The investment case for South African energy and chemicals giant Sasol presents a complex picture. While recent operational developments have strengthened its supply chain foundation, environmental and market challenges continue to apply pressure, leaving the sustainability of its recovery in question.
Financial Health Shows Marked Improvement
A review of the company’s latest financials reveals significant progress. Headline earnings per share (HEPS) surged by 93% to R35.13. Free cash flow saw a substantial 75% increase to R12.6 billion, a figure bolstered by a R4.3 billion settlement received from Transnet. On the balance sheet, net debt decreased by 13% to R64.96 billion (approximately $3.7 billion). Management has stated that dividend distributions will remain suspended until net debt is sustainably reduced below the $3 billion threshold.
Strategic Focus and Long-Term Plans
Operationally, Sasol’s leadership is executing a “coal-heavy, gas-lite” strategy. This approach aims to maximize the value of existing fossil fuel assets while simultaneously integrating renewable energy sources, targeting a 30% reduction in emissions by 2030. A key medium-term operational priority is the successful implementation of a methane-rich gas solution to serve as a bridge beyond 2028. Furthermore, the company is evaluating a potential separate stock exchange listing for its chemicals business by 2028, which analysts view as a potential future value catalyst.
Supply Security Strengthened by Regional Stability
Positive developments in Mozambique have enhanced Sasol’s operational outlook. The country’s president recently confirmed that unrest from the previous year has been overcome, reducing risk for critical gas supply routes. In a related move, the leaders of South Africa and Mozambique celebrated the commissioning of the integrated infrastructure project in Inhassoro. This facility is currently supplying gas, light oil, and liquefied petroleum gas (LPG) to the region, securing feedstock for Sasol’s Secunda and Sasolburg operations through the end of the decade.
Should investors sell immediately? Or is it worth buying Sasol?
Environmental Investigation and Market Sentiment
Counterbalancing these positives is an ongoing environmental assessment. Authorities are investigating a persistent, ammonia-like odor reported in the Vaal Triangle area, specifically in Meyerton, Vereeniging, and Sasolburg. Sasol has denied responsibility from its Sasolburg or Natref operations, stating that internal reviews found no link between its activities and the reported smell. Nevertheless, the continuing state-led air quality investigation maintains a layer of regulatory pressure.
Market reaction reflects this mixed environment. Shares closed at R103.19 last Friday, trading below previous highs. The stock remains weighed down by softer energy prices and cautious analyst commentary. Market observers suggest that a confirmed, sustainable upward trend would require a clear technical breakout above the R110 level.
Clear Conditions for a Sustained Rally
For a definitive recovery to take hold, three concrete conditions likely need to be met. First, a sustained reduction in net debt below $3 billion is necessary, which would also pave the way for dividend reinstatement. Second, the share price must convincingly break through the R110 resistance to signal a new bullish trend. Third, visible progress is required on commercializing the methane-rich gas solution and on the company’s broader decarbonization projects. The potential chemicals business spin-off remains a longer-term factor to watch.
Ad
Sasol Stock: Buy or Sell?! New Sasol Analysis from December 21 delivers the answer:
The latest Sasol figures speak for themselves: Urgent action needed for Sasol investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from December 21.
Sasol: Buy or sell? Read more here...
