Our opinion on the current state of SASOL(SOL)Sasol (SOL) is a large international chemicals and energy company with origins in the oil-from-coal technology developed during apartheid in South Africa. Approximately 50% of the company's profits are directly tied to the price of oil. Sasol has two primary growth areas: its 50% stake in the Lake Charles Chemical Project (LCCP) in Louisiana, USA, and the development of gas resources in Mozambique. The company was awarded two new licenses in Mozambique to explore gas in an onshore area of about 3,000 square kilometers, potentially enhancing its existing gas projects in the Rovuma province.
One significant concern for Sasol is its status as the largest producer of greenhouse gases in South Africa and on the JSE, making it one of the 100 fossil-fuel companies worldwide that contribute to over 70% of greenhouse gas emissions. The company faces international pressure to address its carbon emissions effectively.
After the impact of COVID-19, Sasol's share price saw a dramatic recovery, which was later halted by a decline in commodity prices, particularly oil. On 7th April 2024, the company announced that the Minister of the Environment, Barbara Creecy, upheld its appeal against a decision by the national air quality officer, which could have jeopardized the continued operation of its Secunda oil-from-coal plant.
Sasol operates six coal mines that supply 10 million tonnes of thermal coal feedstock to its operations in Secunda and Sasolburg and for export. In a production report for the end of June 2024, the company stated, "Overall, operational performance across all segments consistently met market guidance, notwithstanding persistent macroeconomic volatility impacting on profitability. The Energy Business achieved operational improvements in Mining, Gas, and Secunda Operations (SO) in Q4 FY24. Despite these improvements and a strong rand oil price, we continue to see the impact of lower diesel differentials and inflationary pressure on our liquid fuels segment."
In a trading statement for the year ending 30th June 2024, Sasol estimated that headline earnings per share (HEPS) would decrease by between 59% and 77%, with core HEPS down by between 9% and 27%. The company attributed these results to challenging market conditions, including depressed chemicals prices and constrained margins.
Sasol remains a volatile commodity share in a long-term downward trend. It is advisable to wait until it breaks up through its downward trendline before considering further investigation.
