The extensive business performance enhancement programme (BPEP), implemented in 2012 by integrated chemicals and energy company Sasol, has resulted in cost savings of R2.5-billion during 2015 – ahead of the group’s R1.5-billion financial-year target.
Moreover, the group’s response plan to combat the effects of a falling oil price, implemented at the end of 2014, recorded cash conservation benefits of R8.9-billion last year.
Sasol’s BPEP and response plan reduced cash fixed costs, net of the BPEP implementation, by 5%, which was offset by the South African producers price index.
“This was achieved despite a difficult South African cost environment in respect of labour and electricity charges,” noted Sasol CFO Bongani Nqwababa at the company’s full year results presentation, held in Johannesburg last month.
The group maintained its savings target for the BPEP, which would generate a sustainable yearly savings target of at least R4.3-billion at the end of the 2016 financial year, Nqwababa added.
Nqwababa further emphasised that the response plan’s cash conservation benefit achievement was at the upper end of the R6-billion to R10-billion target range for the 2015 financial year.
However, the group still planned to deliver the remaining cash conservation benefits of between R30-billion and R50-billion over the following 24 months, said Nqwababa.
“As part of the response plan, we are working to deliver further sustainable cash cost savings of R1-billion a year by the 2018 financial year,” he added, further explaining that these savings would be achieved through further organisational structural refinements, in addition to those implemented, as well as the freezing of at least 1 000 noncritical vacancies and focused reductions in supply chain costs.
“The response plan will provide sufficient flexibility for the company to manage its balance sheet and execute its growth programme,” said Nqwababa.
Outgoing Sasol president and CEO David Constable further noted: “With a new operating model, underpinned by streamlined corporate and management structures, simplified governance and decision-making processes, [as well as] new ways of working, Sasol is a redefined, resilient and integrated chemicals and energy company.”
Constable added that the launch of a significant change programme in 2012, at a time when Sasol was delivering record profits, enabled the company to put itself in the strongest position possible to respond to a turbulent macroeconomic environment.
Nqwababa added that the results for the 2015 financial year were testament to the resilience of Sasol, the diversity of the company’s asset portfolio and the group’s ability to decisively respond to the volatile and uncertain global economic environment.
“Through our tailored business planning, we are making steady progress in mitigating the challenges of a low oil price environment. The BPEP is delivering sustainable cost savings ahead of expectations, while our response plan enables us to conserve cash in a volatile environment.
“Cash flow generation remains robust, which, together with [a] solid, ungeared balance sheet, enables us to execute our growth projects in Southern Africa and the US,” Nqwababa concluded.