Higher oil price benefits Sasol

Sasol posted good results for the year to end June 2026 and the share price is hovering just below its recent 12-month high, and nearly double where it traded in January.

The results and the increase in the share price will undoubtedly make shareholders happy, while the reported recovery in operations at most of the energy and chemical segments of the wider Sasol group brings new hope for the future.

Read: Oil shock turns into a windfall for Sasol

It is obvious that the sharp increase in the oil price was the main reason for the improvement in profitability and the share price.

At the beginning of January 2026, Sasol was trading at just above R100 on the JSE. The oil price was sitting at around $60 per barrel.

Oil surged to above $100 a few months later – and Sasol’s share price to R230. When oil fell back to the current $92 per barrel, Sasol declined to R192.

The rand helped the share price only a little bit during this period, weakening from R15.95 to the dollar to the current R16.15.

Welcome improvements

However, the improvements in operations are to be welcomed.

Management reported that Sasol closed the financial year with strong operational and earnings momentum, pointing to a 17% increase in adjusted earnings before interest, tax, depreciation and amortisation (adjusted Ebitda) to R61 billion.

CEO Simon Baloyi said in a presentation of the results to stakeholders that this increase was supported by several factors, not just the oil price.

“Sales volumes increased by 4% as production improved. The Secunda synfuel operations achieved their highest annual production in five years and exceeded market guidance. This was helped by improved coal quality following the successful implementation of the destoning plant and better overall equipment availability,” says Baloyi.

Read: Sasol’s new destoning plant delivers improved coal quality

This improvement is important because the Secunda operations remain the heart of Sasol’s integrated energy and chemicals business.

Better production, together with more favourable market conditions in the final quarter, contributed to a lower oil break-even price.

The international chemicals business also showed signs of recovery.

Sasol Chemicals’s reset strategy continued to improve the competitiveness of the portfolio and helped offset difficult conditions for most of the year. These included lower US ethylene margins and subdued market demand.

However, stronger markets during the fourth quarter made a significant difference, with International Chemicals’s adjusted Ebitda increasing by 47% in dollar terms compared with the previous year.

Another positive is that Sasol managed to contain its cash fixed costs at R70 billion for the third consecutive year. Inflationary pressures were offset by continued initiatives to reduce costs.

While basic earnings per share increased by nearly 80% to R18.99, headline earnings per share increased by only 9%.

Cash flow

Cash generated from operating activities increased by 22% to R56.7 billion. Free cash flow, however, declined by 5% to R11.9 billion.

This means that while Sasol generated more cash from operations, a higher need for working capital absorbed much of the benefit.

Working capital increased because of higher prices in the final quarter and higher fuel volumes at year-end that necessitated higher stock volumes.

Baloyi says these additional fuel volumes will support planned shutdowns early in the 2027 financial year.

Capital expenditure provided some relief. Spending fell by 18% to about R21 billion, mainly because major feedstock-gas and environmental-compliance projects had been completed and there was no shut down (for maintenance) at the Secunda plant during the past financial year.

Debt

Debt remains a major issue for investors. There was little improvement in the past financial year.

The balance sheet shows that long term debt declined from R88.6 billion a year ago to below R67.9 billion at the end of the 2026 financial year.

However, the note to the financial statements that provides more insight into this number shows the main reason for the decline – R24 billion was moved to short-term debt since it is the portion of the long-term debt that becomes payable in the new financial year.

Total debt declined less, from R103.3 billion to R93.9 billion.

The high debt level remains the reason shareholders will have to wait longer for dividends.

Sasol’s dividend policy provides for the distribution of 30% of free cash flow, but only once net debt excluding leases is sustainably below $3 billion. At the end of June, the figure was $3.3 billion.

Baloyi says management actions and the more supportive macroeconomic environment during the final quarter translated into robust cash generation and further balance sheet strengthening.

“We delivered on our 2026 net-debt target of below US$3.7 billion, reducing net debt by 11% to $3.3 billion,” he says.

Unfortunately, it was still above the target of $3 billion that will trigger a dividend. The board had no choice but to say, once again, that Sasol cannot declare a dividend.

The group has made progress towards its target, but another $300 million needs to be removed from net debt before the dividend policy can be reinstated on a sustainable basis.

Read:

Sasol’s strong update underpins recovery
Sasol flags full-year recovery as margins improve

Sasol’s 2026 results represent a meaningful improvement, helped by stronger oil prices, better production, improved refining margins and tighter cost control.

However, it would be premature to say that its problems have been solved. Sasol remains heavily exposed to high levels of debt.

The big question is whether Sasol’s operational improvements can sustain its profitability when oil prices decline to levels considered ‘normal’ if the war in the Middle East winds down.

View a pdf of the above results summary here.

Brought to you by Sasol. 

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