Our opinion on the current state of SASOL(SOL)Sasol (SOL) is a large international chemicals and energy company with roots in the oil-from-coal technology developed during apartheid-era South Africa. Approximately 50% of the company’s profits are tied directly to the oil price. Sasol’s two main growth areas are its 50% stake in the ethane cracker plant in Louisiana, America, known as the Lake Charles Chemical Project (LCCP), and its development of gas resources in Mozambique. Sasol was awarded two new licenses in Mozambique to explore for gas in an onshore area of approximately 3,000 square kilometers, which could significantly expand its existing gas projects in the Rovuma province.
One significant challenge for Sasol is its status as the largest producer of greenhouse gases in South Africa and on the JSE. Globally, it is listed among the 100 fossil-fuel companies responsible for more than 70% of greenhouse gas emissions. The company faces mounting international pressure to address its carbon emissions effectively.
Sasol’s share price saw a dramatic recovery after the COVID-19 pandemic, but this upward trend was interrupted by the decline in commodity prices, particularly oil. On 7th April 2024, the company announced that the Minister of the Environment, Barbara Creecy, had upheld its appeal against a decision by the national air quality officer, safeguarding continued operations at its Secunda oil-from-coal plant, which faced potential closure due to environmental concerns.
The company operates six coal mines, supplying 10 million tonnes of thermal coal feedstock annually to its operations in Secunda and Sasolburg, as well as to the export market. However, the massive Secunda plant, which accounts for 84% of Sasol’s scope 1 and 2 emissions, is under scrutiny. A study by Wits Business School, reported on 22nd October 2024, found that the plant could not be modified to meet emissions regulations and might have to close, with its fate now resting on government decisions.
In its results for the year to 30th June 2024, Sasol reported a 66% decline in headline earnings per share (HEPS) and a 16% drop in net asset value (NAV). These results were heavily impacted by a R58.9 billion impairment of the Chemicals America Ethane value chain, a R5.3 billion impairment of Chemicals Africa, and a R7.8 billion impairment of Secunda. The company stated, "The business benefitted from a weaker R/US$ average exchange rate, and a favourable rand oil price, however constrained margins impacted negatively on our fuels and chemicals businesses. The financial results were further impacted by various operational challenges across the business."
In a production and sales update for the six months to 31st December 2024, Sasol reported, "The civil unrest in Mozambique affected the Central Processing Facility (CPF), leading to reduced production rates in December 2024. On 4 January 2025, a fire occurred at the Natref refinery that caused damage to supporting piping and infrastructure around the Crude Distillation Unit. International Chemicals revenue improved compared to H1 FY24, though the overall business environment remains challenging."
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the Board with immediate effect.
Sasol remains a highly volatile commodity share and is currently in a long-term downward trend. Investors are advised to wait for the share to break up through its downward trendline before considering further investigation. Its future will largely depend on commodity price recovery, operational stability, and regulatory developments related to its emissions and environmental impact.