Sasol Limited (SOL) Earnings Call Transcript & Summary

Good afternoon, and welcome to our investor update. Thank you for taking the time to join us. To set the scene for today's presentation, I would like to make a few opening remarks. 2020 has been an extraordinary year. And for Sasol, as we entered our peak gearing phase, the onset of the COVID-19 pandemic and crude oil price collapse could not have happened at a worst time. The reasons for our elevated debt are well known. And of course, we deeply regret the cost and schedule overruns at LCCP. We have acknowledged our mistakes, learned painful lessons and have made the necessary changes to ensure these are never repeated. Since March, we have also diligently executed our response plan to stabilize and strengthen Sasol's foundation. To serve as a springboard for building future Sasol, a robust, resilient and sustainable company. This is the focus of today's engagement, future Sasol and our pathway to achieve it through our Sasol 2.0 Transformation Program. Our priority is to stabilize the business in the short-term, but we need the Sasol 2.0 business reset to position for the future. Guiding us on this journey is our new purpose statement, innovating for a better world. This is Sasol's reason for being, innovating speaks to doing things differently, and in new ways touching on every aspect of Sasol, our technologies, our products, how we run our plants, serve our customers and communities, building our brand and unleash the full potential of our people and business. And as importantly, we do all this to make the world a better place, to deliver on our triple bottom line outcomes of people, planet and profit responsibly and always with the intent to be a force for good. Our purpose captures the essence of future Sasol. And our can-do spirit is ingrained in our DNA. I believe what we will share today will demonstrate our purpose in action. This has probably been our toughest year on record. But we have already succeeded on a number of important early wins, and this gives us confidence in our plans and targets. In just the past 10 months, we exceeded our USD 1 billion cash conservation target for the financial year '20 and completed the LCCP, which is now in full operation. We delivered several major asset divestments, defined a new strategy, commenced implementation of our new operating model and crafted a credible sustainability road map up to 2030. So Team Sasol has credibly delivered, and we are more than up to the task to deliver future Sasol. Today, we provide important insights into future Sasol and the key metrics we are targeting to realize a global competitive business. We have a clear pathway to deliver competitive returns, which will be better for the planet and better for people. Although some aspects of our plan still requires further work, such as our 2050 sustainability road map planned for release next year, notwithstanding, we will provide as much transparency as possible today, and we will continue to do so as we progress on this journey. As a final note of introduction, a reminder that during today's presentation, we will make forward-looking statements that refer to our financial estimates, plans and expectations for the next few years. Please note that actual results and outcomes could differ significantly due to factors noted on this slide and in our JSE and SEC filings. Please refer to our annual report, Stock Exchange announcements and SEC filings for more details, all of which are available on our website. Now moving on to the focus areas for today's discussion. In summary, we will share our vision for future Sasol and how our transformation program called Sasol 2.0 will deliver on this. To this end, our presentation centers around 4 topics. We will start off with our case for change and the drivers that have shaped the nature and timing of our strategic reset. Following this, we will unpack the Sasol 2.0 Transformation Program, our vehicle to deliver future Sasol. Next, we focus on our ambition for future Sasol and how this translates into our Chemicals and Energy businesses as well as our sustainability plans and triple bottom line outcomes. This then takes us to our final discussion point, which is the path forward. Before we cast our eyes forward, it is important to remind ourselves why a strategic reset of Sasol is required. Earlier, I alluded to our heavily geared balance sheet. With high debt levels, we cannot pay dividends or invest in new growth opportunities, and our ability to withstand market shocks like COVID-19 is weakened. Second, the macro environment is extremely volatile as we have witnessed in the recent past. Third, we wholeheartedly agree with all our stakeholders that climate change is a critical issue. For this reason, climate change is a central feature of our strategy, and we are taking significant steps towards reducing our greenhouse gas emissions. These are substantial factors which underline the need for both profound and rapid transformation, but we also have capabilities and opportunities. We will leverage, in this time, to deliver sustainable value. Sasol's underlying business is sound. We have many strong market positions and are well-positioned for a number of important long-term macro trends, such as growing consumer demand for energy and chemical products. We also have the ability to meet evolving customer needs, ranging from essential care chemicals, where we have the broadest integrated alcohols and surfactants portfolio in the world to advanced material solutions in, for instance, emission control catalysts or battery materials. We are taking decisive actions to tackle our most pressing challenges and capitalizing on those long-term trends that play to our strengths. This, we do guided by our purpose, innovating for a better world. We will move away from businesses where we don't have competitive advantage. And where we do compete, we will be more competitive with lower costs and closer to our customer needs. Today, the focus is on business repositioning. I'll unpack what this means shortly. But first, I want to be clear on how the other actions we are taking fit into this. In March, we announced our response plan, comprising several initiatives to mitigate the impact of a falling oil price and COVID-19. There were 5 main aspects to that plan. The good news is that we have already made great progress in 3 areas, namely cash conservation measures, divestments and liquidity. This has helped stabilize the business in the short-term and substantially mitigated the financial impact of the challenges we face. Firstly, through our cash conservation measures, we saved over USD 1 billion in financial year '20, and we are on track to save another USD 1 billion in FY '21, without compromising safety or asset integrity. Secondly, we have made great progress on divestments, having recently announced some material transactions and can expect well over USD 3.5 billion in divestments by the end of this financial year. These not only strengthen our balance sheet but also fast track some of the strategic changes we envisage, in particular the move towards a specialty chemicals portfolio. Thirdly, and partly as a result of these actions, we have maintained a robust liquidity position, which has helped stabilize our credit rating. We are grateful for the support of our lenders who have given us the flexibility we needed to navigate this challenging period. This includes a covenant amendment for the half year-end, where we have agreed that the calculation will not be impacted by Hurricane Laura and receipt of divestments proceeds beyond December 2020. The fourth and most important aspect of the response plan is repositioning the business to be sustainably profitable. This is our focus for today. Going forward, our priority will be the successful execution of our plans to deliver future Sasol. To realize this aspiration, the fifth aspect, and one of particular interest, is whether we will need a rights issue. And if so, what is the size? We will discuss this and provide as much transparency as possible on the thinking process later in the presentation. Before we head into the detail, let me summarize our pathway to deliver our ambition. I will start with a case for change. I've already talked to this, so I will be brief. We have challenges that we must address, and we are clear about this. But we also have positive long-term macro trends and capabilities that give us confidence in the future. Where we can compete, we will be more effective. Where we cannot compete, we will exit. The pathway to enable our change is what we call the Sasol 2.0 Transformation Program. This is about fundamentally changing our business. We commenced with the making the business leaner and more agile with a new operating model to help facilitate this. The transition to this operating model commenced on 1 November, providing the chemicals and energy businesses with greater autonomy to enable faster decision-making and closer to the customer. We will make the business much more effective by critically assessing the business against the best practices in class and changing it where there are opportunities to do so. This results in a wide variety of initiatives to be implemented through a proven transformation process. We have now put in place this system, done the comparative work, identified the initiatives and understand how it can change the business and its financial performance. On this basis, we have set ourselves some clear and bold financial targets, and we will talk through these in more detail shortly. Through all of this, we are creating a future Sasol business that will be set to compete in a decarbonizing economy and that is profitable in a USD 45 per barrel oil price world. It is a business focused on areas where we see structural growth in which Sasol has competitive advantages, and it moves us towards taking the lead in the energy transition in Southern Africa. Throughout this process, we will maintain disciplined capital allocation, and we believe this will facilitate attractive shareholder returns over time. Initially we hope by driving a share price recovery through delivery and market trust and finally through a combination of dividends and long-term capital growth. In conclusion, we are clear on the drivers of change. We are well-progressed on shaping and implementing that change, and we are heading towards the future business that is genuinely attractive. Moving on to the next discussion point. We will talk through the Sasol 2.0 Transformation Program in 3 stages. We will outline the Sasol 2.0 targets before talking through the underlying plan to deliver these. This is a combination of using proven process to effect change and a well-defined delivery plan. I will now hand over to Paul to talk through the Sasol 2.0 financial targets and balance sheet repositioning pathway.

Thank you, Fleetwood. Good afternoon, ladies and gentlemen. Please allow me to make a couple of opening remarks to set the context of what we want to achieve with Sasol 2.0 and the journey we have traveled thus far. As Fleetwood has already outlined, Sasol 2.0 is a complete end-to-end transformation program designed to drive the wide-ranging change that we need to reach our ambition for a new and sustainable future Sasol. Our targets will not only significantly improve our cost competitive position relative to our peers but will also leave us with a highly cash-generative business, which yields value to our shareholders. These targets will be delivered over the next 3 to 4 years. Clear milestones are allocated to each target with an objective of delivering the majority of these targets by the end of financial year '23. I will now talk you through the targets we've set for ourselves. We believe that Sasol 2.0 can deliver a step change in our financial performance and ensure business resilience. In line with that, we see clear, bold, and what we believe to be achievable, financial targets. At the heart of this, we need to transform the business so that it is highly cash-generative with a diversified asset base that yields competitive returns to our shareholders through commodity cycles and market volatility. To be more specific, this means making money at $45 oil whilst funding transition to a more sustainable business. To deliver this, we selected 4 key financial metrics to track and measure the results of the Sasol 2.0 Transformation Program based on our diagnostic and benchmarking process. It will come as no surprise that the focus metrics or cash fixed cost reduction, gross margin improvement, capital expenditure optimization and working capital management. The cash fixed costs and gross margin improvement targets are baseline against financial year 2020. Please note that the targets have been calculated. Also the impact of asset divestments have been factored in to provide for a real like-for-like improvement objective as the initiatives are in addition to the impacts of divestments. So let me break it down for you. By the end of financial year 2025, our target is to reduce our run rate cash fixed cost by 15% to 20% or ZAR 8 billion to ZAR 10 billion. We believe that the cash fixed cost reductions will place us in the first quartile of functional cost performance compared to our peer group. For gross margin, we target a sustainable increase of 5% to 10%, which equates to roughly ZAR 6 billion to ZAR 8 billion. We will achieve this through a variety of measures, including increased focus on areas of business where we have the opportunity to deliver higher margins and building on our improved commercial capabilities. We don't foresee any significant CapEx investment in order for us to deliver this incremental benefit. Where organic capital investments are required, these will be driven by clear business cases and in line with our capital allocation framework. In terms of CapEx, we have critically reviewed our capital plan for the next 5 years. We believe that we can achieve a 30% reduction relative to our prior forecast on sustenance capital, which means an annualized spend of roughly between ZAR 20 billion to ZAR 25 billion. This is very much in line with our 2017 Capital Markets Day sustenance target of ZAR 20 billion or USD 1.5 billion. Our capital portfolio review mostly allows for spend to ensure a license to operate, sustenance, feedstock replacement and environmental compliance capital. We are confident that this level of CapEx is sufficient to maintain long-term asset integrity and ongoing safe and reliable operations. The level of improvement does beg the question whether we are unnecessarily increasing our risk profile. Here, we have tapped into the great work that Team Sasol has done over the past 8 to 10 years in improving our sustenance in a safe but also in a very sustainable manner. We have also considered best practices from our industry peers to inform our risk-based sustenance capital management approach. Lastly, for working capital, we are taking 14% of revenue as the benchmark target, which is an improvement of 1% from financial year 2019. We do believe that financial year '19 is the more sustainable baseline year, given the level of disruption to supply in June of 2020. Taken in aggregate, as we will demonstrate that this gives us a business that is really competitive, highly cash-generative and able to make attractive returns in a $45 oil price environment. In order to translate these targets through what they would mean for the underlying business, let me relate what the impact would be on the cash breakeven price for the Southern African value chain. The Southern African value chain will remain a large cash contributor to Sasol. And hence, we need to ensure that it remains safe, reliable and highly competitive. In a $45 oil environment, margin and cash spreads are just too narrow to absorb any significant market shocks or to yield a sustainable and attractive returns. In addition, our effort to transform this value chain to a more sustainable and more robust future requires careful enablement. Our immediate focus with Sasol 2.0 is to find a pathway to take the cash breakeven price for the business down to around $30 to $35 to the barrel from around $35 to $45 to the barrel before the implementation of Sasol 2.0. Please note that this objective is a total cash breakeven and not a cash cost of breakeven level. These improvements span across a range of measures that I have just talked about. And Marius will share more color on those later during the presentation. Again, I want to emphasize that capital spend in pursuit of our 10% greenhouse gas emission reduction target up to 2025 is all included. The more significant impact of the greener future on cost and returns will feature most probably more post-financial year 2025. We will provide more color on our greenhouse gas emission reduction capital needs post 2025 at our Capital Markets Day in 2021. We acknowledge that the cash breakeven level will be impacted by prevailing macroeconomic assumptions, especially movements in the rand-dollar exchange rate. We do, however, hold the view that the underlying assumptions to improve the business fundamentals are robust. And despite of market movements, we will make the value chain much more agile and much more competitive. Through this, we can see a clear pathway to a balance sheet with more sustainable leverage levels and assets yielding competitive returns even in a $45 world, which is below where the consensus price outlook for our peer group and the IOC's currently sits. The Sasol 2.0 transformation process is a critical part of making our business sustainably profitable. Alongside that, we also need to continue to delever the balance sheet, where progress is more urgent so that we can absorb any future volatility that the market throws at us whilst not breaking our stride in delivering Sasol 2.0. That has already required a number of bold steps, which have significantly improved our position. And I just want to take a few moments to talk you through our expected balance sheet repositioning pathway. The intention is, therefore, to make sure that we reset the balance sheet over the course of the next 18 months. That gives us a firm platform that we desperately need. As soon as we have restored sustained balance sheet flexibility, we'll hopefully be in a position to resume our dividend program. Our capital allocation framework does then allow us to follow a balanced approach in delivering and driving returns, making investment decisions and delivering long-term growth as part of our future Sasol ambition. The cash conservation measures that we have implemented to date have had a material impact. And the disposals that we have announced recently will also reduce debt levels significantly as the proceeds arrive over the next few months. The Sasol 2.0 Transformation Program ensures that the balance sheet doesn't just get in a better shape, but it stays there in the face of continued market volatility. The potential last step in delivering a stronger balance sheet is a rights issue, which we would expect to implement in the second half of this financial year, if it is needed. I will come back and talk about that in more detail towards the end of the presentation. We are targeting to manage the net debt-to-EBITDA to below 2x, which keeps the balance sheet efficient with a good buffer to our covenant levels of 3x. This is expected to be achieved by the beginning of the financial year 2023, depending on the factors described above. This level not only allows us to absorb shocks but to provide us with the flexibility to execute our value-based growth strategy as a pathway back to investment grade, effectively restructure our debt financing, restart our dividend cycle. Improving our ROIC is also a key point. Sasol 2.0 as well as further strategy-led portfolio optimization actions will provide us with more competitive returns from our global diversified asset base. More on this topic will be shared at our Capital Markets Day in 2021. We've learnt a costly lesson on capital allocation and the impact it had on our past business performance. We still hold the view that our 2017 Capital Markets Day, capital allocation framework is best suited to enable our strategy going forward, which already incorporated the learnings from LCCP. We obviously had to push out our timing objectives given the LCCP capital overrun and then the adverse changes in the macroeconomic environment, but the principles still apply. Future returns will be highly dependent in how we allocate capital that we acknowledge. Please allow me to briefly step you through the disciplined capital allocation framework. Our first order of capital allocation is to strengthen the balance sheet, as described in the previous slide. Available cash will be allocated to an optimized sustenance capital portfolio focused on protecting business integrity and our license to operate. A minimum dividend of 2.8x or 36% payout ratio will be the second taker of capital. A key trigger for this level is a balance sheet debt level of less than 2.5x net debt-to-EBITDA and a decreasing debt trajectory. Our second order of capital allocation is aimed at following a balanced approach in returning value to our shareholders. Available capital will be considered between organic and inorganic growth opportunities and/or further stepping up the dividend to 2x or payout ratio of up to 45% of core headline earnings per share and/or share buybacks. Capital will be allocated where the best possible balanced long-term value for shareholders is. We believe that this approach reflects our commitment to improve returns to our shareholder base. In addition to changing how we run the business, we will also continue to keep the portfolio under review. We want to make sure that all our capital is deployed in businesses where we are the best owner that are consistent with our strategic focus and where we can generate attractive returns for the long term. We undertook a systematic portfolio review several years ago, and we have been able to build on that work and refine its conclusions, as we have updated our strategic focus and increased our return requirements. This has resulted in an expanded and accelerated divestment program that we are currently executing on and expect about $3.5 billion of divestments to be announced by the end of this financial year. However, to repeat what we have said several times before, we will only sell assets where we believe it's in the best value outcome and we are not a forced seller of any assets. Our asset portfolio post our divestment program still leaves us with a diversified global asset portfolio base, both from a sector as well as from a geographical perspective. Asset divestments were necessary to reset the balance sheet, but also to fast-track the strategy. Beyond 2021, we will continue to keep the portfolio under review, in line with our strategic focus, in particular, reducing our exposure from base chemicals outside South Africa, the transition to a more sustainable business, taking swift action for businesses that cannot make adequate contribution to profitability and cash flows over the long run. In addition, and particularly, as we start to think about growth, the principles that we set out back in 2017 will continue to hold true. This includes a commitment, not to take on mega projects on a sole basis and instead looking at partnering and other options over time to ensure access to breadth of best-in-class capabilities and a more balanced approach to managing financial risk. Over time, we believe this is another factor that can help us to build confidence in our ability to deliver sustainable returns to our shareholders. I will now hand over to Marius to take you through our comprehensive Sasol 2.0 Transformation Program.

Thank you, Paul, and good afternoon. My name is Marius Brand, and I am the Executive Vice President responsible for the Sasol 2.0 Transformation Program. I'm going to talk you through some of the detail of the Sasol 2.0 transformation process as well as the detailed initiatives we are adopting to deliver the targets that Paul and Fleetwood have talked about. To avoid any doubt, Sasol 2.0 is the program which we believe will transform Sasol to a fundamentally more competitive organization, which is positioned to deliver value well into the future. I will talk you through the implementation process and principles we are adopting to execute this program and share some of the levers and examples we are employing to unlock the value targets, which were mentioned earlier. The Sasol 2.0 Transformation Program brings together a number of important elements that combine to deliver the change we require. The foundation of the transformation is a new operating model with more autonomy given to chemicals and energy businesses. The new operating model reduces the decision-making layers, ensuring that the decisions are taking closer to the customer interface, and therefore, reduces cost and improves response time. The new operating model went live on 1 November with all the governance in place to run effectively. This has been a significant undertaking and was achieved with minimum disruption to our business and customers, and we are already starting to see benefits of this change. We also want to build an organization which is sustainable, competitive and once again is energized and inspired. We have been looking critically at both businesses, Chemicals and Energy, to see how we stack up against peers and to try and identify where improvements can be made. This process has identified a number of areas for change with many initiatives suggested and can be grouped into 3 main areas; customer centricity, operational excellence and innovation. Now customer centricity will focus on best-in-class customer experience in our Chemical business. While in the Energy business, the focus will be improving on differentiated position in both mobility and gas markets. Operational excellence will be underpinned by safety as a key priority while also delivering efficiency improvements, which are sustainable and applying best-in-class technology in a risk and financially acceptable environment. We once again want to see innovation as a key theme in the group, particularly on customer solutions in the markets we currently serve as well as new markets in the future. An effective change management plan requires more than just identifying potential improvement initiatives. It is important that there is a systematic process to coordinate the actions and ensure effective and sustained delivery. The first task is to assess and present this -- all the potential improvement initiatives to make sure that they are validated, refined, planned and implemented on an efficient and effective basis with resources allocated on a risk-return adjusted basis. The value finally unlock needs to be sustainable, with nearly 1,000 improvement initiatives to be attended to line ownership and frequent progress monitoring is of utmost importance. Alongside this, real-time transparency and accountability are critical to ensure that the change is delivered on time and lessons learnt are incorporated and on route. A gradual ramp-up of value from initiatives, together with good balance of initiatives across the businesses, are key to reducing our risk and ensuring sustainable savings. This, in turn, is supported with a changed risk management process to make sure that the change does not have inadvertent negative consequences. The centrally led and coordinated renewal delivery offers ensures that focus and consistency in execution across the group with a direct reporting line to Fleetwood. This office has now been in place for many months, and with a number of initiatives now validated, planned and in process of being implemented and are delivering strong results, I am pleased to say that the Sasol 2.0 delivery framework, governance and process is performing well. Given the huge amount of change that we are subjecting the organization to, particularly at a time when we are facing unprecedented challenges from COVID-19, the office question is whether the organization is able to cope. The answer to that is yes. However, it's taking a significant amount of thought and care and is achieved in a number of different ways. The first step we have already talked about is the change to the new operating model. This has already delayed the organization with a 25% leaner management layer and with a notable increase in the number of customer-centric roles than before. We are already also seeing the benefits of decision-making that is closer to the frontline. A number of the initiatives that we have talked about revolve around customer centricity. In other words, understanding what our customers want in real-time. And so being able to coordinate our marketing and our innovation efforts appropriately. The change in the operating model directly facilitates this. This, in turn, is allowing us to leverage other capabilities that we already have, notably our leading technologies and solutions capabilities. Within Chemicals, for example, our Essential Care Chemical business segment has the broadest integrated alcohols and surfactant portfolio available globally. And so we need to make sure that we leverage these capabilities to full value. In Energy, our unique Fischer Tropsch technology applied in South Africa allow us the flexibility to adapt to changing market needs and introduce new technology solutions to sustainably complement the facility, such as green hydrogen and renewable energy. However, beyond this, we also recognize, and in part, changing for the better involves developing a capability set, and we are seeking to do this in a number of ways. Firstly, where relevant, we are looking at long-term partnerships with relevant industry leaders and global customers where this can result in win-win outcomes. We are also expanding our portfolio by partnering with sustainable technology providers. As a final element, we recognize the importance of having the right capabilities available to realize future Sasol. Here, we will be strengthening existing and developing new capabilities by investing in our teams through focused training initiatives and bringing on new capabilities where necessary. Therefore, across all of these different elements, we believe that we have the toolkit that we need to deliver these initiatives we have identified. With this framework and process in place, we will continue to review the effectiveness of the Sasol 2.0 program as challenges and opportunities evolve. Let's now turn to our delivery plan for Sasol 2.0, to provide you with some granularity on how we will achieve our targets, including a few examples of initiatives which are delivering early wins. Sasol 2.0 will be a multiyear journey, spanning across 3 phases. It should be noted that this journey began earlier this year, where significant progress made over the last few months. It also builds on the crisis response plan, and in particular, the cash conservation efforts, which have already delivered over $1 billion of cash improvement in the past financial year. The initial 3 months were spent on a rapid diagnostic of our situation, laying the foundation for the program design. It allowed us to establish targets based on clear gaps, which specified the delivery model all while already realizing early benefits. Currently, we are transitioning from the developed phase into the implementation phase, which will continue until financial year '25, when we will reach the full run rate of sustainable value from all initiatives. As Paul has indicated, we have an objective of delivering the majority of these targets by end of financial year '23. However, we will also be focused on embedding a continuous improvement and innovation mindset and culture that will help us maintain the benefits of this transformation going into the longer-term, well beyond the financial year '25 timeline. This is imperative to protect and improve our cost competitiveness and business continuity into the future. Turning to cash fixed costs, where we aim to close the gap to leading peer performance. We plan to reduce our cash fixed cost by ZAR 8 billion to ZAR 10 billion, against our financial year '20 baseline by financial year '25. We will achieve this by focusing on 4 key levers: optimization of organization, including delayering, consolidation of functions and further development of shared services across the group; improving our productivity through cost efficiency and process effective improvements, complemented by the advanced use of digital solutions across our organizers; reducing our cost of doing business, including elimination of low-value work and focusing on new ways of working post COVID-19 and enabled by our new operating model; and lastly, improving our third-party external spend, which translates to more effective buy and spend programs and exploring new partnership models. I will now talk through only a few examples, which are already mobilized and which have significant value. However, there are many more prioritized initiatives in the initiative value pipeline that are not highlighted here, which are well underway to deliver 100% of the target. A good example of a comprehensive initiative is the implementation of the new operating model. This will result in lower cost structures from 2021 onwards, equating to approximately ZAR 1 billion in EBIT uplift. This involves a number of key changes to structures, decision-making frameworks and business processes. The new management organization that is 25% leaner with more proximity to the frontline, a more customer and innovation focused organization, reflected by having more customer-facing roles. The initiative relating to optimization of our mining infrastructure is expected to sustainably unlock ZAR 300 million to ZAR 500 million once implemented. This involves the optimization of shaft and colliery infrastructure to increase productivity and reduce cost over time. Indirect spend will focus on reducing the number of suppliers and relook at the equipment specifications on our maintenance programs to avoid over-specification. This translates to another ZAR 300 million to ZAR 500 million in EBIT uplift. These initiatives are built on top of effective category management and strategic sourcing frameworks already entrenched in the organization. This is now further supported by focused, digitally-enabled capabilities and partnership mindsets. The next financial metric that we target to improve is gross margin in order to maximize cash generation. Our ambition is to drive a gross margin uplift of 5% to 10% against our financial year '20 baseline. This equates to ZAR 6 billion to ZAR 8 billion by 2025. We plan to use several levers to achieve this uplift, namely, increasing our commercial portfolio value through tailor-made solutions for key market segments, more focused customer intimacy, and driving reliable supply. The results of application-focused research and development are realizing sustainable improvements already. In operations, we will continue to optimize and improve our focus on yield, efficiency and throughput, also realizing full volume potential as we further optimize operations through digital applications and technology advances. We also hope to grow our mobility portfolio through innovative solutions in response to changing customer needs, improving our fleet support and creating a differentiated service offering. Lastly, as mentioned, we will use digitalization as a key enabler wherever it makes sense. As it stands, we are already delivering early wins through a number of initiatives. I will talk you through some examples in our Chemicals, Energy and Mining areas. In Chemicals, we are improving customer fulfillment activities, which roughly correspond with the order to cash process. We will reach this through simplification and bundling of customer fulfillment activities under 1 banner. This will improve our inventory outbound logistics costs and customer experience, unlocking approximately ZAR 500 million to ZAR 800 million in EBIT uplift. Moving to Energy. We are improving operations of our coal gasifiers through improved energy efficiency. Using advanced analytics, we will monitor and manage the gasifier stability index, which aims to optimize the steam to oxygen ratio for gas production. At the same time, we are also lowering greenhouse gas emissions and unlocking ZAR 500 million to ZAR 800 million in EBIT uplift. In Mining, we are moving to full calendar operations. We are adjusting the operations calendar by introducing an additional shift, increasing operational time and using advanced planning and improved dashboarding for our production capacity. The changes will ensure that we maximize own coal production, reduce coal buy-ins and increase coal exports. The mining full calendar operation program is building on the changes we have already implemented through our Siyenza business improvement program. A combined EBIT uplift of ZAR 0.7 billion to ZAR 1.2 billion is expected. In order to optimize our sustaining CapEx, we had to do a review of our previously planned capital spend of ZAR 30 billion to ZAR 40 billion average per year in the period financial year '22 to financial year '25. We will reduce this to a range of ZAR 20 billion to ZAR 25 billion annually, which equates roughly to a 30% reduction from the levels previously anticipated. The Sasol 2.0 CapEx target includes all license to operate mandatory and maintenance, feedstock replacement, environmental compliance and discretionary sustenance CapEx. We will achieve these improvements through the following levers; a review of all capital-intensive projects and reassessing alternatives to reduce CapEx, challenging the scope and optimizing capital procurement to ensure that capital spend is fit-for-purpose and uses the latest proven external spend practices, and lastly, increasing the use of proven-fact and risk-based methodologies and practices to ensure that shutdown and capital scope is optimized. As mentioned earlier, despite significant CapEx reduction, we will continue to maintain asset integrity and keep our operations safe and reliable as a first priority. A significant value example relates to the resequencing of shutdowns, where we can move shutdowns from a 4- to 5-year interval cycle, employing risk-based inspections and other technical solutions to mitigate risk. Approximately, ZAR 2 billion to ZAR 4 billion savings can be realized through this initiative only. Notably successes have already been recorded across several of our operations in South Africa. Other key savings relate to the implementation of digital enablement, such as the connected worker and the optimization of warehousing and logistics center upgrades to better utilize the space we have versus spending money on new facilities. These methodologies, I mentioned, are benchmarked and proven in our industry and our peers and in many cases impacted at different operational sites in Sasol. Thus, we will not pioneer these in our facilities. As part of Sasol 2.0, we will also aim to improve our working capital level by approximately 1 percentage point versus the financial year '19 level, realizing a sustainable 14% working capital to turnover ratio going forward. Please note on the graph that the 12.5% working capital to revenue achieved in financial year '20 is not sustainable as the rapid decline was driven by our crisis response measures, which we deem not to be sustainable. The key levers for working capital improvement are changes in the tools and processes, which will impact every driver of working capital, inventory, accounts receivable and accounts payable with a focus on sustainable improvements. In addition, a system integrated approach will be key to unlock value. The following themes are at the center of our working capital reduction effort; lower our safety stock and minimize the number of storage points, improve processes that have customer and supply interfaces, and lastly, implement more advanced digital tools to manage working capital more effectively. We expect to unlock value of approximately ZAR 2 billion from a combination of these initiatives going forward. There are many more examples we are currently progressing, but I hope that what I've shared with you gives you a clear sense of the type of changes that are currently being progressed throughout the organization. Sasol 2.0 is a significant reset of Sasol and entails deep transformation of Sasol from end-to-end. Guided by a strong leadership ownership, realistic but challenging targets, a history of proven transformation process and capabilities, energized and capable employees and a CEO-led delivery plan, we believe we are positioned to deliver future Sasol. On that note, I will hand over to Fleetwood.

To bring everything together, allow me to summarize the Sasol 2.0 Transformation Program. Sasol 2.0 will transform the business into an organization that is much more competitive, lower cost, higher margin and more capital efficient. We have clear financial targets for all of these goals, which together will make this a business that can deliver attractive returns even in a $45 per barrel oil price world. These targets have been identified by systematically benchmarking the business against peers and identifying many hundreds of different areas that can be improved. The initiatives to address these issues are centrally coordinated, fully and robustly tested, centrally tracked with clear accountability and underpinned by a robust change management program. This leverages internal capabilities and bringing new ones where required. These initiatives combine to form a comprehensive delivery plan that is line owned and led, enabled and accelerated by the new operating model, which is already in place and functioning effectively with a 25% leaner management structure. Our primary focus is on delivering Sasol 2.0. As we have now explained in some detail, if this is implemented successfully, it is a game changer for Sasol. However, I would like to spend a few minutes talking through the outline of the future Sasol business that this creates because I think in the process of Sasol 2.0, we are setting up a business that can play an important and leading role for generations to come. Let us start with Chemicals. We have already made significant progress in 2020 by repositioning the business in line with our strategy communicated in 2017 with a focus towards specialties through our leading positions in Essential Care Chemicals and Advanced Materials. This repositioning included the recognition that polymers will not be a strategic growth area as we do not have scale or technology advantages in those markets. The partnership with LyondellBasell will allow Sasol to leverage our U.S. investments in world-scale assets and to participate in the commodity cycle recovery. Our expanded base of world-class specialty chemicals assets have backward feedstock integration and are well-positioned for future growth. We remain diversified geographically with well-invested assets and integrated value chains, also in Eurasia and Africa, which serves as a great foundation for the future of the Chemicals business. Our leading technologies and enhanced market positions create an accelerated pivot towards performance solutions, which will build on our unique chemistries together with digital business solutions and increased customer centricity. Going forward, we will continue the trend of moving towards specialty chemicals and collaborating with our customers and partners with chemical innovations in sustainability and circular solutions. Moving on to the Energy business. Here, we remain a regional champion in Southern Africa and look to lead the energy transition in Southern Africa and accelerate our sustainability goals in the coming years as we benefit from growth in the demand of our products. There are some important steps that need to be taken in the business in order to achieve this, including feedstock transition, focusing on enhancing fuel margins, becoming more customer-centric and implementing low-carbon solutions at scale. Our focus on delivering affordable gas into our operations in South Africa remains a key tenant of our strategy. The promise of lower cost green hydrogen and the opportunity in green fuels bode well for our deep expertise and knowledge in our Fischer Tropsch technologies. This is already recognized by many industry players seeking to collaborate with us and leveraging South Africa's potential herein. We have actions underway to move forward on all of these objectives and remain confident in the long-term outlook. To conclude on the description of how we see future Sasol, I want to emphasize the development of our sustainability vision. As I said at the outset, this remains a work in progress. But just because we don't yet have all the answers does not mean that this is not a top priority for us. However, we need to get to the right answers. We are already implementing our 2030 greenhouse gas emission reduction road map and are finalizing the 2050 roadmap, which we plan to communicate next year. At the moment, we are implementing no regret options for process, energy efficiency and renewable energy deployment. We already see the results with 2 million tons per annum greenhouse gas reduction banked since 2017 and plan to achieve a reduction of greater than 4 million tons per annum by 2025. From 2025 to 2030, we will advance our technology and gas infrastructure development to lay the foundation for a transition to gas as a complementary feedstock. We would like to position ourselves as leaders in gas and leverage renewable energy in Southern Africa. We will invest up to ZAR 11 billion between 2025 and 2030 with the aim to reduce greenhouse gas emissions by at least 10% by 2030. We have already formulated key principles that will guide our 2050 roadmap, which is under development. Firstly, we want to enable significantly more greenhouse gas reduction in our 2050 roadmap. Secondly, we would like to take a leadership position in the Southern Africa hydrogen economy. Thirdly, we intend delivering all of our future sustainability goals. And lastly, we would like to lead the way in sustainability solutions, making it a key part of our future offering. So let me conclude this overview of future Sasol by stating my belief that we have a bright future ahead for our people and planet while delivering profit. Of course, we have challenges to address. However, I hope we have demonstrated that we are fully aware of what those challenges are. We are working constructively now towards viable solutions, and when implemented, this will give us a more competitive and more sustainable business. This brings us to our last agenda point, our path forward. There is much to be done, but we will be focused on the successful execution of our delivery plan to make our future Sasol ambition a reality. I reemphasize my commitment to all our stakeholders that we will continue to be transparent and take you along on our journey. Transparency is coined as the currency of trust. I will now hand over to Paul to discuss the key considerations in assessing the need for a rights issue.

Thank you, Fleetwood. One of the key questions that people want to know is whether there will be a rights issue? And if so, how large it will be and when it will take place? In short, we do not know yet the answer, but we can talk you through the principles that frame our decision-making and the time frame for doing so. The rights issue is still an important issue that we must consider in creating a sustainable capital structure. We are aware of the intense scrutiny on this matter. It has definitely proven to be the right decision and only considered a rights issue as the final step. There is no doubt that we have put ourselves in a much stronger position than earlier in the year. As we said earlier, by the end of this financial year, we want our balance sheet to be back in a sustainable position. In assessing that we need to consider a number of factors, firstly, we want to be confident that we can operate within the covenant thresholds. We're very grateful for the flexibility that we received from our lenders. By the end of the financial year, we want to be comfortable that we will be able to sustainably operate within our covenant thresholds going forward, allowing for reasonable volatility in the macroeconomic environment. Secondly, we want to make sure that we have and can maintain a robust liquidity position. It was a prudent view on liquidity that allow us to survive the onset of the crisis, and this remains a key priority in an uncertain world that can see profound short-term swings. In considering whether we will meet these tests, we need to consider the outlook of the business and the implementation strategy. This includes business performance, the Sasol 2.0 progress, macroeconomic volatility as well as asset divestments. We intend to look at all of these factors early next year and see whether rights issue is required. With that, I'll hand back to Fleetwood to conclude.

I would like to run through the plan going forward. We will continue to update the market every 6 months on progress, as we go through this transformation process. We have already covered a lot of ground this year with the response plan, the divestments and today the overview of our Sasol 2.0 Transformation Program. Going forward, in February, we will provide an additional update on the Sasol 2.0 progress as part of the financial year '21 interim results announcement. And of course, we will give you an update on our financial position and whether a rights issue will proceed or not. Finally, we will hold a Capital Markets Day around mid-calendar year '21, where we will update you on strategy and our 2050 sustainability road map. In conclusion, let me recap the key messages for today. We understand how to leverage our capabilities and track record together with favorable macro imperatives to support our growth prospects. We have a game-changing Sasol 2.0 transformation plan, which is underpinned by credible financial targets, and this has identified many areas where we can improve and where we have a well-coordinated plan in place to deliver those improvements, utilizing a newer, leaner and more agile operating model. We are committed to leading the energy transition in Southern Africa through a balanced and holistic approach and have made good progress in this regard. Finally, Sasol 2.0 will lead us to our ambition of future Sasol, which is positioned for sustainable value creation in a low oil price world with an attractive investment case. There are many challenges for us still to address along the way, but this is genuinely exciting. We will deliver competitive returns, which is better for the planet and better for people and restore our blue-chip status in the very near future, being proudly rooted in South Africa. Thank you for listening. We will now open the floor for questions, which will be facilitated by our Chief Investor Relations Officer, Feroza Syed.

Good afternoon, ladies and gentlemen. Thank you very much for your questions that we've received already. We will try to group questions into themes as far as practically possible. And we will try if the questions allowed to ask more than one question at a time across one of the executives. So we will proceed with the first question, which is a question from Thomas Wrigglesworth at Citi. The question goes on Sasol 2.0. What volume growth are you assuming to drive lower cost and higher gross margin? Are there any associated cash restructuring charges associated with the plan? And what fixed cost inflation are you anticipating? This also then covers a question by Gerhard Engelbrecht of Chronux Research, which says, what are your targets for restructuring costs? And what are your targets for headcount reduction? Fleetwood?

Thank you, Feroza. And thanks, Thomas, Gerhard. Let me start off with that our gross margin target comprise a number of elements. Of course, volume and price are 2 elements, but the biggest element is the third one that we're driving on the gross margin, which is a variable cost. And I believe that we would be able to show that focus mostly on variable cost reduction. We would see an uplift between 3% and 4% of our gross margin of the base result of FY '20, and therefore, we believe that, that is a quite attainable and a possible target. So if I go to the next part of your question, what are the associated costs -- cash cost. So I think rather than quote a number, in this case, Thomas, I would like to give you a perspective that we put it as a factor to the steady-state run rate. So if I look at what we would spend for -- in implementing the program, we would do about approximately a ratio between cost and what we benefit at steady run rate would be approximately a factor of 0.4 to the steady-state run rate. So it's approximately 40% of the steady-state run rate. When I go to the next one, in terms of inflation. So we have a very, I would say, a composite view of inflation. We would take normally our -- in our financial assumptions the PPIs of the various regions in which we operate and then put our cost structure in the blend of those proportionately, and that's the basis for how we look at cost inflation in our assumptions. When I add to the question the part that Gerhard asked, we are not targeting a fixed headcount reduction. We think rather around a cost reduction, remember, that productivity to be driven in the way where you have to think around not only your own labor cost but it's also about your hired labor cost, your services that you buy in through the period. So our principle here is really to focus on cost rather than the headcount. And I believe if you look at headcount, in any way, we have made significant progress in terms of our structures from GEC-1 to GEC-3. And I know that Marius will cover some of that a bit later for you in more detail to give you color to how we think around that. But I think you need to think much more holistically in our cost element. It doesn't comprise the headcount. Headcount per se is not the driver. It is the overall cost reduction in the cash fixed cost bucket, of which labor is just 1 component that we are looking at. [Technical Difficulty] Marius, please could you mute.

All right. We have the next question, which comes from [indiscernible] of Nedgroup, and its says, we have seen several similar cost saving programs, which we executed historically, Project Phoenix, Project Rand, what are the key differences with the Sasol 2.0 program that will ensure the sustainability of these savings in the future? Marius, will you take that question?

Thanks, Feroza. Thanks, [indiscernible] for the question. Certainly, I think we've had over the recent periods, as you mentioned, significant interventions. Project Phoenix, this was our business enhancement program of 2013 and 2014. Target at the time and realized nearly in excess of ZAR 5 billion of cost improvement. And I'm comfortable to give you that feedback. We maintained and sustained those savings through the period. I think what's quite important for us here is when we looked at those improvement programs we focused a lot at the time on the cash fixed cost component, and this program here has obviously a more end-to-end target on focus. And I think for that purpose, you see significant improvements that we're trying to target on the gross margin side, on the cash cost of capital expenditure, especially the sustaining capital, but then also on the working capital. Again, I think you've seen over the recent periods, on year-ends, on half-year ends, the benefits and the realization of improved working capital, but we really want to focus a lot on the sustaining of those type of improvements. So we believe the program is obviously as we position it, and we took a bit of time to get that all structured. But full ownership is quite critical. So for that purpose, we first had to do a couple of the workforce transition layers, and I think we have that now. We are also structuring ourselves and putting all the metrics in place that we believe we should be continually targeting to make sure that we are really maintaining this improvement. So I think it's quite big, it's quite wider in the sense compared to the others, but I can give you the comfort in referring to Phoenix that we have cut short and are sustaining those improvements. Thank you, [indiscernible].

Thank you, Marius. The next question is at the Capital Markets Day 2017 you targeted to be highly cash generative at $40 oil per barrel. Today, you are talking about highly cash generative at $45 per barrel oil at a weaker exchange rate after significant cost and cash savings. How do you reconcile this with what you said then and with what you're seeing today? That's a question from Gerhard Engelbrecht from Chronux Research. Paul, will you answer that question, please?

Yes, I will. Good afternoon, good evening, everybody, and good morning. A very good question that Gerhard asked. I think we need to kind of take a view in terms of the context in which we made those remarks. At that point in time in 2017, our oil price real assumption was $60 to the barrel. Then ultimately, we had a cash breakeven -- cash cost breakeven that we also publicly stated in that presentation on the South African value chain of $35 to the barrel. What is -- and in the rand-dollar exchange rate, to Gerhard's point, was in our forecast between ZAR 14 and ZAR 16. We did use a very wide range in terms of assessing where the world will move on. So where we find ourselves today is we cannot ignore the fact that inflation is also with us. So if you just merely focused on the $35 to the barrel cost of breakeven and you apply inflation to it of 2.5% per year to U.S. inflation rate, then ultimately that gives you around about $42 to the barrel. Now the long and the short of it is to say that in a $45 world -- even in a $40 world, you will then become -- you will go underwater. And it is the impact of inflation and margins, not really following the base thereof. We had a relook at this and say, we actually don't want to look at the cash cost breakeven. We want to look at the free cash flow breakeven level. Chris Nicholson asked this question several times in previous calls, and I think it was the right question. So we ultimately look at the whole value chain. And as I've indicated on the presentation slide, we believe that through Sasol 2.0, we can effectively get that $35 per barrel down to around about $30 to $35. Now again, as I've said, these things are not apples for apples because the $35 was a cash cost and now we increase sustenance capital in it. And we say, despite that and despite inflation, we're targeting now $30 to $35. What it now does provide you is to say, if oil prices stay at $45 in future, you at least have a margin on your South African value chain of between $15 -- between $10 and $15 to the barrel on the free cash flow basis, which ultimately talks to that type of profitability and free cash flow that we want to generate from the business. And we have really reset our business from that context. So Gerhard to answer your question to reconcile it exactly, we do believe that inflation would have had around about $6 -- $5 to $6 to the barrel. We would have -- in a very similar situation, if we use the same base as 2017 being in the 40s with regards to our kind of cash cost breakeven level. And what we've done is we really fundamentally reset it after sustenance capital to this more -- much more competitive level of $32 to $35 through all the contributions of the various initiatives to give us that profitability level. Of course, if oil prices do move up to $50 to the like on the high side, we will be so much more profitable. But if oil prices do go down to $40, we will have the resilience in the system to deal with aberrations in oil prices over 18- to 24-month period actually. Feroza?

Feroza, you are on mute.

Can you hear me now? All right. So the follow-on question, Paul, is back in 2018, you had a target of free cash flow per share to be above $6 in 2022. Do you believe that we can achieve that or at least half of this, and that's a question from Siphelele Mdudu of Excelsia Capital.

Thank you very much for the question, Siphelele. Also a very good question. And now the short answer is in a $45 oil world, we -- and also a world that looks totally different for commodity chemicals compared to 2017. Our current assumption is that $6 to the share, it's not an achievable target. But again, as I've said, what has changed, macroeconomics are totally different, as I just explained. If one move from $60 to the barrel real assumption to $45, that $15 does make a significant impact on your cash flows. We have divestment -- and plan to divest close to $4 billion of assets in the foreseeable future, which we will probably talk to a little bit later. So that ultimately changes the nature of your asset base and your earnings flows. And your balance sheet is different because your debt levels are so much higher than anticipated. So if you should impose the new macroeconomic layout, in terms of the $45 world as well as the contribution of Sasol 2.0 and based on the targets that we've provided to you today, we do believe that there's a chance that the midpoint, meaning the $3 per share can be achieved. Of course, if macroeconomics weaken, that's going to be more difficult. And if macroeconomics improve, that's going to be more achievable in terms of that midpoint of $3 per share. So definitely, our scenarios indicate kind of that midpoint is very achievable and that a higher point and as well as the exposure if oil prices go to $40 may kind of draw this to lower than the $3 per share level. Thank you.

Thanks, Siphelele, for your question. We have a question at -- from Andrew Snowdowne at Sanlam Investments. It says, please help reconcile the target for CapEx relative to the need for potentially more CapEx required for increased gas requirements or reduction of existing gas deals. Is anything allowed for this in the Sasol 2.0 CapEx target of $20 billion to $25 billion per annum?

Thank you, Andrew. I'll take that question. So the $20 billion to $25 billion per annum does cater for a number of areas that we have included in terms of cash. So the infill drilling campaign that we are doing on our existing fills in the PPA and Southern Mozambique as well as the compression and debottlenecking of some of those wells. And on top of that, we also factored in the near term, the PSA capital that we would sanction in the next months. And notwithstanding that, I believe we also, in terms of our structuring, have put together the focus that continues now on a gas -- bringing affordable gas to South Africa beyond what is included here. So I think the capital allocation program in terms of the way that we look at the capital allocation structure rather will then be -- will be applied in terms of any additional opportunities that we have to be able to bring in more gas. But to your question, infill drilling is included, compression and debottlenecking of the existing both fills are included as well as the PSA.

Thank you, Andrew, for your question. We have a few questions on the similar topic. So I'll cover them all in one. We have a question from Adrian Hammond. How does your labor complement change under Sasol 2.0? And then there is a very similar question from Andrew Snowdowne around labor, which says how much of your 25% leaner management structure that's already been implemented, i.e., what is already counted in the headcount reduction? And then there is a last question from Rory Kutisker-Jacobson at Allan Gray, which says 25% leaner management, can you elaborate on the people and cost savings fees? How many people have you taken out broadly way? And what are your annualized cost savings?

Thank you, Feroza. I'll take that. Thanks for the questions; Adrian, Andrew and Rory. In terms of the 25% leaner management structure on a cost basis, those have been captured. So we have concluded our GEC design, so which is our Group Executive Design. We have concluded GEC-1, GEC-2 and GEC-3 layers. So the sustainable savings that we've realized amongst all of those layers are the 25% in cost savings. So how much on an annual basis is that, that is nearly ZAR 700 million on an annualized basis as a cost saving, and that we have cut short. So we concluded those designs. We are now moving officially to the remaining of the organization, the so-called GEC-4-plus layers. I think it was quite important there we think more about -- along the lines of productivity. And Fleetwood has explained it. We are taking a broader, more holistic view on that. It includes the wider definition of labor requirements; our own contracted labor, hired labor, the full complement of those labor components. So I trust I have addressed that questions correct. Thank you.

Thank you, Marius. The next question that also relates on to this topic. There's a question by [indiscernible]. The question is also what has the impact of the restructuring being on employee moral together with the HR savings levers that we used -- that we exercised towards the end of financial year '20?

Okay. I think -- thank you for the question. So I will start with 7 first. I think that's the one from Thomas [indiscernible] and the answer to that one is very simple. We've gone through quite a strenuous period under COVID and oil price collapse. And during this time, we had on a very open and transparent basis have had also to implement salary sacrifices. Our people -- the majority of our people, a significant part, I would say, very, very high uptake supported us through that period. We retained a very open and regular communication with the workforce. We have implemented this GEC to GEC-3 structures within 3, 4 months, and they are already operative. So we tried to reduce the time of implementation where there could be and where there is normally anxiety in the workforce to do that. And so by acting very decisively and quick, I think we have really minimized the trauma and anxiety through this period. But I do believe I've also launched in terms of the new purpose for Sasol and the reset values. I must say that has energized the organization into a new level of focus and optimism. And I do think all of these play together to keep the morale to say, look, we are not going to go from a response plan to another response plan every year. We have to now fundamentally reset the company so that we can get on with the job for those that are with the company so that they can focus and move on to also see the labor of their fruits and as all the stakeholders would be seeing including our shareholders.

Thank you, Fleetwood. We have a question from Gerhard, another question from Gerhard Engelbrecht of Chronux Research, which says, it appears as if many of your costs and capital targets are technically and innovation driven. What are your technology capabilities? And what do you expect your spend to be on technical services and R&D?

Okay. Thank you, Gerhard. And as you know, our group technology has been right-sized over the last 2 years. We've concluded that program. So as part of Sasol 2.0, the work has mostly been done already. So there's no new significant reductions or changes in that regard. But I think we need to take into account that as we see new technology opportunities unfold in terms of renewable energy, in terms of green hydrogen, of course, we will have to see how that impacts our strategy. And as you know, structure follows strategy, and then we will relook at what is appropriate to be able to address that strategy fundamental. Suffice to say that our current base of costs do factor in the cost for what we're going to spend on R&D and the various other costs in that field as you are so. That has already been covered in our outlook going forward.

Thank you, Fleetwood, and Gerhard, for the question. The next question we have is what oils are and polymer input assumptions are required to achieve your target of below 2x net debt-to-EBITDA by FY '23 to '24, Slide 11. Are you able to achieve this without a rights issue if inputs stay at current spot or more price rises or weaker ZAR is still required? It's a question from Andrew Snowdowne at Sanlam Investments.

Good afternoon, Andrew. A very good question that you asked. So Andrew, basically on the price sheet assumptions for '23 and '24 in terms of the target to go below 2x net debt-to-EBITDA, we have, from an oil price perspective, obviously applied the $45 world. And we've applied that consistently throughout the 5-year period that we currently talk about. In terms of the rand-dollar exchange rate, we've also kept the rand-dollar exchange rate very much kind of stable at a $15.50 level on average throughout the period. There's some slight kind of weakening of the rand, but that's more kind of on the interest rate essentials if you base it on that. So ultimately, what that translates into, Andrew, is a ZAR 700 a barrel oil price. And now today's spot price to your question is around about ZAR 720 a barrel. And we are seeing significant volatility. And I will say that from your question on the rights issue. So at these levels, do you need a rights issue? I guess it depends on 3 things, and it comes back to maybe a lighter question that will come up on the rights issue. But I think where we find ourselves is the run rate of the business needs to be sustained. We are quite comfortable with the run rate that we've achieved thus far in this financial year despite all the challenges that we have been faced with on all dimensions of gross margin, cash fixed costs, working capital as well as capital. We've been hitting our targets for financial year '21, and we are slightly ahead of our run rate. So from a run rate perspective, we feel quite upbeat that if we can sustain this, that really kind of contributes quite well in the decision towards a rights issue, whether to go or not on what the size is. So ultimately, that's the first thing. Then the second thing is in also the asset quantum in terms of asset disposals. So we have banked at this point in time around about $3 billion of assets, slightly over that in asset disposals. And we believe that there is a close to 100% certainty that all those cash will flow. Yesterday evening, we received the $2 billion check from LyondellBasell on the U.S. project. So we feel quite comfortable that the $3 billion is very bankable. And I guess, then the other issue is to say we've also messaged today that we are still targeting around about $3.8 billion of asset disposals. So the other $800 million is ahead of us in the next couple of months towards June. We've made good progress in terms of our asset disposal program on those assets. And I will say that, that's probably the next big game changer for us in the go, no-go decision on the rights issue and how successful we believe we're going to be in the disposal of those assets. Now after you've considered that, then ultimately, run rate is good, asset disposals are going very much according to plan, then the view is to say, in February, in the $700 -- ZAR 700 a barrel world, which has $45 as underlying, and in that, we also, from a polyethylene pricing perspective, considered roundabout our LDPE Northeast Asia price margin there of around about $400 a ton, which is also kind of very much where it currently sits there or thereabouts. And if we can maintain that run rate, it will definitely push us below a $1 billion ticket size on the rights issue, somewhere between $0 and $1 billion. So ultimately, we then need to make the call to say are we comfortable that if the run rate anticipates, and we are comfortable to stay below our covenant level because I think that's the critical part of the covenant for June. Then ultimately, what is that decision that will inform that rights issue. So to give you just kind of a couple of these markers, we haven't been overzealous in our assumptions in terms of macros. Very much if today's macros plays out going forward, we will be in a good space. We, ultimately, need to deliver the quantum of asset disposals. I think those make a significant kind of delta. And we have to be honoring our promises in terms of the 2.0 target as well as the current run rate on the self-help measures, which I can give you already comfort that this year things are going very much according to plan. So that will inform the decision in terms of all of this. But we are tracking our plan in terms of what we shared before to really leave the rights issue as the last decision after these factors have been considered. I think you have to allow us to get to February. I know it creates an overhang. I will be the first one admitting it. But if we do it in a smart way, maybe we'll have a good answer in February lately. Thank you.

Thank you. There's a question from Wade Napier at Avior Capital Markets, which says your CapEx of ZAR 20 billion to ZAR 25 billion is in line with the USD 1.5 billion guidance from 2017. Why are the numbers the same despite $3.5 billion worth of divestments?

Wade, good afternoon. Hope you are well? Also a very good question, Wade. I will say that if you look at the $1.5 billion guidance, and you just apply inflation on the $1.5 billion because the world never stands still. The $1.5 billion never included any of the LCCP capital, but we never envisaged that to be that significant either due to the fact that the plant was new and we didn't invest too much capital. But the $1.5 billion really looked at the foundation business in the way that we had it before. Now if you look at the $3.8 billion target, then ultimately, you can -- and you may argue to say, well, LCCP is $2 billion of that, which ultimately leaves you then with the remainder. And if I'm kind of looking at the CapEx that contributes some money towards the $1.5 billion, I will say around about $150 million to $200 million that it contributes. So if you really take the $1.5 billion and you apply inflation to it, and then ultimately take the asset disposals out, you're kind of very much where the target is today in terms of ZAR 20 billion to ZAR 25 billion. I will say ZAR 20 billion is probably beating that target that we had in 2017, and ZAR 25 billion will probably be kind of matching the $1.5 billion. So I think we've done really exceptionally well if you think -- also think about the ZAR 20 billion to ZAR 25 billion. It does include the 10% greenhouse gas improvements, which the previous estimates didn't include and it also includes the environmental compliance projects to the fullest extent. In terms of the estimates, which I think previously those estimates were kind of best estimates and that the ZAR 20 billion to ZAR 25 billion really kind of gives effect to that. So I think these targets are very robust, very challenging, and they will kind of provide good value for us in maintaining our asset base, but also ensuring that we deliver sufficient cash flow stream and not over-maintain.

Thank you, Wade, for that question. We have a few questions on capital, which I'll try to consolidate. It comes from Henri Patricot with UBS, as well as Thomas [indiscernible] and then also from Alex Comer of JPMorgan. So in no order, it says, the first question is, are the savings on CapEx not going to impact on sustainable operations, especially the savings on maintenance, like the longer phased shutdown cycle? Will this not impact production volumes in future? And then is clean fuel's true capital included in this capital budget that you've talked about, the ZAR 20 billion to ZAR 25 billion, and then I think in the cash -- in the carbon costs, what do we assume for our $30 to $35 per barrel breakeven. So there's a mixed bag of the question here.

Okay. Feroza, thank you. I'll start with the question that Henri posted with respect to, is there any additional CapEx related to growth projects or any greenhouse gas emission reductions above the ZAR 20 billion to ZAR 25 billion. So in this case, Henri, we have excluded any growth projects. This ZAR 20 billion to ZAR 25 billion is basically our sustenance, maintenance, compliance capital that we have to run the business. And yes, all the key fuels, the gas projects that I've mentioned for the decline in the gas fields to spend that has been included, all the capital required to fulfill our commitment to the greenhouse gas emission reductions by 2030 is included here. So all of that, I think the only exclusion that we have is any growth projects as we've qualified that before.

Yes. Thank you. Perhaps I'll take [indiscernible] question. I think a very important question. And obviously, we are a maintenance-intense company, as you know it. So a lot of our improvement are based on improved methodologies that we are now taking to a larger scale. So risk-based inspection and risk-based maintenance is well-known in the industry. It's been formulated very effective. And I think our peers, you would have also seen as extensively applied it across all the operations. So Sasol is not new to this. In the recent period, we have started to apply these. And in several of our operations, we are seeing significant success to that. So it is really a very important focus area for us. We really need to make sure that we are a reliable supplier of product, but also that we can do it very safe, as I just want to highlight those as nonnegotiables for us. So having, I think, better access now to more data that we've gathered over the recent periods of times, together with the improved inspection methodologies, we are fairly comfortable that we can now apply that much wider. We have also, in many of our projects, now started to extend so-called capital scrubbing processes. And we will also be applying that much further into also the larger-scale maintenance and sustainability type projects to give us those added benefits also in that regard. So certainly, I think we are comfortable. It is land-owned. So I think we have deep expertise in our operations that really make sure we do the right things here. And I think we're fairly comfortable that we are trading aligned with our peers and making sure that we stay reliable and also safe in our operations. Thank you.

And Alex, I will be taking your question in terms of 50% of the labor cost, how many job losses. I think that question has been answered earlier by Fleetwood and Marius. I think at this point in time, we would like really steer away, as we are in the process of reconfiguring the kind of whole labor force and reorganizing them that it will not be for us prudent to count numbers today. However, as what we've done with Phoenix in the past, the soon we complete the process, we will be -- in terms of the different levels, we will be more open to talk about it. Ultimately, we did give you a kind of a sense, and as Fleetwood mentioned, that we are targeting cash fixed costs in that range, as we mentioned. And ultimately, labor cost is a big portion of that in terms of its overall contribution. So safe to say that there will be a large contribution from labor in making up that number, but we will not be in a position today to give you a sense of exactly how much that is. The second part of your question then also relates to what part of carbon taxes have been included in our $30 to $35 breakeven level. Again, we have maintained the same position as what we've done before due to the fact that there has been really a lack of clarity at this point in time what's going to happen beyond the 2022 period. So we have still maintained the ZAR 1.5 billion per annum common tax level in our assumptions. And obviously that needs to be updated if we get better clarity getting into sort of what that tax exposure will be if and so. And the last question that has been asked is by Chris Nicholson. Chris asked the question whether these targets are cumulative and whether they're on real and nominal terms. Chris, the cash fixed cost target that we've given to you today is an annualized run rate. So ultimately -- so that's the run rate per annum that we want to achieve. But as you can imagine, and as we've mentioned, that by 2023, we at least wanted to be at the level of around about 60% of that, meaning that 60% of the range that we provided today we want to achieve in that year and then building that up to the full potential in year '25. So that is every year we want to then from there on kind of reduce our cost base with that absolute value of cash fixed cost as we indicated. The numbers that we provided here will then be also a quoted number in nominal terms for financial year 2025. So you have to discount them back to the relative years and you can use -- we've used an inflation rate of between 4% and 4.5% to get it in the monies of the respective year.

Thank you, Chris, for that question. The next question -- there's a few questions around the future Sasol and the strategy, which Fleetwood will handle. The first one is from Matthew Whitlow at 361. Once the balance sheet is fixed, it's fitting the business into Energy & Chemicals and auction.

Thank you. Thank you, Matthew. I'll agree with that. I think it's fair to say that over the past couple of years, we've done a lot of work in this regard, and that's also as part of our defense strategy. And splitting the business is not really a consideration currently for Sasol. We believe there's really much more value to be unlocked from the 2 businesses through the Sasol 2.0 transformation rather than selling these businesses or splitting it. How to best structure the company is a matter that concerns the Board, and one needs to assess whether value can be added through changing capital structure. So it is a matter that will be reviewed from time to time. But currently, and based on our analysis thus far, is that the share price discount is more related to other factors than the restructuring of the company. And so we believe that we'll continue to monitor this space going forward. But as I mentioned, more value can be delivered through focusing on delivering Sasol 2.0 and future Sasol in this regard.

Thank you, Matthew. There's -- the next question is from Campbell Parry, Investec Wealth. Are you confident that you still have the necessary technical skills to be as innovative as you aspire to be?

Thank you, Campbell. I think the answer to that is yes, and why do I say that, we have in the recent months bolstered our capability in certain areas, whether that's commercial, technical, in support of our strategy and our focus in the Energy business as well as the Chemicals business. So I believe we're well-positioned to do that. And we have, in the recent months, bolstered our own structures with the necessary skills that we brought into the company if we didn't have it already in the company, and I think we would continue on that basis to look at where the needs are, and somehow Sasol can attract really good talent from outside.

Thank you very much, Campbell. The next question is from Gerhard Engelbrecht of Chronux Research. You talk about the increased use of gas in future to reduce emissions. In light of the declining production at Pande and Temane, do you have any concrete plans in place to supplement gas? And are you in talks with the owners of Matola LNG project?

Thank you, Gerhard. I think we've shared at previous occasions that we are at -- we're having a very strong focus on sourcing gas at scale. And of course, beyond the areas that we've already discussed in terms of our own gas fields, we are in discussions with the LNG options via Maputo, which is the Matola Gas company. We are in discussions also with players in the Rovuma. We are in discussions with the governments in South Africa and Mozambique to enable gas from the Rovuma to South Africa. So we have got a myriad of actions at this point in time running in parallel to address bringing in affordable and long-term gas into South Africa as we have indicated is required to not only to have gas as a complementary feedstock, but also to decarbonize in the journey going forward and reduce greenhouse gas initiatives.

Thank you, Gerhard. The next question is from William Beecham at Access. What further changes do you plan to your Chemicals portfolio as you move towards the more specialty focus?

So I think the focus in our Specialty Chemicals business is really to work with the building blocks we've got right now. We have just commissioned world-class assets integrated into very affordable ethane-based ethylene in the U.S. We've got strong Eurasian operations, where we've got Specialty Chemicals. So our focus is now not to only look at the holistic market leadership but really to focus on the leadership in terms of certain segments. And I think there, we've got quite a strong right to succeed. If I look at our Essential Care Chemicals, if I look at our Advanced Materials grouping and as well as the Performance Solutions, there's a lot of opportunity there. As I say, we've just commissioned Guerbet alcohols, additional Ziegler capacity and all of those plays into the areas where we can really bolster and grow our presence in Specialty Chemicals. And of course, as we've indicated, once we've got the balance sheet in order, we would look at then how to grow the Specialty Chemicals, and that is on the radar in terms of our capital allocation framework, and it will include both organic and inorganic opportunities to grow our Specialty Chemicals portfolio.

Thank you, William. The next question is, what the investments in future do you see for Sasol in electric vehicle space and charging stations, et cetera. It's from Rudy [indiscernible].

Rudy, thanks for that. I think we would give much more color in terms of our Chemicals business and our Energy business at the Capital Markets Day and how this Sasol 2.0 financial KPIs will enable that businesses to prosper. But suffice to say that our mobility solutions that we -- mobility area that we have structured in the Energy business are taking heed of the need for electrical cars going forward. And yes, in future, and as the critical mass gather in that field, it will be part and parcel of our consideration and offering at our retail fuel stations.

Thank you. The next question is from Adrian Hammond at SBG. How does your cash fixed cost target of $8 billion to $10 billion compare to the EBITDA foregone from asset sales except for LCCP?

Thank you very much, Adrian, for that question. So ultimately, the $8 billion to $10 billion are -- as I've indicated to Chris, is a significant kind of -- not lots, well, is quite significant, but it's an annualized run rate improvement that we ultimately want to target by 2025. In that, we're then ultimately -- in calculating that, we've already taken the asset disposals into account in calculating that specific number. So your question then remains as to say, but how much -- what is the impact, ultimately, from the asset disposals on that in terms of EBITDA. So ultimately, the total EBITDA, and I think we -- what we will do is we will not quote a number today in terms of the EBITDA impact of the various assets. In terms of the EBITDA, taking the EBITDA and the interest that we save as a result of the asset disposals as well as the sustenance capital into account, it is significantly less than the -- meaning the reduction in EBITDA compared to the $8 billion to $10 billion target, probably kind of less than half of that is then ultimately the impact of EBITDA, and that will include the LCCP. So LCCP, we did speak to you guys about. So I won't go to that number. So ultimately, the 25% portion that is sold on the $1 billion run rate that ultimately make a ZAR 2 billion impact. So you can then translate that back to dollars. So the long and the short of it is to say that the EBITDA impact less than half of the cash fixed cost, if you then take effectively your interest also into account because you cannot ignore that per se on a cash basis as well as your sustenance capital. You need to look at it on a net-net basis. Thank you.

The next question is, what other asset sales drive the target to $3.5 billion given that we've concluded and announced almost $3 billion? It's a question from Adrian Hammond and Wade Napier.

Thank you, Adrian, and thank you, Wade. We also need to take note that we have done quite a number of smaller divestments that may be under the radar so the Gabon upstream assets, we've got a smaller ALT pipeline in Europe that we divested from and also some properties in South Africa. So all of that adds up. And I think the 2 that we have already declared or mentioned before were the Aramco pipeline and the CTRG. So those are just the examples of what is part and parcel of that as well as further additional assets that we have assessed. And of course, I don't think it's the right time to divulge any further names on assets. Suffice to say that when we're ready and when the commercial processes have unfolded, and we're ready to announce, we will, of course, announce that to the market if it's of material nature.

Thank you. There's a question from Herbert Kharivhe of Investec. In terms of the COVID response plan, you mentioned a debt reduction target. Are you still targeting $6 billion with the $4 billion coming from asset disposal and a potential rights issue? Is that how we should look at this?

Hello, Herbert. I hope you are well. Most definitely, we want to target the $6 billion. We haven't announced that we will kind of step away from that objective. But I think, again, I want to caution to say that none of these things are ever absolute. So on the $2 billion self-help measures, I think we are unwavered on that target. When it comes to the contribution of the asset disposals, again, we feel quite comfortable that we've made significant progress to at least kind of achieve the lion's share of the $4 billion in terms of the asset disposals, which we already referred to in the presentation. And then it really begs the question to say, do you want to top it up with a rights issue. And again, I think we have said in the past, if the rights issue ticket size is becoming smaller, then it becomes less needed in the overall scheme of things. So it comes back to Andrew Snowdowne's question, which I answered to say, we made good progress with our self-help measures. We are ahead of our run rate. Our asset disposals are on track. We really need this lost $800 million of asset disposals in the next couple of months, as Fleetwood has also now alluded to. And then based on that, it will really inform us to say, do you fill up the whole $6 billion or at least the significant portion of that. If we get to $5.5 billion that will be fine, because, I mean, ultimately, then your balance sheet will be more or less in a position that it's significantly below that 3x covenant, and that's really what we're targeting. But for now, that still remains the overall objective.

Thank you, Herbert. The next question is from [indiscernible] at Nedgroup Investments, which says during LCCP's construction, there was a mention of several low-hanging fruit opportunities that could realize soon after completion, such as debottlenecking, cost optimization, et cetera. Are these still possible? And what would they involve? And what benefits could be expected?

Thank you, [indiscernible]. The answer is yes. They're all still on the table. Remember, as we share the 50-50 partnership now with LyondellBasell, the cracker and polyethylene plants to the extent that they would be optimized, we will share in 50% of that. We've indicated that there is in the realms of 5% to 10% opportunity where there is probably very low, if any, CapEx to be spent. And on the specialty side, of course, we would still participate in all of those areas that we have indicated. Suffice to say that you need to keep in mind that on our Performance Chemicals assets, the more specialty chemical assets as part of the LCCP, that means the Ziegler, the Guerbet, the aluminas and the phosphorylation -- phosphorylate type of products. We have the opportunity to ramp-up in terms of market demand. So it is not the thing that you do immediately and you can take market. It is not a fungible product like polymers or polyolefins. And in that regard, we would see that the debottlenecking will happen over a period of time and not necessarily in the foreseeable future. We will first ramp up, as we've indicated, over a period of 3 to 5 years. And after that, of course, we will then be able to make use of debottlenecking opportunities. And as part and parcel of Sasol 2.0 program, this is a global program we're implementing. So when we talk about gross margin improvements, when we talk about cash fixed cost reductions in working capital, that is as applicable in South Africa as it would be in Europe, as it would be in U.S. So I guess there are further opportunities that are being assessed, and that will be implemented as part of Sasol 2.0.

Thank you. Eugene [indiscernible] asks a question on the balance sheet. Are we planning to tender and roll over the 2022 Eurobonds or issue new bonds in the near term?

So we will most likely not roll over the bond. And in all likelihood, we will need to go to the capital markets at some point in time, Eugene. But before we just kind of go too quickly down that line, we do fully acknowledge that we have a Manhattan in terms of our debt maturities in 2 years from now. So it's vitally important that we reset the balance sheet that we see towards investment grade, if the rating agencies allows us to move again in the realm of investment grade based on their metrics. And then all of that will kind of inform in which shape or form do we want to kind of go to the capital markets. We do believe that ultimately we've exhausted probably our exposure on bank on debt to some extent. And ultimately, the focus will be more on going to the debt markets in terms of issuance of new bonds. More work will be done on this, and then we'll ultimately inform you as the owners of the business in terms of which direction we want to go once we get to that point.

All right. Thank you. The next question is -- we have is what metric -- sorry, what metric are you targeting, most importantly, net debt of $4 billion to $6 billion or the covenant? That's a question from Adrian Hammond at SBG.

Again, I think that's a very, very good question, and thanks for that. So we are not targeting an absolute debt level. That's not in our target. What is really key is that we have the pathway back to investment grade. And that ultimately, we achieve covenant levels that allow sufficient headroom for us to manage the balance sheet, execute the strategy and add value to shareholders. And that's really the objective. So where we stand here today, and you will see in the presentation, I made reference to, firstly, targeting a 2.5x level. Then moving below 2x, and below 2x is where we believe for our industry kind of that -- kind of more in the lower risk area, and that's really where we want to be. But it will take us time to effectively get there coming back to the question that Andrew Snowdowne asked. So ultimately, our key objective is to target that. And then also from a ratings agency's perspective, covenants and liquidity is really very important, of course, other factors as well, such as sources of income, your exposure to South Africa and the different sectors. So we are really considering all of those factors in addition to the covenant to kind of articulate and plan for a clear pathway back to investment grade if that is doable.

Thank you. We have quite a few questions on the rights issue. The first one is how are sales volumes performing and how is pricing developing and what metrics will dictate a call on the rights issue? And could you paint the scenario where you foresee no rights issue? It's a question by Adrian Hammond. And maybe I should cover the rest of the rights issue questions. You mentioned earlier that if the rights issue size is less than $1 billion, we may not go ahead and execute one. Does that outlook still remain? That's a question for Sashank Lanka of Bank of America. And then I think, what are you expecting to change between now and early '21, calendar year '21, when you might decide on the rights issue, you have a plan to reduce cost, you have a successful divestment program. Only short-term earnings will change to my mind, which is not a key consideration for a rights issue. Where am I missing? That's a question by Thomas Wrigglesworth of Citi.

Good -- all very good questions. And I think I have extensively tried to answer some of the questions when it comes to the rights issue. So ultimately, to the first part of Adrian's question is our business is performing well. We are ahead of the run rate. We are kind of seeing the price realization, the cost realization, the capital realization being on target, and which is a very critical step. And we have mentioned that to you several times during the results announcement and even earlier, that we really need to make sure that our underlying cash flow is translating as a kind of -- as a first principle. So that's quite good. We also have a very robust process in Sasol in managing liquidity, and you would have seen in our liquidity buffer, we are doing quite well in terms of maintaining and actually increasing our liquidity level. The second part, which I spoke to, was the disposals and the quantum of disposals. And we shouldn't underestimate that $800 million to $1 billion yield there can make a shift in terms of the ticket size. So ultimately, coming back to the principle that I've said that if we can achieve and have a high probability of achieving our $3.8 billion asset disposal target, then a part or significant part thereof, it really kind of will contribute quite significantly -- in significantly reducing that ticket size or may even remove the need for a rights issue. What then remains is in February is a view to say, all right, what is in that ultimate -- after you've done all the disposals and this run rate continues, what is the headroom that you leave yourself below the covenant level of 3x in June. The banks have been very lenient at this -- to this point in time to navigate to and lower a balance sheet debt level. But ultimately, I think they also have taken a lot of risk on them. And hence, I think it will become increasingly difficult to renegotiate and keep on renegotiate covenant levels. It's not the matter that we will not try. We will try that. But the banks do want to see us moving down that path of lower debt and lower covenant levels. So all of that will then take into account. And then Sashank's question is quite right. Sashank, if we sit with a small ticket size, I think we need to go to shareholders and also explain what the consequences of that is. That may mean that the future dividend is delayed a little bit longer down the path, maybe not kind of as we envisage but a little bit longer. But I think rights issue versus dividends, I will definitely favor delaying the dividend and not doing the right issue. So all of these things are definitely applied. We are definitely in a much stronger position than what we've been over the past couple of months. And our objective is to avoid it if we can avoid it. But if we can't, we also have to explain to shareholders why we need it. And that's where we believe, in February, we will be able to clearly position it. I know that there's a long strong push to say, well, you can't take it off the table today, and I think it's a little bit premature. The markets are too volatile, and we really want to make sure that we make the right decision because this is a decision that has long-term consequences. So just allow us, I think 2, 3 months from now, and hopefully, we will be in a position where we all can have alignment of minds in terms of that. Then in terms of the 3x covenant, the covenant for December, and that was the only covenant that we could renegotiate with the banks, that did include the impact for Hurricane Laura, and we will make an allowance for that. That doesn't say banks have agreed to that for June. As I have said, the June covenant is an independent renegotiation all in itself, and banks will closely monitor our actions leading up to June in the way that we then ask for a full leniency, if at any. So ultimately, it's been allowed for December, but we have no view at this point in time that we can share on how -- what the outcome for June will be.

Thank you. So there's a question on the sovereign rating and investment-grade rating. Given the challenge SA's sovereign rating, how do you plan to get to IG rating and IG grade as a company given the sovereign cap in terms of not to upgrade? That's a question from Chris Reddy at Mazi.

Thanks, Chris. Also a very, very good question. And we have already started our conversations with the rating agencies to understand the methodology and thinking on their side and approach in kind of allowing us back to investment grade. So I have had conversations with S&P and Moody's, and it is very early days. And I think we have to accept that there is a bit of a dilemma about the South African sovereign, which we cannot escape at this point in time. However, rating agencies, in terms of the methodology, primarily, first, look at the sectors in which we operate, the risk of the sector, the growth potential of the sector. I think that's quite important. They will look at our liquidity and underlying quality of cash flows and earnings, where the balance sheet sits. And then ultimately, in their methodology and thinking, they need to kind of then allow you if your risk profile is low enough -- effectively allow you to decouple from the sovereign, which we've done before. I think the highest we've been was 2 notches above the sovereign. And that ultimately is probably still where kind of I think the rating agencies guidance today sits. I can't speak for them. But I think that's kind of my assessment of that situation. So we will effectively evaluate it going forward, and see where it leads us. If the sovereign is like at least 3 notches, 4 notches below investment grade, I think a lot of the shareholders have asked us in the past what can you still do to the investment grade. I think in a scenario like that, that the chances are very remote for us to be investment grade, just because of the home address. And I think we have to accept it. If we get there, that is the situation that we are dealing with, but we're not there yet. So our objective is to get the fundamentals of our business correct, so that we have a path to investment grade. But it doesn't mean that even if we meet all the metrics that the South African Sovereign might still bear in on that final impact.

Thank you, Chris for that question. We'll move on to ESG topics. There's a question from Andrew Snowdowne at Sanlam, which says you are using a peer group as a benchmark. Given the focus amongst peers to reduce emissions, are you comfortable that a 10% reduction as planned is enough?

Thank you, Andrew. I've mentioned a couple of times in the media roundtable. And when we explained also our 2030 Greenhouse gas emission road map that we have to also look at the practical constraints and the technical feasibility when we announce any reductions. So we can't promise up high in the sky, and it's not backed up by fundamental technical solutions. And in this regard, I'd just also like to put the perspective that when I look at our peer groups, they are located in areas in developed countries where there are infrastructure. So for example, if you in the Gulf of the U.S., you connect it to a myriad of options to look at alternative feedstocks like gas. If you're in the middle of Europe, there's huge gas infrastructure. If we had such infrastructure in Southern Africa, we would immediately look at gas in much higher volumes that we can decarbonize much sooner. But the fact is we have to make sure that, that infrastructure is developed in the region. That takes time. It takes a lot of parties and governments to come together to say this is what we can do, and that's how we're going to do it. So that constraint make us as a developing country a bit uneven with our peer group. And so we've also said that the focus will be to have at least a 10% reduction. So we aim definitely to do more than 10%. And as the opportunity unfolds in terms of our renewable space in terms of all the other opportunities that we are looking at -- if we can move faster, if we can do more than 10%, and if we can do it at better cost, we will do much more. And I think that is our commitment. But what we can deliver is what we would say, and we've communicated already, is at least 10%. And that we've got solid plans on how to deliver that, but we are not leaving any stone unturned to look at more opportunity in that regard. But please keep in mind our constraint in a developing country versus other countries where our peer groups may be content.

Thank you, Andrew. We have a question from Abdul Davids at Kagiso. Please provide more color on your A quality Capex, if required, and the timeframes as part of Sasol 2.0.

What I can say -- thank you, Abdul. So the focus on our ESG capital. So when we set the ZAR 20 billion to ZAR 25 billion over the period, it takes care of all our sustenance capital requirements. So it covers clean fuels. It covers our replenishment of gas in Mozambique. It covers our maintenance cost, and it covers our A quality cost that we will implement through the period. So all I can say, I'm not going to call out any specific number. Suffice to say, it is part and parcel of our capital road map. And yes, it includes it. And yes, it does conform to the timelines that we have seen. The only area that we've also indicated before is the SO2 that a level of specification has been published by government only in March of this year. We have made an allowance for the technologies we think which can abate that SO2, but we are currently reviewing all the technology options. And if there's a delta to the CapEx that we have allowed, we'll have to consider that. But at this point in time, it is covered.

Thank you, Abdul, for your question. We have a question from Kevan Salisbury of Ninety One. A lot has been discussed about increasing commitment to renewables to reduce GHGs, which is admirable. What is the plan for existing dirty infrastructure? Shutting down Secunda alone would accomplish many of your goals. Under what circumstances could this be accomplished?

So thank you, Kevan. I think if you have looked at our climate change report, and our 2030 road map, you would have seen that there is a quite a clear strategy over a long journey that we call reduce, shift and eventually transform and so that is applicable to our South African energy value chain. So in the reduce part, we will reduce the need for energy, which takes the form of scope to electricity by doing it via renewables. The second area would be to use less energy in terms of steam and the consumption of electricity by making sure that we run our plants more efficiently and optimally. So that's all part and parcel of the reduce. The shift period is really to look at how we can shift our feedstock to this complementary gas as feedstock into our operations. So you would know that if you look at a ton of an equivalent value, for the equivalent amount of gas used compared to coal, there's a 60% reduction in your greenhouse gas footprint if you use gas. So the more gas you can use, the more you can reduce your coal footprint if you commensurately reduce that. Of course, that is not going to happen like a light switch that you throw and all of a sudden there would be only gas. That's not the case. I've mentioned before, the constraints with respect to infrastructure, the issue of affordable gas that we are looking at, and we're looking at all levers. We would start off with LNG, which is the bridging option at best, and then move onto a long-term gas. But not only that, I think if we look at the area of eventually transform our portfolio of products, that is where the exciting part of the future of green hydrogen comes in, for example. So you can theoretically, in terms of our Fischer Tropsch process, if you use the CO2 that comes out of the process, you use -- reuse that carbon as a sequestering thought. And you combine that with green hydrogen. What you do with Fischer Tropsch is that you produce green products, whether that is now chemicals or whether that's fuels or jet fuels. And I think the affordability of hydrogen is the issue here, but we've set our own very solidly on the opportunity, how to unlock that. And you should not forget that Fischer Tropsch is one of the few processes where you can turn it in a complete green machine to produce greener products. Of course, that won't happen in the next 5 or 10 years, but the potential to pursue that is coupled to the economic costs and the reduction of costs in terms of producing green hydrogen through the renewable path. So I do think there's exciting prospects for us going forward. And as I've already said, we have had approaches from many partners that does realize that Sasol is well positioned with respect to Fischer Tropsch. South Africa is well endowed with solid solar and potential wind energy, and that makes us a very, very good partnering prospect as a country and also as a company as Sasol.

Thank you. There's a question on the general topics from Siphelele Mdudu from Excelsia Capital. How will the key financial targets you shared today be incorporated in Sasol's management remuneration?

Thank you. Thank you for that question, Siphelele. So our current scorecard has really been to look at, and that is this financial year ending June to make sure that we get the company back to a solid balance sheet and recovery. And that is the response plan and the Sasol 2.0 reset that we announced today. As we go forward now, the delivery of that as of our new financial year FY '22, the Board and the remuneration committee would apply their mind to make sure that the incentives that will be for the financial year '22 is aligned with this announcement today. So if you ask us, will it be aligned, the answer is, yes, it will be, and it will be done in the next 6 months and be ready then for our financial year 2022.

Thank you. On chemical prices, can you please talk about the chemical price recovery that we are seeing? Is your view that this is something that can be sustained? That's a question from Sashank Lanka of BofA.

I'm going to ask Brad to weigh in here as well. I'm just going to kick off to say that what we see is that there is a resurgence or there's a stabilization in terms of polyolefin prices. And we do believe that once the pandemic eases and the vaccine takes effect, there is actually a pent-up demand for commodities and then what follows. Brad, any additional thoughts there?

Yes. Fleetwood. Thank you for that. And thanks, Sashank, for the question. As we do see the recovery in the economies around the world, we are seeing then the pent-up demand starting to recover, in particular, in a number of markets such as automotive, industrial, construction. And so I think this does bode well as we go into fiscal -- into calendar '21, also with the emergence of the vaccine trials moving into production also creates, I think, opportunities for the markets to recover. Thank you.

Thank you, Brad. On the next question, I think I'll deal with that one for us as well. What lessons have you learned from the delays in cost overruns at Lake Charles Cracker Project, which can help you to improve the execution of future projects. I'm going to ask Marius to weigh in here because he has under his leadership run with a total program Sasol wide to incorporate that in terms of the approach that we will take forward in terms of all projects that we execute. Marius?

Thank you, William, and thank you, Fleetwood. I think this is certainly, for us, a very important topic. And we have, as far as 2 years ago started -- starting to incorporate the key lessons that we've captured from the Lake Charles Cracker Project as well as also those that we've seen coming from other projects we executed also in South Africa. FTWEP, for example, comes to mind. That program has been formalized to the extent that we have a direct reporting back to our Board in terms of our progress. We are covering a wide range. It includes, amongst others, the culture that we see playing out on our project execution. That's a very important one. Our collaborative efforts with the various partners that we work with on projects. I think that's a very critical component for us to monitor. And we've seen in that regard as part of also our rollout of our renewed focus on certain value elements. I think really trying to embed that quite effectively. We have also implemented a range of practices being from technical project management practices and really updated all along across all our operations, new ways of working there. And I think we've seen the effectiveness of that already coming through. And in the recent period, tracking both capital cost expenditure as well as adherence to schedule. And we've seen those coming through very positively. It's -- we're midway through that flight. And I think we don't want to claim too much success at this stage, but we are feeling comfortable that I think we're seeing the entrenchment into our organization. Capabilities is a very important one. I just want to pause there for a moment because as part of the group technology repositioning, we have positioned -- partnership is a very important component in that. And over the last 1.5 years, we have on-boarded 2 large engineering contractors as part of our offering when it comes to project engineering. We are successfully moving forward with those. And I think we are already seeing the benefits that they bring and complementing the Sasol way of doing projects and engineering. So a comprehensive program, and we can spend more time in the future if you want more detail. But I think it's really for us now to entrench those new practices, ways of working and behaviors within the way that we do projects. Fleetwood, thanks, and back to you.

Thank you, Marius.

There's the next question on sustainability. It comes from Johan de Kock of Vunani Fund Managers. Your sustainability plans implies less coal and more gas. Did you consider selling the coal mines? And if not, please provide the reasons.

Thank you, Johan. I think if you look at our cost structure, the coal input cost is still the most competitive feedstock if you compare that to any other feedstock that we've got currently at our disposal. So with that in mind, I believe the best owner concept does bring the reality that if you run the coal mines and you can do it at the optimal point with the view to have the lowest cost of production that is what we need to enable our cost structures for fossil fuels. We believe we are very good operators of coal mines. We've invested quite heavily over the last 10 years in the renewal of that. And we believe that, that coal will be still a very significant part of our feedstock going forward as we transition to gas, notwithstanding. So the period of 2030 to 2040 is a transition with more gas and probably less coal. But the point is there would always be some coal that we would use in the operation at a very competitive cost structure. But if we're the owner of that business, it means we can ensure that, that cost structure is very competitive rather than someone else that is driving not the cost base, but the profit or the price base, and that is not in our interest to go and buy that and someone else take the profit, and we have to see the increased cost in our input cost in the value chain of our energy business.

There's a follow-up question on dividends, that Paul will handle.

Thank you very much, Feroza. I just want to clarify I received 1 or 2 questions from the earlier response on the rights issue and the connection between a rights issue and dividends. I want to make it quite clear that our objective is not to do a rights issue and immediately start with the dividend program thereafter. That will be nonsensical. So the focus on the rights issue is to do a fundamental reset of the business. And if it's needed, and that we need to kind of explain to shareholders when we approach you if needed. A dividend decision is something that, as we all know, follows from a decision further down the road and the rights issue is not to enact a dividend program. So I just wanted to make quite clear that these things are different. We do view them different, fundamentally different. And ultimately, our first objective is to focus on the long-term sustainability of our debt and capital structure on the balance sheet. And this decision on rights issue has not been driven by the pressure to pay dividends sooner. Dividends will be paid at the right time when the balance sheet affords you to do that. I just wanted to clarify that. Thank you much for the question as well.

Thank you, Paul. We have a question on how does the carbon tax glide path impact your strategy to shift from coal to gas. When does carbon tax become a negative profit driver within the energy business? It's a question from Theo Botha at STANLIB.

Theo, this is a very good question. And a lot of work we are still doing in this regard. I think this question we need to let that stand over for our Capital Markets Day of next year. Obviously, you cannot only look at carbon tax. So you must also look in terms of the cost of the investment to go greener. You must also look at your incentives, and the net sum of is then effectively kind of driving your capital allocation and project business decision on FID with regards to that. We don't have a plan just to let carbon taxes happen to us. Obviously, as part of our future and greener future, we will kind of consider the impact of carbon tax, but also the impact of efficiencies and incentives and favorable financing structures. We plan to share more details of that with you. We don't see that the carbon tax will make a fundamental shift in the next 3 or 4 years. But beyond that, it is something that one really needs to take cognizance of. But I think it's not a singular answer looking only at one element. You need to look at the whole -- contribution of all elements in terms of the business case, but we'll share more with you in mid next year.

Thank you. There's a question from Gerhard Engelbrecht from Chronux Research. Have you made a decision on Natref yet? And does your updated capital guidance include Natref clean fields CapEx?

Thank you, Gerhard. I'll deal with that. I think we -- what we've done with Natref is that we've done all the work necessary to understand what would be required to implement clean fields. We have not included in our capital that we have now shared with you, any capital for Natref clean fields per se because it is a decision that we and our partner, Total, need to take, and we haven't made those decisions. So therefore, we've brought everything up to a point where we are ready to evaluate that, but we have not done it because it's not only in our decision, it is a decision with our partner as well.

Thank you. There's a question from Mish-al Emeran from Abax Investments. Given the risk of not being able to sustain an investment-grade rating due to home address, why the focus to get there if it means you may have to dispose potentially valuable assets at a discount or do a higher rights issue?

That's, again, a very superb question that's been asked, Mish-al. And again, it comes to the point where we find ourselves with investment grade, our key objective is to have, like I said, a clear pathway to investment grade. If it's doable in terms of fixing the fundamentals of our business, meaning the controllables within our disposal. But we -- the shareholders have asked me many times over to say at what point in time does investment-grade just become too expensive or counterproductive and actually value destructive. And your question really kind of focuses on that. I think the one thing that we have to accept by merely splitting the company or just kind of changing its home address from a listing perspective is -- I think we are naive to think that, that will going to be a strong catalyst to necessarily become investment grade. You can be a company -- kind of home courted in the U.S., but if all of your business is in, let's say, a high-risk country in Africa, you're still going to be subinvestment grade. So ultimately, I think it's quite important that we focus on the portfolio, to your point, we retain our high-value assets that yields strong cash flow through cycles. We make our assets robust and competitive as we discussed. And then basically let that inform the decision. If that is not good enough for investment grade, then we have to consider to say what next. So it's not investment-grade at all cost. We do accept if we are subinvestment-grade and we go to the capital markets, it will mean that our future listings on the debt markets are more expensive. But then ultimately, you need to compare that against kind of your current quality of assets. So we are very much alive to all those different moving parts, and it's not investment-grade at all cost, but let's fix the fundamentals. And if that's still within that range of 2 levels above the sovereign, then why not do it, why not be kind of focused at that because that is in the shareholders' best interest. But if we start to make decisions on investment grade, that's not in the interest of shareholders, we will be doing the right thing, and we very much alive to make the right decision.

Thank you. We have the last question now, which is a question from Gerhard Engelbrecht of Chronux Research. Does the Sasolburg site, waxes in particular, fall into the chemicals or energy business post this restructuring?

Thank you, Gerhard, and thank you for clarifying that. So our value chain in South Africa is very, very integrated. So you have to look at it from the gas fields in Mozambique, as it come into South Africa, going to Sasolburg into Synfuels portion as well as the mines and how that value chain then is put together. So from an operational point of view, all of the Energy & Chemicals assets that is running that integrated value chain is run by the energy business, energy operations because that just makes sense. We don't want to duplicate anything in South Africa. So they run everything on operations, both Sasolburg, Secunda and elsewhere, where chemicals is also produced. But the chemicals business take over any customer-facing activities. So from that point, it's produced to getting it to the customer, to banking, to developing the strategy, to growing the business is all part and parcel of the Energy -- for the Chemicals business auspices and accountability. I hope that clarifies that. So I would like to thank everyone for your time that you spent with us this afternoon. It has been quite a momentous point for us to announce Sasol 2.0 and the financial KPIs that is associated with that. We believe that it is a real strong positioning for the company and for the right to succeed and to recover, and as I say, to soon attain again our blue-chip status. And we all look forward to informing you on a regular basis how we're making progress in this regard. And I would like then to conclude the session. Thank you for your time.