Sasol bulls will be happy with a doubling of the share price in the space of a few months, even as Brent has softened into the $60 range. The rally shows a market willing to reward delivery, and Sasol’s financial 2025 results suggest management is starting to make good on promises set out at May’s Capital Markets Day.
The company’s stated targets — cutting its Southern African breakeven to $50 a barrel by financial 2028, improving international chemicals margins and strengthening the balance sheet — are ambitious, but early signs of progress have helped justify the recovery in sentiment. Yet much of that optimism rests on a delicate balance, with operational progress visible but the financial position still requiring careful navigation.
Though Sasol’s net debt has reached $3.7bn, its lowest level since 2016, the group’s finances remain stretched in a high interest rate world. CFO Walt Bruns explained that if US bonds had to be refinanced today, the cost would be between 9% and 10%, compared with 5%-6% previously. That 300-400 basis point gap translates into roughly R4bn in extra pretax financing costs on gross debt of R104bn. Against free cash flow of only R8.3bn once the R4.3bn Transnet windfall is stripped out, the difference is material.
Bruns stressed the priority: “Any excess cash at the moment we are using to deleverage the balance sheet and just make sure we can get to that $3bn target as soon as possible.” Dividends, he said, will only be considered once net debt is sustainably below that mark, with operational delivery supporting that journey rather than the other way around.
On that score, the financial 2025 numbers do suggest that Sasol is beginning to put building blocks in place. A major factor was capital expenditure discipline. Sasol brought capital expenditure down to R25bn, 13% below earlier guidance, thanks to what management calls its “capital excellence” programme. Rather than simple cuts, the initiative involves careful scope management, rejecting overengineered solutions, opting for minimum technical designs, and extracting construction efficiencies.
“We just finished construction, we’re busy with start-up activities … we don’t want to declare victory yet
— CEO Simon Baloyi
As operations chief Victor Bester explained: “It’s part of a rolling capital plan stretching to 2030 that’s reviewed twice annually to ensure capital is deployed ‘efficiently and effectively’.” The impact will be even more evident in financial 2026, when Secunda avoids a phase shutdown under its new five-year cycle, saving billions in maintenance spend and supporting volumes.
Operational delivery, however, is still being tested at the coalface — literally. The new coal destoning project at Twistdraai, a centrepiece of the reset, has been completed and is now in startup. The technology strips stone from mined coal, boosting calorific value, reducing abrasive ash and improving gasifier yields. The aim is to move towards a more consistent feedstock, underpinning the $50 break-even target.
Management is deliberately phasing the ramp-up, cautious not to overpromise. “We just finished construction, we’re busy with start-up activities … we don’t want to declare victory yet,” CEO Simon Baloyi told analysts. Sasol has had to buy in additional coal to maintain blends but as destoning improves yields those purchases should fall, reducing costs.
Encouragingly, even with these challenges, Sasol reported a Southern African breakeven of $59 a barrel for financial 2025. But that figure included the Transnet settlement; without it, the breakeven was closer to $63. Management insists the trajectory is downward, with Secunda expected to produce 7Mt-7.2Mt in financial 2026, higher gasifier availability, and the benefit of no shutdowns helping push the breakeven towards $55-$60.
International Chemicals is also starting to look steadier. Adjusted ebitda rose from $291m to $411m with margins improving from 6% to 9%. The reset emphasises value over volume, asset optimisation, and a more focused product mix. Financial 2026 guidance of $450m-$550m at 10%-13% margins would represent a step closer to peers. Reliability will be key here too: both US ethylene crackers were down for long stretches in financial 2025, limiting Sasol’s ability to benefit from stronger margins. Management has made it clear that one of the main aims in financial 2026 is to keep those assets online.
The broader backdrop, however, remains tough. Goldman Sachs expects Brent to slip into the low $50s by 2026 as stock builds weigh on balances, with a baseline forecast of $56. Sasol’s models, by contrast, assume Brent at $74 in 2028. The contrast highlights how important the $50 break-even target is. Hedging offers some short-term comfort: for next year, Sasol has 60% of Brent exposure hedged with a $60 floor. But beyond that, cover thins out, leaving the group once again at the mercy of oil markets and the rand.
Sasol’s valuation is as much about credibility as it is about the numbers. On paper, the stock trades at just 6.5 times adjusted cash earnings — once one accounts for capex still running R11bn above depreciation, equal to about R17 a share deducted from the reported R35 a share in headline earnings. That makes the shares appear inexpensive, but consistent delivery remains to be proven, and the rand oil price has softened since year-end. Whether the rally continues will hinge on management’s execution and a supportive external environment.
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