Sasol Limited, a prominent South African integrated energy and chemical company, has been a significant player in the country’s industrial landscape since its establishment in 1950. Listed on both the Johannesburg Stock Exchange (JSE: SOL) and the New York Stock Exchange (NYSE: SSL), Sasol has attracted a diverse group of investors. However, recent financial challenges have raised concerns about the company’s performance and the attractiveness of its shares.
Financial Performance and Shareholder Returns
In the first half of the 2025 financial year, Sasol reported a 31% decline in profits, primarily due to lower oil prices and reduced sales volumes. Headline earnings per share (HEPS) fell to 14.13 rand from 20.37 rand in the same period the previous year. Consequently, the company decided to forgo paying a dividend, citing negative free cash flow of 1.1 billion rand and net debt of $4.3 billion, which exceeded its capital allocation policy thresholds.
This downturn followed a challenging 2024, where Sasol experienced a 66% drop in full-year profit, largely attributed to weaker chemical prices. The company recognized impairments totaling 55.1 billion rand ($3 billion) in its chemicals and fuel assets, leading to a basic loss per share of 69.94 rand for the year ending June 30, 2024.
Operational Challenges
Operational issues have further impacted Sasol’s financial health. In the first quarter of the 2025 financial year, the company increased its external coal purchases by 53% due to ongoing quality and operational challenges at its mines. This reliance on external coal, coupled with a 17% decline in external coal sales to export markets, has strained the company’s resources.
Environmental and Regulatory Factors
Sasol’s environmental footprint has also come under scrutiny. The company’s Secunda plant is recognized as one of the world’s largest single-point sources of greenhouse gas emissions. While Sasol has announced plans to reduce emissions by 30% by 2030, environmentalists and shareholders have expressed skepticism about the feasibility of these targets.
In a recent development, Sasol won an appeal regarding the calculation of emissions at its Secunda facility. The decision allows the company to regulate emissions based on alternative load metrics rather than concentration-based limits, a move criticized by environmental groups for potentially leading to increased pollution.
Investment Considerations
Given the recent financial and operational challenges, potential investors should approach Sasol shares with caution. The company’s substantial debt, declining profits, and environmental concerns present significant risks. As of February 28, 2025, Sasol’s stock price on the NYSE (SSL) stands at $4.63, reflecting the market’s response to these ongoing issues.
In conclusion, while Sasol remains a key player in South Africa’s energy and chemical sectors, its current financial instability and environmental challenges necessitate a thorough evaluation by investors. Staying informed about the company’s strategic responses to these issues will be crucial for making sound investment decisions.