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\t\t<\/span><\/p>\n <\/span><\/p>\n \n \t\t\u00a9 Thomson Reuters 2012 All rights reserved<\/p>\n","protected":false},"excerpt":{"rendered":" (The following statement was released by the rating agency) Overview — On Oct. 12, 2012, we lowered our foreign currency long-term credit rating on the Republic of South Africa to ‘BBB’ from ‘BBB+’ to reflect the deterioration in the social and economic environment. The outlook remains negative. — The ratings on South Africa’s largest oil […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-15629","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15629","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=15629"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/15629\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=15629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=15629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=15629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}(The following statement was released by the rating agency)\n\nOverview\n -- On Oct. 12, 2012, we lowered our foreign currency long-term credit \nrating on the Republic of South Africa to 'BBB' from 'BBB+' to reflect the \ndeterioration in the social and economic environment. The outlook remains \nnegative.\n -- The ratings on South Africa's largest oil and chemicals company Sasol \nLtd. are influenced by those on the sovereign and South African country risk \nbecause Sasol generates about two-thirds of its operating profits in South \nAfrica.\n -- We are therefore lowering our foreign currency long-term corporate \ncredit rating on Sasol to 'BBB' from 'BBB+' and affirming our short-term \nrating at 'A-2'.\n -- The negative outlook on Sasol largely reflects that on South Africa, \nand the likelihood of us lowering the ratings on Sasol if we lower those on \nSouth Africa further. \n\nRating Action\nOn Oct. 16, 2012, Standard Poor's Ratings Services lowered to 'BBB' from \n'BBB+' its foreign currency long-term corporate credit rating on South \nAfrica's largest oil and chemicals company Sasol Ltd. At the same time, we \naffirmed our 'A-2' foreign currency short-term corporate credit rating on \nSasol. The outlook is negative.\n\nRationale\nThe downgrade reflects that of the Republic of South Africa (foreign currency \nBBB\/Negative\/A-2; local currency A-\/Negative\/A-2) on Oct. 12, 2012, as well \nour perception of increased country risk for companies operating in South \nAfrica. (See \"South Africa FC Long-Term Rating Lowered To 'BBB'; LC Ratings \nLowered To 'A-\/A-2'; Outlook Remains Negative,\" published on RatingsDirect on \nthe Global Credit Portal.) The ratings on Sasol are influenced by those on the \nsovereign and by South African country risk because Sasol generates about \ntwo-thirds of its operating profits in South Africa.\n\nCountry risk factors for Sasol in South Africa include currency volatility, \npersistent input cost inflation, limited access to suitable labor, the \npotential for windfall taxation, and a degree of political uncertainty. These \nare in addition to recent challenges that all mining companies operating in \nSouth Africa face following strikes by miners. We note, however, that Sasol's \nunderlying performance for the financial year to June 30, 2012 was strong and \nthat its operations have not yet been affected by the recent strikes.\n\nWe see a rebound of the South African rand's strength against the U.S. dollar \nas a material risk for Sasol (the average exchange rate in the year to June \n30, 2012, was slightly weaker than in recent years at South African rand \n7.78 to $1). This is because Sasol's domestic product sales, as well as its \nchemical exports, are indexed to U.S. dollar-based international prices, while \nSasol's cost base is largely in rand. \n\nSasol's sound operating performance and reported net cash balance sheet \nmitigate the company's announced dividend increases and material investment \nplans, in our opinion. On June 30, 2012, Sasol's gross financial debt totaled \nZAR16.1 billion, and was covered by the company's total cash balance of \nZAR18.7 billion. The 35% dividend increase is in line with earnings growth \nyear on year, but outstrips growth in operating cash flow. Strong operating \ncash flow boosted free operating cash flow before dividends in the year to \nJune 30, 2012, although investment continued to increase. \n\nThe ratings on Sasol reflect our view of the company's \"satisfactory\" business \nrisk profile, thanks to its diversified and highly profitable domestic \nactivities along the energy chain, particularly its South African \ncoal-to-liquids synthetic fuel plant and its Oryx gas-to-liquids (GTL) plant \nin Qatar. The ratings also reflect our assessment of Sasol's \"strong\" \nfinancial risk profile and what we consider to be its prudent financial \npolicies. \n\nThese strengths are tempered by Sasol's earnings' high sensitivity to lower \noil prices and\/or a strong South African rand, alongside a potential rise in \ndebt and project execution risks if and when several multibillion-dollar GTL \nprojects are built. \n\nUnder our prudent crude oil price assumptions, we see oil prices declining to \n$80 per barrel (bbl) from $100 per bbl over calendar 2012-2014, and a rand to \nU.S. dollar exchange rate of ZAR7.5 to $1. Accordingly, we currently estimate \nthat funds from operations (FFO) could be about ZAR34 billion for the \nfinancial year 2013 (ending June 30, 2013). However, we believe that Sasol's \nfinancial metrics should remain robust in the medium term, reflected in our \nforecast of Standard Poor's-adjusted FFO to debt of more than 75% in 2013. \nThis is in spite of large capital expenditures (capex) of ZAR25 billion or \nmore annually. The actual amount of capex could be higher depending on the \nprogress of new GTL projects and potential upstream, gas-focused acquisitions. \n\nAn adjusted ratio of FFO to debt of more than 50% (it was about 200% at the \nend of June 2012) is consistent with the current ratings under our prudent \ncrude oil price assumption of $80 per bbl from 2014 for Brent and an exchange \nrate of ZAR7.5 to $1. We estimate that FFO to debt of 50% is consistent with \nthe lower end of Sasol's target range of balance sheet debt to equity of \n20%-40% (which was 2.7% on June 30, 2012).\n\nLiquidity\nThe short-term rating is 'A-2'. We assess Sasol's liquidity as \"adequate\" \nunder our criteria, with sources covering uses by more than 1.2x in the next \n12 months. This is based on Sasol's comfortable reported cash balance of \nZAR12.7 billion on June 30, 2012, excluding restricted cash of ZAR5.3 billion \n(largely at joint ventures). Together with our estimate of FFO of about ZAR34 \nbillion, this should comfortably cover Sasol's modest short-term debt of \nZAR3.3 billion and working capital needs. \n\nWe anticipate modestly negative discretionary cash flow in financial year \n2013. We reached this projection after deducting from FFO the group's estimate \nof capex of about ZAR24.8 billion and dividends of about ZAR11.0 billion \n(assuming the declared final and interim dividends are at a similar level to \nfinancial 2012). We note that if Sasol continues to increase both investment \nand dividends ahead of growth in operating cash flow, it is likely to have to \nraise additional debt.\n\nAs a major South African company, Sasol should maintain sound access to local \ncommercial paper markets and bank facilities, in our opinion. We note that \nSasol has a $200 million revolving bilateral credit facility that matures in \nMay 2015, committed 365-day bank lines, and substantial short-term uncommitted \nbank credit lines.\n\nOutlook\nThe negative outlook largely reflects that on the Republic of South Africa, \nand the potential that we could downgrade Sasol if we downgrade South Africa \nfurther. We presently consider it unlikely that our ratings on Sasol would \nexceed those on the sovereign, as Sasol generates about two-thirds of its \nprofits domestically. \n\nWe could also consider taking a negative rating action if we anticipated that \nSasol's credit metrics would weaken markedly, possibly as a result of future \nmaterial increases in debt. Such increases could stem from potential large, \ndebt-funded, multibillion-dollar GTL projects, relative to Sasol's future cash \nflow strength, visibility of which is complicated by the rand's volatility. We \nwill monitor the actual construction and completion risks associated with any \nsuch large projects, as well as related funding arrangements. Other risks that \ncould lead to a downgrade include further increases in perceived country risks \nor a material strengthening of the rand. \n\nWe could revise the outlook to stable if we revise that on South Africa to \nstable. Such a revision would also depend on Sasol maintaining a robust \nbalance sheet, with prevailing oil prices supporting its operating profits (as \nwe anticipate they will). \n\n\nRelated Criteria And Research\nAll articles listed below are available on RatingsDirect on the Global Credit \nPortal, unless otherwise stated.\n -- Key Credit Factors: Global Criteria For Rating The Oil And Gas \nExploration And Production Industry, Jan. 20, 2012\n -- Revised Methodology For Oil And Natural Gas Price Assumptions, Nov. \n16, 2011\n -- Key Credit Factors: Business And Financial Risks In The Commodity And \nSpecialty Chemical Industry, Nov. 20, 2008 \n -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 \n -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008\n\n\nRatings List\nDowngraded; Rating Affirmed\n To From\nSasol Ltd.\n Corporate Credit Rating\n Foreign Currency BBB\/Negative\/A-2 BBB+\/Negative\/A-2\n\n (Caryn Trokie, New York Ratings Unit)<\/pre>\n