SASOL LTD Sector: Materials Max Sector Exposure: 23%

Company Results Analysis 12 September 2017 Recommendation: Neutral JSE Capped SWIX weighting: 4.35% Recommended exposure up to: 3.85% JSE Code: SOL Current Share Price: ZAR 38453c SASOL LTD Sector: Materials Max Sector Exposure: 23% Nature of Business: Sasol develops and commercializes technologies, builds and operates world-scale facilities to produce a range of high-value product streams, including liquid fuels, chemicals and lowcarbon electricity. It is one of the country s largest investors in capital projects, skills development and technological research and development. The group mines coal in South Africa, produces gas in Mozambique and oil in Gabon. Its chemical manufacturing and marketing operations span the globe. Stock Data: Market Cap (Rbn) 250.5 52-Week High 43 620.0 No. of shares 651 52- Week Low 34 655.0 Avg. Daily volume (Rm): 523.00 1 Year TR 7.93% Free-float 79.8% 1 Month TR -3.56% Beta 1.05 Source: Bloomberg Year-end results for the period ending Jun-17 Key Financial Data: 8% Jun-17 Jun-16 Headline EPS 3 906.0 HEPS Growth 6.2% -26.1% Historical P/E 9.8 Turnover Growth -0.3% -6.7% NAV 32 500.9 Operating Margin 19.4% 21.1% P/NAV 1.2 Interest Cover 19.7 70.0 Current assets NAV 5 492.9 Effective Tax Rate 27.4% 28.7% NTAV 31 665.3 ROE 13.0% 12.3% DPS (last 12 months) 1 260.0 Debt/Equity 27.4% 16.4% Dividend Yield 3.3% Cash/EPS 0.9 1.2 PEG Ratio* 94 ROC 8.0% 8.5% Share Price 38 453 Quality Rating** 60% 60% See *Value Filter and/or **Quality Filter Comments on results: Gavin Leo-Smith Equity Analyst +27 (11) 996 5200 Gavin.Leo-Smith@psg.co.za Revenue growth was flat at R172.41bn where the low oil price environment, where oil prices traded on average of $50/barrel, and the stronger rand were headwinds. Strong sales volumes were seen in Performance Chemicals (up 2%), which was ahead of management guidance owing to stronger demand, and Base Chemicals (up 3%), which was slightly below market guidance. Sales volumes were slightly offset by Liquid fuels which was down 2%. Operating profit before depreciation came in 6% weaker to R49.7bn. Depreciation was 1% lower at R16.2bn. Operating profit decreased 8% to R33.5bn. Operating margin came in at 19.4% (2016: 21.1%). William Eatwell Equity Analyst +27 (11) 996 5200 William.Eatwell@psg.co.za

Other income was R1.19bn (2016: loss of R2.68bn). Net interest expense increased from R521m to R1.7bn. EBT was 1% weaker at R32.92bn. Interest expense was R1.7bn (2016: R521m). Taxation expense decreased 5% to R9bn. Profit after tax strengthened 1% to R23.91bn. Associate income after tax saw an up-tick to R1.09bn (2016: R522m). Earnings attributable to outside shareholders was 37% lower to R1.14bn. Core earnings attributable to ordinary shareholders improved 6% to R23.85bn. Basic earnings per share were 3336 cents (2016: 2166 cents). Core headline earnings per share was 6% stronger to 3906 cents, this was on the back of several adjustments namely translation gains (of 270 cents), mark-to-market valuation of oil and foreign exchange derivatives gains (of 173 cents), Sasol Oil tax litigation provision (of 149 cents) and impact of prolonged labour actions at Mining (of 145 cents). A final gross dividend of 780 cents per share was declared (2016: 910 cents per share). The net dividend amount payable to shareholders who are not exempt from the dividend withholding tax, is 624 cents per share, while the dividend amount payable to shareholders who are exempt from dividend withholding tax is 780 cents per share. Cash conversion remains healthy even with the large increase in working capital. Segmental overview: Profit from operations Revenue Profit from operations Revenue

NB: Excludes Other group functions -Mining (contributed 10% to revenue and 12% to operating profit) Revenue increased 12% to R18.96bn with full supply of coal volumes to the integrated Sasol value chain through own production and external coal purchases. Operating profit decreased 21% to R3.73bn owing to the impact of Secunda mining operations labour actions which resulted in additional once-off costs of R1bn and external coal purchases of R0.4bn to ensure continuous coal supply to Secunda Synfuels Operations. The operating margin decreased to 20% (2016: 28%) because of lower productivity resulting in normalised unit cost of production increasing by 13% above inflation to R270/ton compared to the prior period. Going forward: ramp-up of operations continues to achieve targeted production run-rates. The targeted level of operational performance is expected in the next 12 months. The targeted unit cost of production is to be between R260 R270/ton for 2018 due to the business performance programme aimed at limiting cost increases to inflation. -Exploration and Production International (contributed 2% to revenue and 2% to operating profit) Revenue decreased 3% to R4.08bn. Mozambican producing operations saw production volumes increase 2%. The Gabon asset and the Canadian shale gas asset decreased production by 18% and 6% respectively with the deferral of drilling activities in line with the Response Plan cash conservation initiatives. These initiatives achieved a 29% reduction in cash fixed costs. Operating profit came in at R585m compared to 2016 operating loss of R11.7bn which was primarily from a R9.9bn partial impairment of the Canadian shale gas operations. It is to be noted that current operating profit includes a R337m translation gain (2016: loss of R695m). Mozambican producing operations saw an increase in operating profit to R2bn (2016: R1.1bn) due to a net positive impact of foreign currency translation and higher production volumes. The Gabon asset had an operating profit of R295m (2016: loss of R994m) on the back of higher sales prices, lower depreciation and the partial reversal of an impairment of R197m. The Canadian Shale Gas asset saw a lower operating loss of R746m (2016: loss of R1.1bn, excluding the R9.9bn partial impairment). The overall operating margin improved of 14% -Energy (contributed 33% to revenue and 36% to operating profit) Revenue increased 1% to R64.77bn supported by a 16% increase in ORYX GTL volumes, offset by 2% lower gas sales volumes. Operating profit decreased 20% to 11.22bn. Normalised operating profit improved 5% on the back of higher crude oil prices, excellent production performance from ORYX GTL and positive contributions from the RP and BPEP initiatives. However, this was slightly offset by a 19% decrease in petrol differentials, lower fuel sales volumes and a stronger rand/us dollar exchange rate. The operating margin decreased to 17% (2016: 22%). Fixed cash costs increased below inflation. -Base Chemicals (contributed 18% to revenue and 18% to operating profit) Revenue increased 2% to R35.76bn where sales volumes increased 3% due to higher volumes from Secunda Synfuels Operations and due to the commissioning of the C3 Expansion project last year. US dollar basket prices of commodity chemicals increased 6%. Dollar basket prices realised were offset by a stronger rand/us dollar exchange rate. Operating profit increased 25% to R5.63bn. Normalised operating profit was 13% lower at R5.1bn which was at the midpoint of market guidance. Operating margin increased to 16% (2016: 13%). Cash fixed costs were well contained. -Performance Chemicals (contributed 36% to revenue and 32% to operating profit) Revenue decreased 5% to R69.89bn although sales volumes grew by 2% primarily from a 2% increase in Organics volumes due to favourable market conditions. In addition, US assets benefited from higher ethylene sales prices during H1 but this came under pressure. The Fischer-Tropsch Wax facility, which is in ramp-up phase, performed in line with the forecast. However, wax volumes were offset by lower volumes from the European wax facility due to lower demand. Operating profit decreased 11% to R10.00bn with a partial impairment in the US Phenolics cash generating unit of R527m.

Operating margin decreased to 14% (2016: 15%) which is despite a margin squeeze in the ammonia business due to an oversupply in global markets. Normalised operating profit increased by 2%. Consensus Forecast: Forecast Date HEPS (cents)* Forward PE Dividend (Cents)* Forward Dividend Yield % 2018-06-30 3554 10.8 1295 3.4% Growth year 1-9.0% 2.8% 2019-06-30 3703 10.4 1400 3.6% Growth year 2 4.2% 8.1% 2020-06-30 4766 8.1 1903 4.9% Growth year 3 28.7% 35.9% Source: Bloomberg ZAR Company prospects: Management expects macroeconomic headwinds to continue. The Lake Charles Chemicals Project 74% complete, where capital expenditure to date of US$7.5bn with the total forecasted capital cost for the project remaining within the approved US$11bn budget and the project progress tracking the approved schedule. The return estimate has been lowered to an IRR of between 7-8% as, according to management, the industry view around polyethylene margins are pushing the return estimate down. The start-up of the high-density polyethylene plant commenced in Q4 2017. The plant is a 50% joint venture with Ineos Olefins Polymers USA. Management cite that market conditions continue to be favourable with low feedstock cost and strong polyethylene market demand. The strategic R14bn mine replacement programme, which should ensure uninterrupted coal supply to SSO, is nearing completion. This should support Sasol s strategy to operate its SA facilities until 2050. The development of the Production Sharing Agreement (PSA) licence area in Mozambique remains on budget and schedule. The Business Performance Enhancement Programme (BPEP) achieved sustainable savings exit run-rate target of R5.4bn per annum in 2017 which was reached a year earlier than previous market guidance. The Programme is aimed at containing cash fixed costs to below inflation in nominal terms. The comprehensive Response Plan (RP) is aimed to counter the effects of a low oil price by focusing on capital conservation and cash savings, by positioning the company to operate profitably in a US$40/bbl oil price environment, and to proactively manage its balance sheet and liquidity. RP achieved savings of R32.3bn in 2017, bringing the total cumulative cash conservation to R69.4bn. The internal gearing ceiling will remain at 44% until the end of the 2018 financial year. Current gearing of 27% is 2% lower than guidance. Net debt-to-ebitda ratio is 1,13 times compared to 0,56 times in the prior period and the target of 2,0 times. Other issues: Sasol is assessing the impact of the revised Mining Charter on its business. The tax litigation between the South African Revenue Service (SARS) and Sasol Oil concerning international oil procurement activities is ongoing. On 30 June 2017, R1,2bn was ruled in favour of SARS for the periods between 2005 and 2007 in the Tax Court. On 31 July 2017 Sasol Oil issued a Notice of Intention to Appeal to the Supreme Court of Appeal. For the periods of 2013 to 2014 there could be a potential tax exposure of R11.6bn concerning the aforementioned activities. Sasol Oil has submitted an objection and requested suspension of payment, resulting in SARS suspending payment for the significant majority of the disputed tax.

Recommendation: The company has illustrated its ability to generate sustainable cash flows at oil prices of $40/bbl. It has been delivering on its cost and cash improvement programmes which has placed Sasol in a strong position, which is in addition to the diversified nature of its products and geographies. The company has been successful in mitigating risks(hedging) to create some headroom on the balance sheet. Sasol is a quality company with an exceptional track record, but remains influenced by a number of external factors, which has a significant impact on profitability but is not under management s control, such as oil price and exchange rate movements. Management has been proactive in reducing costs and improving operating efficiencies which should to a certain extent negate the weaker oil price. We feel that the group remains a sound investment with its long term drivers intact given their diverse portfolio of operations and the potential inherent to their GTL (Gas-to-Liquid) and CTL (Coal-to-Liquid) ventures. Concerns on potential capex overruns and delays at the USD 11bn LCCP project and the stain that this would place on its balance sheet continue to weigh heavily on investor sentiment. Given the nature of this project these concerns are likely to persist in the medium term. However, given Management gearing targets, the company has scope to focus on their growth objectives. Trading on a forward PE ratio of 11 times and 1.2 times its NAV, we feel the share is fairly valued. The share offers an attractive historic dividend yield of 3.3% but this is likely to come under further pressure if the weak operating environment persists. Portfolio Guidance: Capped SWIX All Share weighting of 4.35% We maintain our neutral guidance and would recommended exposure of up to 3.85%

About PSG Wealth recommendations: PSG Wealth provides medium to long term recommendations based on the premium or discount that a company trades at relative to our estimation of intrinsic value. We expect companies to rerate towards their intrinsic value over a one to three year period. The Long-Term Valuation is a quantitative based valuation based on the fundamental performance of each company in the past, as well at their future forecasts. The fundamental features used are based on profitability and includes EPS growth and Return on Equity (ROE). *PEG Ratio: The calculation is based on the normalised historic P/E Ratio / Forecast sustainable average growth over next 5 years. By using the PEG we envisage to outperform by selecting not only companies with low P/E ratios as such, but those companies with P/E ratios low relatively to their EPS growth. Above 140 the Peg ratio will be displayed in red pointing to a possible overvalued situation. Between 75 and 140 the yellow illustrates a fairly valued position. The green is for PEG's between 35 and 75 and this is where the best values can be found. Below 35 times the share is either very cheap or insiders know of bad news that has not yet been announced (thus not reflecting in our valuation). This is why we classify these shares as speculative. Investors should ensure that they have a lot of knowledge about shares classified as speculative before investing. These ranges are stated as an indication only. For more information refer to the actual publication. Although widely used, the PEG method is unstable when applied to companies showing volatile EPS trends. All assumptions and valuations are constantly updated and published in comparative tables per sector (Value Filter). **Quality Rating: The Quality Investor is an attempt to quantify certain financial ratios of a company to result in a quality rating. 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