Sasol business update: Strategic progress amid global challenges
Update shows resilience with improved EBITDA in International Chemicals and strong hedging strategies, but faces ongoing challenges with coal quality, production volumes, and margin pressure
Sasol’s business update on April the 17th demonstrates strong cash flow management despite global economic headwinds, with its destoning project at Secunda Operations progressing on schedule and within budget to enhance coal quality and operational efficiency. The renewal of atmospheric emissions licenses for key facilities underscores Sasol's environmental compliance commitment, while South Africa's extension of the 60% carbon tax allowance until 2030 provides crucial regulatory stability for long-term energy transition planning.
The company's International Chemicals division has achieved EBITDA growth despite volume challenges, reflecting operational resilience in difficult market conditions. Sasol maintains robust liquidity reserves and implements rigorous cost management strategies, complemented by comprehensive hedging programs for FY25 and FY26 that shield operations from oil price volatility.
Strategic portfolio optimisation continues with the planned divestment from the US Phenolics business to strengthen margins and competitive positioning.
However, persistent operational challenges impact Sasol's performance metrics. Margin compression continues due to macroeconomic uncertainties and geopolitical tensions. Coal quality issues at Secunda Operations necessitate reduced internal production and increased reliance on higher-cost external coal sources. Recent operational disruptions, including a Natref facility fire and unplanned Secunda outages, have significantly impacted production capacity. Sales volumes show concerning trends across all segments, with Fuels declining 1-3%, Chemicals Africa down 2-4%, and International Chemicals falling to the lower end of projected 4-8% decreases. Global trade tensions and US tariff policy changes create additional supply chain uncertainties. The downward revision of mining production targets to 28-30 million tonnes reflects persistent coal sourcing and quality challenges that threaten operational stability.
Broker ratings and long term price target
According to a Reuters poll, the long term analyst rating consensus on Sasol remains a buy with a price target mean of 20044c.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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