Sasol (NYSE:SSL) executives focused on safety, operational stability and cash generation during the company’s interim results presentation for financial year 2026, describing progress on internal performance levers amid what management repeatedly characterized as a volatile and challenging macro environment.
Management framed priorities around safety and operational execution
President and CEO Simon Baloyi opened the call by reiterating Sasol’s two-pillar strategy—strengthening the foundation business while positioning the company to “grow and transform”—which he said remains unchanged since the May 2025 Capital Markets Day.
Southern Africa operations: coal quality, gas, and Natref utilization
Baloyi said operational delivery in Southern Africa is improving, citing progress on coal quality and reliability. The de-stoning plant reached beneficial operation in December “on plan” and is already improving coal quality. Mining EVP Sandile Siyaya later said the plant is operating at full capacity and that Sasol is achieving its commitment for coal supplied to Secunda Operations at “below between 12% and 14%” (with Sasol targeting below 12% in later periods).
Baloyi said external coal purchases were elevated in the first half during the ramp-up of the de-stoning plant. He said purchases should be lower in the second half and are expected to normalize in financial year 2027 as Sasol focuses on increasing its own production volumes and reducing external purchases.
On the gas portfolio, management said plateau extension projects remain on track to support supply through financial year 2028. However, startup delays at the CTT Gas-to-Power project in Mozambique affected the timing of PSA volumes. Baloyi said “total gas volumes are unchanged,” but a revised production profile deferred monetization and, together with a stronger rand/U.S. dollar exchange rate, resulted in a PSA impairment. Management also said Sasol is using approved sub-gas arrangements to maintain flows to South Africa while CTT progresses, and is evaluating performance testing and potential infrastructure improvements to optimize production.
In Q&A, EVP Victor Bester added that after achieving “Ready for Operations” on the PSA asset in the second quarter, Sasol identified physical restrictions limiting throughput of excess gas to South Africa. He said a performance test run will inform options to address the constraint and that the fix is expected to require “low or no capital solutions.” Bester also said Sasol lowered gas guidance due to reduced external customer demand and higher “pure gas” production from Secunda’s gasifiers displacing natural gas, along with other factors including recent flooding in Mozambique and work needed on wells and licensing.
Baloyi said Secunda production increased 10% year-on-year, supported by the absence of a phase shutdown, improved coal quality, and gasifier availability. Responding to questions about whether the company could raise guidance given improved run rates, Bester said Sasol is “optimistic” but is following a ramp-up curve toward FY 2028. He said the gasifier restoration program has covered 25% of the fleet to date and is expected to reach 40% by year-end, and that Sasol wants a fuller understanding of required restoration work before changing guidance.
At the Natref refinery, management said operational performance improved and commissioning of the last low-carbon boiler supports reliability and emissions objectives. Baloyi also said Sasol stepped into capacity after Prax SA entered business rescue, to maintain supply to South Africa and OR Tambo Airport. In Q&A, Baloyi said Sasol can utilize that portion of volume while business rescue continues, but an M&A process is underway with timing potentially around December. He said Natref was running around “480-500” (versus a possible 620-650), depending on the ability to place volumes, and that higher utilization has working capital implications as Sasol carries crude and finished product components for the refinery.
Financial performance: free cash flow, lower capex, and impairments
CFO Walt Bruns said the macro backdrop remained difficult in the first half of FY 2026, with Brent crude down 14% year-on-year and a stronger rand contributing to a 17% decline in the rand oil price. While the stronger rand weighed on earnings, Bruns said it reduced the rand value of U.S. dollar-denominated debt. He also pointed to refining margins as a “notable positive,” supported by improved diesel differentials and stronger performance at Natref.
Bruns said sales volumes rose 3% in the first half, supported by improved production and a better sales mix into higher-margin channels. He said cash fixed costs declined 2% overall, driven by lower labor costs and reduced external spend. Capital expenditure fell 43% year-on-year, mainly due to the absence of a Secunda phase shutdown, lower Mozambique PSA spend, and reduced environmental compliance capital as programs near completion.
As a result, Sasol revised its full-year capital guidance down by ZAR 2 billion to a range of ZAR 22 billion to ZAR 24 billion, with Bruns emphasizing the reduction is “not a deferral” and “not rolling over” into later years. In response to questions about higher expected second-half spending, Bruns said Sasol anticipates an increase due to projects progressing through gates in the second half, including mining investments to raise own production and reduce external purchases, as well as non-phase shutdown capital at Secunda.
Bruns highlighted positive free cash flow in the first half—“for the first time in 4 years”—and said it was more than a 100% improvement from the prior period. Gross margin declined 6% due to the lower rand oil price and chemical pricing pressure, partially offset by stronger refining margins and higher sales volumes.
EBIT decreased 52%, which Bruns said was mainly driven by non-cash remeasurement items, including impairments of ZAR 7.8 billion (vs. ZAR 5.7 billion in the prior year). He said the current period included:
- ZAR 3.0 billion impairment related to the Secunda Liquid Fuels Refinery (which he said is now fully impaired), with recoverable amount improved through management actions but impacted by lower forecast price assumptions and a stronger exchange rate.
- ZAR 3.9 billion impairment on the Mozambican PSA gas development, reflecting the revised production profile and stronger rand-dollar exchange rate.
- ZAR 500 million impairment of Sasol’s equity-accounted investment in the CTT Gas-to-Power project due to startup delays and a higher end-of-job cost estimate.
Bruns also said mining EBITDA was lower, largely due to the phaseout of export coal sales, partly offset by redirecting volumes to Secunda and income from leasing Richards Bay Coal Terminal (RBCT) capacity. In Q&A, management said leasing the entitlement generated about “ZAR 500 million, give or take,” and that it was leased to more than one operator.
Deleveraging, hedging, and revised chemicals outlook
Sasol reported net debt of $3.8 billion at the half, with Bruns saying the company remains on track to achieve net debt below $3.7 billion by year-end, supported by expected higher second-half cash generation and working capital unwind. He said Sasol’s longer-term path remains to reach the $3 billion net debt level that triggers dividends, but given the macro outlook, that target will “likely be achieved in FY 2028.” Bruns also said liquidity headroom exceeds $4 billion.
Bruns said Sasol completed its FY 2026 hedging program and has begun FY 2027 hedging. For the second half of FY 2026, he said oil price risk is hedged at an effective cover ratio of 55%-60% with an average floor around $59 per barrel, and 25%-30% of rand/U.S. dollar exposure is hedged, primarily through zero-cost collars in a ZAR 18 to ZAR 22 range. In Q&A, he said Sasol has broadened the instruments used, including put spreads and “butterflies,” to balance protection, cost, and upside participation.
In International Chemicals, Baloyi said a “reset” is progressing but markets are “tougher than we anticipated.” He said adjusted EBITDA increased 10% year-on-year despite challenging markets, supported by early benefits from self-help measures, but the company revised full-year adjusted EBITDA guidance from the prior range of $375 million to $450 million and revised margin outlook to 8% to 10%. EVP Antje Gerber said Europe remains a challenging environment due to weak demand, overcapacity, high and volatile energy costs, and regulatory complexity. She said Sasol is operating on a “value over volume” basis, emphasizing specialty and contracted positions, and that “Europe must perform on its own merits.”
Gerber also said Sasol remains confident in its FY 2028 International Chemicals EBITDA target of $750 million to $850 million, noting that management expects two-thirds of the improvement to come from self-help measures rather than market recovery assumptions.
Grow-and-transform update: renewables, offsets, and eSAF progress
Baloyi said Sasol’s decarbonization approach remains “pragmatic and value accretive,” and that the company will scale solutions in line with market demand. He said Sasol secured an additional 300 MW of renewable energy (a solar and battery storage project reaching financial close and expected online in 2028), bringing contracted renewables to more than 1.2 GW in South Africa toward a 2 GW target by 2030. Management said 180 MW is operational and 740 MW is under construction, and that Sasol received a renewable energy trading license from NERSA in December 2025.
Baloyi said Sasol has contracted approximately 9 million tons of carbon offsets over the next three years, covering around 60% of offset requirements, and that following a renewable diesel pilot at Natref, certification is nearing completion and planned for the second half.
Management also highlighted a EUR 350 million grant secured in January by Zaffra, Sasol’s joint venture with Topsoe, for an eSAF project in Germany. In Q&A, Sasol said the project is designed as a “small plant” of about 2,000 barrels per day, translating to around 40,000 tons of sustainable aviation fuel, with first production expected around 2030, subject to progressing feasibility work and securing offtakes before a final investment decision.
About Sasol (NYSE:SSL)
Sasol Limited is an integrated energy and chemical company headquartered in Johannesburg, South Africa. The company’s core operations encompass the conversion of natural gas, coal and heavy hydrocarbons into liquid fuels and a wide array of chemical products. Sasol leverages proprietary Fischer-Tropsch and gas-to-liquids (GTL) technologies to deliver cleaner-burning diesel, jet fuel and naphtha, alongside solvents, surfactants and specialty polymers for industrial and consumer applications.
In addition to its GTL business, Sasol operates downstream facilities for the manufacture of alpha olefins, ethylene, propylene and other base-chemical intermediates.
