Our opinion on the current state of SASOL(SOL)
Sasol (SOL) is a large international chemicals and energy company that originated from the oil-from-coal technology developed in South Africa during the apartheid era. Around 50% of Sasol's profits are tied directly to the oil price, and the company has two key growth areas: its 50% stake in the Lake Charles Chemical Project (LCCP) in Louisiana, USA, and the development of gas resources in Mozambique. Sasol was recently awarded two new gas exploration licenses in Mozambique, covering approximately 3,000 square kilometers, which could significantly enhance its gas projects in the Rovuma province.
One major concern for Sasol is its significant contribution to greenhouse gas emissions, being South Africa’s largest producer and listed among the top 100 global fossil-fuel companies responsible for over 70% of greenhouse gas emissions worldwide. The company faces international pressure to reduce its carbon footprint and address its environmental impact.
Sasol experienced a dramatic recovery after the COVID-19 pandemic but has since been affected by the decline in commodity prices, particularly oil. On 7th April 2024, the South African Minister of the Environment, Barbara Creecy, upheld Sasol's appeal against a ruling by the national air quality officer that could have threatened operations at its Secunda oil-from-coal plant. Secunda is a key facility for Sasol, with six coal mines delivering 10 million tonnes of thermal coal feedstock to both Secunda and Sasolburg for their operations and for export.
In its results for the year ending 30th June 2024, Sasol reported a 66% drop in headline earnings per share (HEPS) and a 16% decline in net asset value (NAV). These declines were driven by a significant R58.9 billion impairment of the Chemicals America Ethane value chain, a R5.3 billion impairment in Chemicals Africa, and a R7.8 billion impairment related to Secunda. Despite benefiting from a weaker rand against the US dollar and a favorable rand oil price, constrained margins and various operational challenges negatively affected Sasol’s fuels and chemicals businesses.
Sasol’s share price remains volatile due to its exposure to commodity prices, particularly oil, and it is currently in a long-term downward trend. Investors are advised to wait for the share to break through its downward trendline before considering further action.
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the Board with immediate effect. On 22nd October 2024, *Business Day* reported on a new study by academics at Wits Business School, revealing that Sasol’s massive Secunda plant, which accounts for 84% of the company’s scope 1 and 2 emissions, may not be modifiable to comply with emissions regulations. This means that its future could now depend on government intervention, with the possibility of closure looming if compliance cannot be achieved.
One major concern for Sasol is its significant contribution to greenhouse gas emissions, being South Africa’s largest producer and listed among the top 100 global fossil-fuel companies responsible for over 70% of greenhouse gas emissions worldwide. The company faces international pressure to reduce its carbon footprint and address its environmental impact.
Sasol experienced a dramatic recovery after the COVID-19 pandemic but has since been affected by the decline in commodity prices, particularly oil. On 7th April 2024, the South African Minister of the Environment, Barbara Creecy, upheld Sasol's appeal against a ruling by the national air quality officer that could have threatened operations at its Secunda oil-from-coal plant. Secunda is a key facility for Sasol, with six coal mines delivering 10 million tonnes of thermal coal feedstock to both Secunda and Sasolburg for their operations and for export.
In its results for the year ending 30th June 2024, Sasol reported a 66% drop in headline earnings per share (HEPS) and a 16% decline in net asset value (NAV). These declines were driven by a significant R58.9 billion impairment of the Chemicals America Ethane value chain, a R5.3 billion impairment in Chemicals Africa, and a R7.8 billion impairment related to Secunda. Despite benefiting from a weaker rand against the US dollar and a favorable rand oil price, constrained margins and various operational challenges negatively affected Sasol’s fuels and chemicals businesses.
Sasol’s share price remains volatile due to its exposure to commodity prices, particularly oil, and it is currently in a long-term downward trend. Investors are advised to wait for the share to break through its downward trendline before considering further action.
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the Board with immediate effect. On 22nd October 2024, *Business Day* reported on a new study by academics at Wits Business School, revealing that Sasol’s massive Secunda plant, which accounts for 84% of the company’s scope 1 and 2 emissions, may not be modifiable to comply with emissions regulations. This means that its future could now depend on government intervention, with the possibility of closure looming if compliance cannot be achieved.
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