the production update I would like to provide you with now is starting with our South African operations. When I look at mining, our Q1 productivity rate of 1,169 tons per continuous miner per shift was 2% lower than our Q1 result of FY '20, that means a year ago, and similarly, also lower than the last quarter. And I've touched on it in the beginning, it was because of the impact of COVID-19 pandemic and direct impact on our workforce and mining activity as a result. What I'm pleased about is that September month productivity rate was in line with our targeted productivity rate of 1,200 to 1,250 tons per continuous miner per shift. So our salable production in the period compared for the previous year was 7% lower. We did move our stockpile up to 1.5 million to 2.5 million tons to mitigate risk, and that was because of a prudent preparation for the impact of COVID. As we saw the statistics rising, we had to prudently and proactively start looking at our stockpile to bolster that as we did not know how that was going to play out. And therefore, we've embarked on a call purchase, which did then alleviate and mitigated the risk that played out because of COVID. Of course, we're very pleased that it didn't come in as bad severity as it could have. And we've weathered that impact through the month of August. We now look at our Synfuels business. The total production volumes were 6% higher than the comparable quarter. And I think that was mainly as a result of the postponement of our September 2020 shutdown to Q1 of the financial year '22 compared to a phased shutdown in September 2019. So this was enabled by our successful completion, and we call it a pit stop, a very much shorter-focused shutdown, which we had in May of this year. As we throttled at the time Synfuels operation, we had the opportunity then to do the phased pit stop shutdown, which was really 2 things that we achieved by that was that we could get more volume out of this quarter because we were not going through the planned shutdown that was slated. We averted that. And secondly, we also did it at a much lower cost than we had a full-fledged shutdown planned for in September of this year. So when I compare the full production forecast or when I look forward to the forecasted volume for this year, we still project a 7.7 million to 7.8 million tons for the Synfuels value chain for this financial year. Turning now to Natref. Natref production was, as expected, 18% lower compared to Q1 FY '20 as a result of the decrease in fuel demand and particularly, the lower jet fuel demand that was prevalent and still is hampering us in terms of the ramp-up to capacity of the Natref site. So the crude rate of around 540 cubic meter per hour for the full year FY '21 is as demand is expected to increase later in the year as the lockdown restrictions ease but as also, we expect jet fuel to normalize, which is the big constraint why we run at that level. Moving then on to our international operations, ORYX GTL. We had a Q1 utilization rate, not surprisingly, of only 48%, which was because train -- there was only 1 of the 2 trains operating. Train 2 is now in a start-up completion mode of its -- rather completion of its turnaround and expected to start-up still this quarter. And that will then bring the utilization, as we forecast for the remainder of the year or the full year, back to 75%, 80%, taking cognizance that the first quarter was hampered by the train 2 not operating and in shutdown mode. Our Eurasian Operations, production volumes decreased 6% compared to the same quarter the previous financial year. That was largely driven by a weaker market demand in the wake of COVID-19 pandemic. Our overall production was further impacted by planned outages of selected units during the quarter. If I move on now to Energy, we had a strong recovery in Q1 following the easing of lockdown restrictions, a 47% increase in liquid fuel sales compared to Q4 of the previous financial year. The current market is around 80% to 85% of pre-COVID levels. And consequently, liquid fuel sales decreased by 13% compared to the previous reporting period of Q1 financial year '20. Our sales volumes are expected to be 2% to 4% higher through the rest -- or for the full year compared to the previous financial year in the Energy business. Moving to our Base Chemicals business. In terms of the foundation business now, excluding U.S. products, our sales volumes were 4% higher compared to Q1 FY '20 and 9% higher compared to Q4 FY '20, mostly because of improved market demand as well as higher Synfuels chemicals production rates following the lifting of COVID-19 lockdown restrictions. Our polymers U.S. sales volumes were 65% higher compared to Q1 FY '20 due to the LCCP ethylene cracker, which achieved BO in August of 2019 only. And then Q1 for FY '21 sales were 28% lower than Q4, but that is now as a result of Hurricane Laura and Delta, resulting in an extended disruption to the electrical power supply. And of course, our plants were down, as I mentioned, since the last week of August through the month of September and the most part of October. We're only starting up back now and have most of the plants already back online, with the rest slated in the next week before end of October. So that leaves us then to the total sales volumes expected to be 1% to 2% higher than the prior year, lower than the previous guidance of 3% to 5%. But that is due to the impact of the hurricanes. Moving on to Performance Chemicals. Due to the pandemic impact and Hurricane Laura, our sales volumes decreased by 11% compared to the same quarter the previous financial year. Organics division was impacted the most, with 18% lower volumes, and the lost production at the U.S. operations and continuing weak macro environment, especially in Europe and Asia. Wax division delivered a strong performance in Q1, with sales increasing by 22%, benefiting from high demand, specifically in the application of hot melt adhesives. Our advanced materials sales volumes were 5% higher, and that was driven mostly by higher carbon sales volumes. In light of the impact of Hurricane Laura and Delta, we have revised our previous market guidance sales volumes to be in line with FY '20 because we don't believe we can make up those 2 months' lost volumes. The status of our operations in Louisiana, post the hurricanes, we are at the busy -- in the start-up sequence of the plants. We have currently sufficient industrial level power to resume the start-up process. And all the plants, as I mentioned, will be started up by the end of October. Currently, we have 3 plants that is not yet started up. The main cracker is in the process of starting up. The LD plant will follow. And then the -- and concurrently to that, the Ziegler plant is starting up. All other plants on the Lake Charles complex is up and running as we sit here in this call today, barring those 3 that is in the process of starting up. So as far as the partnering transaction is going, we are busy with the preparation for shareholder approval and regulatory approvals. Those are proceeding as planned, and also as consistent with our strategy to reemphasize, Sasol will retain full ownership and operational control of the Lake Charles east plant, ethane cracker and 8 U.S. performance chemical plants that will remain under our control and running. The transaction will accelerate our delivery of the strategic objectives and reduce our leverage as previously communicated. When I look forward, the guidance I would like to leave you with is that on the FY '21 forecast for LCCP ring-fenced, the EBITDA is in the range of $50 million to $120 million. Of course, the range is wide because we've seen, at the moment, quite a recovery on the polyolefins. And that trajectory could be helping us to the positive side of the range or beyond. We are seeing a strong recovery in pricing globally at this point in time. And if we have a solid good ramp up, we believe that range is quite attainable. And of course, the upper end of the range would be more pleasing. When I look at the steady state LCCP ring-fenced EBITDA range, we project USD 600 million to USD 700 million. Of course, that is incorporating the impact of that. So you have to take out the half of the 2 polyethylene plants as well as the half of the cracker merchant remaining ethylene volume that will not be reflected in these amounts of EBITDA forecast. Given this partnership transaction and our revised strategy in the new operating model, we will transition from our current LCCP ring-fenced view reporting to reporting Sasol North American Chemicals as part of the overall Sasol Chemicals business and not continue to have a ring-fenced view into the business. Our FY '21 business outlook, the possible second wave of COVID-19 I've mentioned at the outset and of course, there could be commensurate restrictions that may impact oil price and product demand outlooks. Now with that caveat, I believe that there are other risks to business and pricing remaining. To name 1 or 2, the uncertainty of the extent of the Libyan oil supply recovery poses an additional risk to the global oil price outlook. And then the point I've made around a significant new Chinese chemical supply combined with uncertain demand outlook causes also a significant risk to chemical price outlooks. Ongoing volatility due to news flows related to U.S. election outcomes, inventory data and then the second wave of COVID all are risks to our outlook and pricing. So I'm going to pause there a minute and ask Paul to deal with where we are with some of the other matters and how we are progressing there. Paul?

Thank you, Fleetwood. Good afternoon, ladies and gentlemen. We have issued the circular on the LCCP. We acknowledge that there are several interpretations and level of understanding that will be required with regards to those numbers. We do promote that if you need a one-on-one meeting with us, to contact the IR department. Tiffany and Feroza will be helpful in that. We'll set up those conversations with you. The teams are ready to assist you to take you through the pro formas, the workings as well as the buildup of the transaction. So we are very keen to engage with you prior to you making your final decision as a shareholder on the transaction. Also, the transaction and the valuations that we provided at year-end is very in line with what's ultimately contained in the circular. But there are always these nuances that one needs to take into account to conform to the JSE Listing Requirements, which makes some numbers a little bit more difficult to understand than others. And we are very comfortable to engage with you on that. On the balance sheet, good progress that we are making in terms of our balance sheet efforts. Actually, I guess you will have comments later on in questions on that as well. I think very safe to say that the first quarter for us, if we take these production results, we interpret those in terms of our EBITDA expectations, we are on or slightly higher than our expected run rate, which I think is quite good. We feel quite positive about it. Unfortunately, Laura has had a relative large impact on our expected cash flows from the U.S., but that has been mitigated by the very effective cost management and capital and working capital management over the past couple of months. So we feel very comfortable with the level of our results. And we have no other reason to expect this to continue, although the markets do expect quite volatile, and those macros may be quite challenged in the next couple of months. But in our forecast, we have remained quite relatively conservative in what we take into account. So we feel quite comfortable that we're making good and steady progress. On the liquidity side, things are also looking quite good for us. We obviously, as you can imagine on the liquidity side and also on the debt financing side, quite dependent on the proceeds to flow from the mergers and acquisition process as we've announced thus far, with some other deals to come in the future. So we do believe that that will also going to be a very important part and continues to be an important part in paying down the debt. In terms of the rights issue, I guess, the question that already had been sent here to us to say, what we've seen thus far, where does it put us in terms of our decision on the rights issue? And again, I want to remind you to say that that decision is only in February. It will be a combination of the run rates up to February in terms of the business and how successful we are on the M&A transaction. I can give you that assurance that between Fleetwood, myself and the GEC and as well as the Board, if we can avoid a rights issue, we will work our darndest to get to that point. But at this point in time, it is a decision that's still in play that we have to consider. And hopefully, after we've shared with you our kind of our details on Sasol 2.0, which is also progressing extremely well, by early December, I think you will be able to also form an opinion of kind of where are we with the rights issue. I think very much so that we will be probably more to the lower end of the range currently provided in the market as up to a higher ticket size as been previously expected by some. So ultimately, it's still in the making, but we feel that we are making good progress. Then lastly, the update on our December Investor Day. So that's currently, Feroza, if I'm right, scheduled to December 2. Tiffany and Feroza will make all the necessary arrangements for us, but we feel quite positive that we will have a very strong story to share with you in our focus of resetting the company to Sasol 2.0. We've made good progress thus far as I've mentioned. We will share with you the targets that we plan to achieve over the course of the next couple of years. We'll also share with you the updates in terms of our self-help measures and M&As. So we hopefully -- and we believe that it's going to be a very fruitful day for us and with you in terms of what will be the future for Sasol. So a lot of development going on, a lot of things that we need to prepare for. I think quite immediately, the circular and the decision by shareholders on LCCP is absolutely critical. And hence, again, I want to reinforce that invite to proactively engage with you once you've got time to actually look through the circular. Thanks, Fleetwood.

Thank you, Paul. We will now open up the session for questions and answers.

I see the first question coming out in terms of what is the outlook on liquids fuel demand. Is it recovering? Have we seen any structural indication that the lockdowns have had on that in terms of demand? When I look at liquid fuels, Wade, we don't see that structural change. We are not supplying 100% of the market so we cannot comment how market shares change in these areas. But what I do believe is that we don't see any impact barring the demand as we've explained and reported. And the reasoning and rationale on the normalization around jet fuel is a key thing. Of course, that will play out its due course. But in terms of our Synfuels operations, we see the volumes and we can place that, and we don't see any structural changes in the market.

Then I'll deal with the questions on Sasol North America that's been posted. First question by Wade and Gerhard that wants to understand what is the portion of the insurance costs or insurance proceeds that's included in our $50 million to $100 million EBITDA range. Again, as a half warning, we are currently working at those final estimates with the insurers. These numbers will change as we get final clarity. So I'm just providing you the directional range at this point in time, which we believe is our best estimate. On the lower end, we believe that the insurance proceeds can be as high on a ring-fenced basis now only for LCCP, around about $15 million. On the high end, it's around about $25 million that you can -- and usually, when one looks at the lower end of the range, the $50 million, you can associate it with a smaller end of the proceeds. And when you look at the higher end, you can assume it's associated with the higher end of the range. But like I say, we will work these numbers up further and really take them as directional at this point in time. Secondly, as -- with regards to the LCCP steady state, which financial year do you expect this to occur? Very much -- thanks, Wade and Sashank, for those questions. We actually believe that's still be very much on the 2024 guidance. But again, I've looked at prior years in terms of our assumptions. We've also looked at other assumptions other than the Sasol assumptions such as IHS and Wood Mac, which is no surprise to you as well. And there are various interpretations at this point in time in how quickly the recovery may or may not be in the U.S., and that will ultimately affect us kind of this range that we provide. And ultimately, we do believe that if the recovery is 18 months, then we will probably -- we can even hit these numbers in '23. But as a general rule of thumb, let's -- and even in our base planning, we assume financial '24 to be kind of us achieving the full run rate. And again, maybe it's sounding like a broken record, but the markets are volatile, please take them with the best interpretation of what we have today in terms of the market. Then building on to that, we've got questions from Chris, Adrian and Wade that ultimately ask me what is the indication of what the pricing assumptions are that we've used in assessing these ranges. And again, I just want to reemphasize, the ranges that we provide is now net of the 25% that we effectively divested from. So it's our remaining 50% -- or 100% of the Specialty Chemicals business and the half of the portion that we retained in Base Chemicals. So ultimately, from an assessment perspective, we assume ethane to be in kind of the mid-$0.30 per gallon. That's where we kind of assess it. So let's say for this argument between $0.30 and $0.35 as a range. We then ultimately also think that when one think about your merger ethylene level, merchant ethylene prices at U.S. level is round about the $650 to the $700 per ton range that we've taken into account, and then we very conservative look at LL margin in the U.S. of $350 to $400 a ton above that. We're not changing our guidance on Specialty Chemicals. I think that's very much aligned to what we've messaged to you before. And we do anticipate in the next 18 months to see a relatively strong recovery in Specialty Chemicals to what we've messaged before.

Thank you, Paul. I see a question on -- with respect to how do we see the relative pricing development between U.S. and spot, and I assume that is also export fundamentals. So you've seen, and I'm not going to give you the numbers that's supported in the weekly ICIS and IHS reporting on polyolefins. But you would observe there, there has been quite an increase in the local domestic prices that was reported over the past 2 months. You would have seen that the ethane, ethylene spread has been increasing steadily. That spread is now almost as good it was more than a year ago. So we believe there are some margin opportunity opening up compared to what we've seen in the last 2 quarters. And then, of course, the balance between what the products are being placed in the U.S. versus export is also playing in there. And we have been, as I've reported before, more than half of the product is being placed in the U.S., and we do enjoy that better pricing then from a domestic versus export dynamic. So I hope that gives you a flavor there. I'm not going to talk to pricing per se. I mean that is reported elsewhere and you can observe that, and we are following those trends right now. If I move on to the question around how many plants are then running in Lake Charles if 3 or not? It depends on how you look at the plants, but I can say that all our legacy plants, and I'm going to just give you a flavor of that. So the east cracker is running. Our LAB plant is running. The ethoxylation plants are running. The Ziegler plants, as I mentioned, is in the process of starting up now, is 1 of the 3. Our normal paraffin solvent plant is running, Tetramerization is going. Our ethylene oxide, ethylene glycol plant is running. Our polyethylene, the LL plant is running. So the only ones that is now in the process, as I mentioned, is LD, the cracker -- the large cracker has to start-up. It's in the process of starting up. We are seeing that in the next couple of days to be fully running. And then the LD will come in as a big consumer of that ethylene. And Ziegler is in the process of running in parallel. So I think that gives you the flavor. So that all complex is starting to normalize with a focus on the last 3, as I mentioned.

Next question is in the circular, you talked about the marketing fee as well as the commission to Equistar on sale of polyethylene. Are these 2 separate charges? And can you give us an idea of the quantum of these commissions? They're actually low single digits, high single digits, double digits percentage commission?

Yes. So I think, Gerhard, to be honest, that is information that we would not publicly divulge. But what I can tell you is that in terms of our marketing approach, we have been in agreement with our partner to continue -- or to do that activity. And when we compare it to our own option of marketing it, it is marginally better, and that's why we made a decision for them to market it. So I think that will give you a good view that it is a very competitive rate. And if I compare it to our own marketing cost, it is the same or just a tad bit better. So that's why we made that decision.

Also, Gerhard, if it was material, we had to disclose it in the circular under the impact of both significant contracts. And there, on that line, you are -- exactly to Fleetwood's point, the fact that it is marginally better didn't require us to spill it out and give you those details.

Okay. So in terms of the -- Gerhard, your other question with respect to the polyethylene plants and the cracker. So the operator will be Equistar in terms of all the current employees of Sasol that is running the 2 polyethylene plants and the cracker will be then run by Equistar under their supervision. So to be clear, the operations of the 2 polyethylene plants and the cracker will be operated by Equistar.

On the balance sheet, so the question has been from Wade that ultimately wants to know why does it appear that we haven't hedged the ZAR and the ethane hedging for quarter 4 '21. Was this a decision that's been based on a cost-benefit analysis? And when do we expect to conclude the rights issue by quarter 4, implying your balance sheet can handle the additional external volatility. So Wade, I think 2 separate questions. The reason why we haven't engaged on hedging on those 2 specific items are as we start to get the balance sheet levels lower from a gearing perspective, the banks will need to provide us credit lines, especially on the ZAR side because we use the 0 cost collar, and we move forward on the ethane hedging. And the banks have only recently, with the latest announcements on the disposals, started to provide more credit lines for us. On the ZAR side, we are not in such a big rush either. So we will ultimately assess -- come at those levels. And I think the range that we have had our mandate on before in terms of the ZAR side is still kind of holding, and that's where the rand kind of trades. So ultimately, we're good at this point in time even not having a hedge in place so that volatility can be dealt with, so to say. But ultimately, as the credit lines will come back, we'll obviously we'll evaluate it. Ethane is a little bit different. So currently, we've hedged our ethane for quarter 1, 2 and 3 based on the premise that we still operate a big facility in totality. So we have reworked our mandate for quarter 4. We ultimately need to lower our ethane hedge levels in quarter 4. And the moment that those credit lines open up, we will definitely consider our hedging positions for ethane. So to say that our current hedging positions on ethane is quite kind of protecting us against the higher prevalent ethane prices, especially leading up to the hurricane. So that's good. So ethane's definitely something that we all want to focus on for that quarter 4 as soon as we can. And then secondly is the other fundamental question on the balance sheet, and will we be able to deal with more volatility? I will say that on the oil price, I think we've spoken a lot about that. Oil price for us at least to the point where kind of the balance sheet's gearing level is more approaching towards 30% gearing, and we're still far from that, ultimately, we will want to continue with hedging that 80% -- 70% to 80% level on oil to put the floor level in at least put options. The world still very volatile so we'll definitely like to continue with that, please, if you allow us. And then on the rand-dollar side as well as the ethane side, that will be very dependent on kind of where the gearing level is. And typically, the rand cover ratio will be significantly lower in a kind of an under or low leveraged balance sheet as the same goes for ethane. So oil is the one where we still want to put that well put option level in, but we will change the hedge cover ratios on rand-dollar and on ethane.

Okay. Good. So I see a question with respect to the chemicals and Energy business reporting. So Adrian, your question there is, why are we separating the business? I think the whole synergy or the value that we unlock by reporting and focusing on the 2 strategic business units is part and parcel of Sasol 2.0 so that we can get the efficiencies that we have been able to target, and more of that we will share with you in the investor update on the 2nd of December. But suffice to say, we are reporting profit and loss now under Energy, South African Energy Value Chain and Joint Ventures Incorporated, as well as being separately the chemicals business and the chemicals business various products and value chains that is Eurasia, U.S. and the sales out of the South African chemicals value that will be reported as part and parcel of that business. So no, the idea is not to unbundle it. The idea is to get focused and to derive synergies in our new operating model.

There's also a question, Adrian, that you've -- that you specifically asked and it may be good to deal with that now. Does the recent fall in the share price impact your ability to do the rights issue? And what's the progress on the discussions with the banks? I think 2 very good questions that you asked. At this point in time, I think we should be, as a company, very much focused on doing and focusing on the controllables. We do believe, as I said to you, if we do things smartly, we do things right and the run rates are going to -- going along, that will definitely put us at the lower end of the rights issue range as well as, as I said previously, if that even does spill out to a smaller ticket size in terms of the rights issue, we really need to strongly consider whether that makes sense or not. But there are a couple of months ahead of us before we need make that final decision and our commitment to do that all possible to see what we can do to that situation. But ultimately, at this point in time, I don't think the current share price will impact our -- as much because we don't have to enact on any decision at this point in time, which ultimately has been more favorable given the prevailing market circumstances. And we do believe more closer to February, the markets may have recovered a bit more. I think we will have better line of sight on our cash flows and run rates and what we need and disposals. So I think -- and you will have a better interpretation of 2.0. So again, to reemphasize those points, I think many different kind of developments that's ahead of that final decision on the rights issue and our commitment to push very hard on those controllables. The discussions with the banks is progressing well. Ultimately, as with U.S. equity holders, we've had many interactions with the banks on a continuous basis. They are very extreme important key stakeholder for us, which we are very proactively also managing. So ultimately, we are now in talks to say how do we navigate through December. And ultimately, once we've agreed those terms with the banks, we will also communicate those. Obviously, if we get all the proceeds from the American transaction as well as the ASUs before December, we will be very safely below our covenant level. But ultimately, there's a timing issue on the covenant on the proceeds and ultimately, we need to navigate that with the banks. And that's very much where the conversation will be going in the next couple of weeks is to say how do we steer for that. We don't anticipate any concerns there due to the progress that we've made on these deals and others yet to be announced. So ultimately, I think that we are definitely in a better space to talk to the banks completely a couple of months back.

So I see a question from [ Sibongile ] regarding what do we expect what the future company would look like. So Sasol of the future, by the time that we have fully implemented our management focus areas in terms of our financial KPIs will be in our financial year '25. The company that you will see then would be a company that thrive in a $45 oil world, that is viable, that is paying dividend, that is restoring its blue-chip share status and that would look quite focused in terms of the asset review that we have done and the commensurate sale of assets to focus our strategy. We would have a real company that is thriving with returns on investments that is compared to its peers in a favorable manner so that it is an attractive investment opportunity to any shareholder. And I believe the company would be quite a new force to be reckoned with compared to competitors because Sasol of the future or the program that we implement Sasol 2.0 will really bring us in a new dimension with a step change to be a viable, competitive and increasingly attractive investment destination. So if you ask me what Sasol of the future look like? Exactly that. Moving on then to the question by when should we achieve that? I alluded to it. We will tell you more in the invest update on the 2nd of December. It is a program that we implement already as of this year where we can. So our approach was that we will make the savings sustainable. We indicated that this year, we have a $1 billion saving target comprising of cost savings, working capital as well as CapEx savings that we want to make sustainable with Sasol 2.0 implementation. And therefore, some of the benefits to make it sustainable will be start coming through still in FY '20. But we see the majority of it only coming through as of FY '22, '23 and then run rate later in that '24, '25 period, but that's the last increments. So we have made very good progress with our cost initiatives. So the announced $1 billion savings target, we are tracking that at the moment. I believe we would be tracking for delivery on that as we've done on the previous $1 billion in FY '20. So the cost initiatives, the CapEx, working capital, which we've committed to deliver in this financial year, I believe we're on track to deliver that. So thank you for that question.

So just checking if there's any remaining questions which you may have. So there's a question that came up in terms of the breakeven price for Sasol. What do we do is also at the Capital Markets Day -- I'm sorry, not the Capital Markets Day, the investor update in early December is provide you with the most latest update in terms of those breakeven levels? Obviously, we will interpret the impact of 2.0 on those and also our target in terms of where we plan to progress those going forward. I must say with what we've seen thus far, again, from the impacts on cost this year is our cost performance has been really steady for the period up to date. So yes, there's a combination of non-sustainable and sustainable savings. I think we would rather want to communicate that sustainable level to you. Otherwise, they may give you today a bit of a wrong impression. But that's definitely top of mind to be shared with you. But just in terms of cost performance for Sasol at this point in time has really been phenomenal. The last question is from Adrian's side. Adrian, you asked the question when we potentially can anticipate the payback for the tax benefits from -- relating to the CARES Act. A good question. We have submitted our application to the revenue services. They are already processing. They informed us they're processing. So the payout is what we expect quite imminent.

Thank you very much. That's all -- almost all of the questions covered.

Okay. Thank you, Feroza, and thank you for everyone participating in this call. And if there are any residual questions, please continue to interact with our Investor Relations to clarify those. We thank you for your participation, and we're going to go close the call now. Thank you very much. Thank you, all.