Sasol’s HY26 reality check: Operational wins masked by Macro headwinds R7.9bn impairments

Key topics:Earnings drop sharply; dividends halted due to high debt.Oil volatility and stronger rand drive major impairments.Operational gains and debt reduction show underlying progress..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 every morning on 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 to the BizNews channel here..By Alec Hogg.If there is one South African corporate giant that consistently tests the nerves and patience of its shareholders, it’s Sasol. Its share price has been on a tear of late, boosted by the surge in oil prices amid tensions between the US and Iran. Analysts say oil is currently trading at a $10-a-barrel premium due to concerns about supply should war break out. This has helped Sasol’s share price to its best level in 18 months, capped by a 27% surge in the past month. But in the real world, things are a lot more challenging for CEO Simon Baloyi and his team. The energy and chemicals group released its interim results for the six months ended 31 December 2025 this morning. True to form, it is a quintessential story of impressive operational progress on the factory floor being heavily hampered by unforgiving global market realities.The Bottom LineLet’s cut straight to the numbers, because Mr Market does not grade on a curve. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 12% to R21.0 billion. Earnings before interest and tax (EBIT) took an even bigger hit, plunging 52% to R4.6 billion. Consequently, headline earnings per share (HEPS) fell 34% to R9.27. Basic earnings per share were smashed, plummeting 95% to just 38 cents..Read more:.Sasol’s rollercoaster: When a 99% earnings crash isn't the whole story.Shareholders hoping for a dividend will have to keep waiting. Sasol’s dividend policy dictates a payout based on 30% of free cash flow, provided that net debt (excluding leases) is sustainably below US$3.0 billion. With net debt currently sitting at US$3.8 billion (R63.3 billion), no interim dividend could be paid.The Elephant in the Room: ImpairmentsSo, what wiped out the bottom line? The reality is that Sasol is battling a perfect storm of macroeconomic headwinds. Oil and chemical markets were considerably lower in the six months to the end of December, compounded by a stronger Rand/US dollar exchange rate. The average dated Brent crude oil price dropped 14% to US$66.38 per barrel. While a stronger Rand is celebrated by consumers at petrol pumps, for Sasol it has a significant impact on its local-currency revenues. This macro-toxicity resulted in staggering R7.9 billion in remeasurement items affecting operating profit. The Secunda liquid fuels refinery's cash-generating unit remains fully impaired. The stronger Rand outlook and lower forecast macro price assumptions meant that the entire R3.0 billion in capital costs spent on the asset in the six months had to be written off immediately.Over in Mozambique, the pain continued as the Production Sharing Agreement (PSA) development suffered an impairment of R3.9 billion. A revision of the expected gas production profile has delayed monetisation, and the strengthening Rand contributed further to this painful valuation hit.The Silver Linings: Controlling the ControllablesBefore you write off the stock, it is crucial to examine what CEO Baloyi and his management team actually can control. And on this front, the news is surprisingly positive.Sasol has been working relentlessly to restore its Southern African value chain, and it is making tangible progress. Down in the Mining division, the much-talked-about destoning plant achieved beneficial operation in December 2025, landing within schedule and cost guidance. Processing coal through this plant is already yielding improved coal quality for the Secunda Operations.This improved coal feedstock, alongside better gasifier availability, drove a solid 10% increase in production at Secunda compared with the same six months of 2024. Meanwhile, the Natref refinery delivered a stellar performance, with production ending 28% higher. This benefited from improved operational reliability and the strategic utilisation of capacity from Prax SA, a shareholder currently in business rescue.International Chemicals and Cash FlowSasol's International Chemicals business is undergoing its own reset initiatives, including a strict asset mothballing and closure programme. In the Americas, EBIT fell 16% to R550 million. While the business benefited from 15% higher sales volumes and strict cost control, these gains were offset by lower US ethylene margins. Conversely, Chemicals Eurasia provided a glimmer of hope by swinging from a prior period loss to deliver an EBIT of R255 million. This turnaround was driven by higher unit margins and stronger Palm Kernel Oil pricing.Thanks to these operational wins and disciplined cost management, Sasol generated a positive free cash flow of R794 million for the half-year. This was supported by prudent capital expenditure, which came in at R8.5 billion, lower than expected due to the absence of a phased shutdown at Secunda. Management also successfully chipped away at the total debt pile, reducing it from R103.3 billion in June 2025 to R93.5 billion.The BizNews VerdictSasol remains a highly geared play on global macroeconomic factors, particularly oil prices. Management is clearly doing the hard yards where it matters—cutting capital spend, improving coal quality, and boosting production volumes. However, the underlying reality is that no amount of internal optimisation can entirely shield the business from softer global chemical prices and a structurally stronger Rand. .Read more:.Sasol’s operational grit shining through, keeping the BizNews tribe in its fan club.Until the macro environment turns in its favour, or until Sasol can sustainably drag that net debt below the US$3 billion trigger, it will remain a story of internal resilience fighting an uphill battle against global realities. But given the progress being made on the things Baloyo and Co can control, it’s worth hanging in there.

Sasol’s HY26 reality check: Operational wins masked by Macro headwinds R7.9bn impairments

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