Sasol: Is it really different this time?

Sasol’s new management team spent much of the May 20 capital markets day acknowledging that the past few years have been bruising. “Our recent performance has not lived up to our own expectations,” CEO Simon Baloyi conceded, before promising that the company is being reshaped “into a business that delivers a strong, resilient performance even in an uncertain world”.

The roadmap he unveiled is peppered with quantifiable milestones: a $50 Brent crude oil breakeven price for the Southern African base by financial year 2028; a 30% cut in group greenhouse gas emissions by 2030; full compliance with air quality standards; and a 15% through-the-cycle earnings before interest, tax, depreciation and amortisation (ebitda) margin for International Chemicals, lifting that division’s annual ebitda to $750m-$850m.

The plan leans heavily on self-help measures — more renewable energy, improved coal feedstock, leaner management structures, lower capex — yet it lands in an oil price environment that may be weakening again after Opec+ confirmed it’s debating another 400,000-barrel-a-day supply hike for July.

The cornerstone of Sasol’s reset is the $50 breakeven oil price for the Southern African operations. Getting there starts with coal quality. As Victor Bester, head of Southern African operations, told analysts: “Poor-quality coal has a dual impact: it reduces gas yield in the gasifiers and it damages equipment, leading to longer downtimes.” The destoning project that retrofits the Twistdraai export plant will strip stone from mined coal, raise calorific value and cut abrasive ash. Beneficial operations are promised by December 2025, three years earlier than initially scoped, and management has already proved the concept: a 14-day test run using low-sink coal lifted gasifier yield enough to annualise at more than 7.4Mt of product, the volume that underpins the $50 breakeven number.

However, destoning only solves part of the problem. Cutting the delivered cost of coal will get harder as the Isibonelo coal mine will run dry in late 2025 and Bosjesspruit by 2030. Sasol is attacking the gap — sinking a new shaft at Syferfontein, stepping up exploration drilling and weighing a mix of in-house developments and joint venture supply that could add as much as 6Mt a year. Even so, any coal trucked or railed in from outside the Secunda footprint carries an inherently higher transport premium.

Gas — about one-tenth of Secunda’s feedstock mix — is likewise a finite resource. The Pande and Temane fields in Mozambique that have supported Sasol’s synthetic fuel economics since 2004 are expected to decline sharply in the next few years. For external customers, Sasol’s answer is a two-step bridge: divert methane-rich recycled gas out of the Secunda reformers to industrial clients through 2030, then land imported liquefied natural gas (LNG) with Eskom as anchor offtaker.

Since LNG is too expensive as an internal feedstock, once Pande-Temane bottoms out in the early 2030s, Secunda’s throughput inevitably will slip below 7Mt and the breakeven oil price will float upward again — an exposure investors must keep in mind.

Sasol plans to wind down electricity generation from its ageing coal-fired boilers and substitute it by up to 2GW of embedded renewables. Strategy and technology chief Sarushen Pillay called the buildout “a catalyst for growth as well as compliance”, arguing that every megawatt of on-site solar or wind simultaneously lowers emissions, trims the breakeven and, thanks to South Africa’s newly liberalised trading rules, can be sold into the market when Secunda does not need it. The first 757MW of third-party power-purchase agreements are already signed, and a new trading venture launched with Discovery has been oversubscribed.

Cost is a big driver of the climate agenda, with renewable energy displacing Eskom tariffs that are escalating in double digits while also reducing the carbon tax bill. The optimised emission reduction roadmap drops capital spend from an originally mooted R11bn-R16bn to R4bn-R7bn by swapping briquetting and fine-coal recycling for offsets and renewable energy certificates.

While trimming the emissions reduction budget captures the low-hanging fruit, stretching Secunda’s major shutdown interval from four to five years unlocks a further R5bn in periodic capex savings beginning in financial 2026.

This integrated approach, rather than a separate programme, ensures we achieve our goals

—  Simon Baloyi

The second pillar of Sasol’s turnaround plan is its International Chemicals division. New division chief Antje Gerber was blunt: at a 6.4% ebitda margin in financial 2024, the business “was burdened more by the chemical market downturn than peers”. Her reset pivots from chasing volume to chasing margin. Commodity lines such as linear alkylbenzene are shifted to a low-service, regional model; four subeconomic assets in Italy, Germany and the US are being closed or mothballed, adding $50m-$60m a year from financial 2026; procurement and operational excellence programmes seek a 15%-20% fixed cost reduction; and the sales force is rerouting alcohols and surfactants into higher-value personal care and metalworking niches. Those measures supply 70% of the drive to a 15% margin; the remaining 30% assumes only a modest cyclical chemical market recovery as global overcapacity works itself off.

Management has also left the door open to monetising the Lake Charles complex once the turnaround gains traction. By the end of the decade, Sasol could explore a partial listing, joint venture or outright sale of the US assets — moves that would crystallise value, cut debt further and let the group redeploy capital into new-energy projects.

Now for the main caveat. If the self-help script feels familiar, it’s because investors have heard it all before. Four years ago Sasol promised a $30-$35 oil price breakeven and never got close. Baloyi, appointed last year, tried to address the credibility overhang head-on. “This time we are embedding the targets in both our short- and long-term incentives,” he said, adding that “this integrated approach, rather than a separate programme, ensures we achieve our goals”. Still, markets are understandably sceptical: the share price discounts roughly a 70% probability that Sasol misses the financial 2028 goals, one analyst calculated during the Q&A.

Debt is a major obstacle to any shareholder payouts. Net borrowings are $4.1bn today; the new dividend policy restarts distributions only once net debt is below $3bn, roughly one-1.5 times ebitda through the cycle. Sasol CFO Walt Bruns expects to reach that threshold in financial 2028 “even under a downside oil scenario”, but the balance sheet still has to absorb a $650m bond maturity in September 2026, likely to be rolled at higher rates after the US Federal Reserve’s tightening cycle. Share buybacks, he said, are not on the table before the deleveraging hurdle is cleared.

Hedging is the near-term safety net for a weak oil price environment. Sasol has completed its financial 2025 programme and has about 60% of financial 2026 Brent exposure covered at an average $60 per barrel floor. As Bruns reminded investors, however, the rand is a larger swing factor for Sasol than oil. Since roughly 70% of financial 2026 rand-dollar exposure remains unhedged, a rand that drifts back below R17 would erode a good chunk of the cost gains.

Securing forward cover gets trickier the further out you look, and the macro backdrop could still stress-test Sasol’s blueprint. Opec+ is opening the taps, while Goldman Sachs — once a staunch oil bull — now forecasts Brent at only $58 in 2026 and warns that even this may prove optimistic. Accelerating electric vehicle uptake and resilient US shale supply could push prices lower still. The chemicals market offers no relief either: structural overcapacity and muted demand show little sign of abating. Sasol’s own models assume $74 Brent in financial 2028; anything lower lengthens the time to the promised sub-$3bn net debt mark that unlocks dividends.

Despite these macro risks, the strategic architecture of Sasol’s reset feels more coherent than at any point since the Lake Charles misadventure. The shift from “moonshots” to more measured bolt-on renewables and sustainable-fuel projects shows a more cautious approach to capital allocation. Margins are protected near term by hedges, medium term by destoning and power substitution, and long term by diversification. If management converts the early wins — coal quality stabilisation, a repaired ethylene cracker, closure of subscale plants — into a habit of regular delivery, the share’s risk premium could compress quickly.

Whether that happens will depend on thousands of execution details, from coal mining in Mpumalanga to SAP workstreams in the US. Closing the session, Baloyi reminded investors that “our journey is like running a marathon, not a sprint”. After a decade marked by more than one misstep, shareholders — and a nation that counts on Sasol for roughly 5 % of its GDP — will be looking for signs that this time is indeed different.