Our opinion on the current state of SASOL(SOL)Sasol (SOL) is an international chemicals and energy company, historically rooted in South Africa's oil-from-coal technology, and about 50% of its profits are linked to oil prices. Sasol has two major growth areas: its 50% stake in the Lake Charles Chemical Project (LCCP) in Louisiana, USA, and its expanding gas exploration efforts in Mozambique. Recently, Sasol was awarded two new gas exploration licenses in Mozambique, covering approximately 3,000 square kilometers, which could bolster its existing projects in the Rovuma province.
A major concern for Sasol is its environmental footprint, as it is the largest producer of greenhouse gases in South Africa and one of the top 100 fossil fuel companies worldwide, responsible for over 70% of global greenhouse gas emissions. Sasol is under increasing international pressure to reduce its carbon emissions, as its operations, especially in South Africa, heavily depend on coal.
Sasol's share price experienced a significant recovery after the COVID-19 pandemic but has since been affected by declining 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 jeopardized the continued operation of its Secunda oil-from-coal plant. This plant, along with the company's other coal operations, delivers 10 million tonnes of thermal coal feedstock annually to its Secunda and Sasolburg facilities, as well as 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). The financial results were significantly impacted by large impairments, including a R58.9 billion impairment on the Chemicals America Ethane value chain, a R5.3 billion impairment on Chemicals Africa, and a R7.8 billion impairment related to Secunda. While Sasol benefited from a weaker rand and a favorable rand oil price, its margins were constrained, leading to negative impacts on its fuels and chemicals businesses. Additionally, operational challenges across its portfolio further contributed to the disappointing financial performance.
In a production and sales update for the quarter ending 30th September 2024, Sasol reported that international chemical sales were negatively affected by the East Cracker in the US remaining offline. Mining saleable production was down 1% in the quarter and 4% compared to the previous year.
Sasol remains a volatile commodity stock in a long-term downward trend, and potential investors are advised to wait for a clear break above this trendline before considering any investments.
On 16th September 2024, Sasol announced the appointment of Ms. Muriel Dube as Chairman of the board, effective immediately. More recently, on 22nd October 2024, Business Day reported that a study by Wits Business School found that the future of Sasol's Secunda plant, which produces 84% of Sasol’s scope 1 and 2 emissions, rests in the hands of the government. The study concluded that the plant is unlikely to be modified to meet emissions regulations and may face closure. This adds significant uncertainty to the company’s future, especially given the growing regulatory and environmental challenges.
