Sasol Ltd. ADR Earnings Call Insights: Dividend Policy and EPU5
Sasol, Ltd. ADR (NYSE:SSL) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Jarrett Geldenhuys – Deutsche Bank: Two questions, if I may. The first one is related to the dividend policy. As I understand it, at the moment it’s based on EPS. Is there any change to it that we could potentially shift this to a cash-based model or an EPS number, or what are your thoughts around the dividend policy going forward? Second question relates, potentially one for Andre, just related to the South African Polymers margins. Just with all else being equal, can you give us some kind of margin upside, which we could expect from the EPU5 plant and the C3 stabilization? Then just the last question from my side is just on the exploration. On Slide 23, you’ve given us quite a nice breakdown of all the potential drill sites for the next couple of years. Can you just breakdown the costs, as well as the timing, specifically in Mozambique and Botswana?
David E. Constable – CEO: It sounds like we’ve got some static on the line, but we’ll soldier through here; if Christine could take the dividend question first, please.
Christine Ramon – CFO: I think, firstly, we are committed to our progressive dividend policy and delivering superior returns to our shareholders. I think, quite importantly, our dividend has always been based on EPS and our (EBIT) going forward, that we will maintain that. I think with the progressive dividend policy, like we’ve demonstrated, that we will at least maintain the dividend for the year, like we’ve actually done at the interim and we’ll certainly update it going forward. I think declaring the dividend based on EPS certainly does provide shareholders with a certain amount of predictability into what our sustainable earnings label is going forward, and therefore, we do not predict that we will actually change it.
David E. Constable – CEO: Thanks, Christine. On to EPU5, which is scheduled for completion this year and C3 stabilization scheduled for completion in calendar year ’14 delivering benefits, Andre?
Andre De Ruyter – Senior Group Executive, Operations: Yes. Just a quick reminder, what we’re trying to do with EPU5 is to extract additional quantities of ethylene so that we can run Poly 2 and 3 in Sasolburg at full capacity. We are also investigating the opportunity whether there is a chance for us to optimize some of our smaller and less efficient cracker assets along the way, and this is part of the turnaround that Christine referred to earlier. So I can’t give you a firm number to play into your model, unfortunately. This is work in progress and within the scope of the turnaround that is in progress. On C3 stabilization, again, this is to introduce a measure of stability in the C3 value chain. It is intended to reduce flaring losses, which at this point in time is quite considerable. So we want to cut that down by building storage capacity for C3 feedstock into our polypropylene value chain. We anticipate that with the improved availability of both our polyethylene as well as our polypropylene assets, that those assets will have a significantly enhanced return on invested capital.
David E. Constable – CEO: Thanks, Andre. Next question is on drilling in Mozambique and Botswana. Giullean, I know that Inhassoro, with the oil we are starting a field development plan over the next couple of years. So, we are excited about that, but maybe you could talk a little bit about Sofala and Block A and then Botswana, the coal bed methane?