Sasol shares surge as it flags massive profit reversal
Key topics:
Sasol’s share price jumps 7% on forecasted major profit turnaround for 2025.
Earnings rebound driven mainly by sharply reduced asset impairments, not operations.
Operational cash profits fall 10-17% amid lower oil prices and refining margins.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.
If you prefer WhatsApp for updates, sign up for the BizNews channel here.
BizNews Reporter
Sasol's [JSE:SOL] share price surged 7% to over R90 in early trade on Tuesday after the energy and chemicals giant released a trading statement flagging a dramatic return to profitability for the year ended 30 June 2025.
Investors reacted positively to the news, which signals a significant turnaround from the heavy losses reported in the prior year.
Sasol accounts for 5% of the BizNews Shyft model portfolio, having been acquired earlier this year for R76.33 a share (inclusive of all costs).
The company advised shareholders that it expects earnings per share (EPS) to land between R7.00 and R12.00. This represents a more than 100% improvement from the prior year's headline loss of R69.94 per share, a swing that caught many market watchers by surprise.
Furthermore, headline earnings per share (HEPS), a critical measure of operational performance in South Africa, is forecast to increase by between 85% and 100%, to a range of R33.60 to R36.30, up from R18.19 in the previous year.
Lower Impairments Drive Bottom-Line Recovery
The spectacular swing in earnings is largely attributable to a substantial reduction in asset impairments. Sasol booked impairments of R20.7 billion (before tax) in the current year, a stark contrast to the massive R74.9 billion write-down in the prior year.
This accounting adjustment, rather than a fundamental operational surge, is the primary driver of the bottom-line improvement. The impairments for the current year include a R13.1 billion write-down on its Secunda and Sasolburg refineries and a R4.4 billion impairment on its Mozambique assets.
Read more:
Other significant contributors to the positive earnings result include:
A R4.3 billion (before tax) net cash settlement from Transnet.
Higher average chemicals basket prices coupled with strict cost control measures.
The non-recurrence of a R15.3 billion deferred tax asset derecognition from the prior year.
Operational Headwinds Signal Underlying Pressure
Despite the positive headline figures, the trading statement highlights persistent operational challenges. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) – a key indicator of cash-generating ability – is expected to decrease by between 10% and 17% to between R50 billion and R54 billion.
This underlying weakness was driven by several headwinds:
A 15% decline in the average Rand per barrel price of Brent crude oil.
Significantly lower refining margins.
A 3% decrease in sales volumes due to lower production and market demand.
The divergence between the soaring EPS/HEPS figures and the declining EBITDA reveals a crucial narrative for investors: while accounting profits have rebounded sharply due to lower write-downs, the core operational earnings of the business remain under significant pressure from weaker macroeconomic conditions.
Sasol is scheduled to present its full, audited financial results on Monday, 25 August 2025, when the market will look for further detail on management's strategy to navigate these operational headwinds.