• Adjusted EBITDA: ZAR24 billion, 15% lower than the previous year.
• Free Cash Flow: Improved by more than 80%, despite being slightly below expectations.
• Gross Margin: Declined by 11%, with a stable percentage at 45%.
• Cash Fixed Costs: Decreased by 1% due to ongoing transformation initiatives.
• Net Loss from Remeasurement Items: Approximately ZAR6 billion, mainly due to impairments.
• Net Debt: USD4.3 billion as of December 31, 2024.
• Dividend Policy: Interim dividend passed due to net debt exceeding USD4 billion.
• International Chemicals EBITDA Contribution: Increased from 6% to 13% of group adjusted EBITDA.
• Southern Africa Energy and Chemicals: Mining segment earnings improved; Fuels earnings declined by 61%.
• Gas Business Earnings: Increased by 71% due to higher gas prices and volumes.
• Chemicals America Earnings: Increased by 77% supported by improved US ethylene margins.
• Chemicals Eurasia Earnings: More than 100% increase, though margins remain low.
• Capital Expenditure: Reduced by 6% in the first half of the year.
• Hedging Program: 100% completed for FY '25 and over 85% for FY '26.

• Warning! GuruFocus has detected 3 Warning Sign with SSL.

Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sasol Ltd (NYSE:SSL) has remained fatality-free since August 2024, indicating a strong focus on safety.
• The company has improved free cash flow by more than 80%, despite macroeconomic headwinds.
• Sasol Ltd (NYSE:SSL) has successfully completed repairs at the Natref refinery, bringing it back online.
• The company is committed to reducing its carbon intensity by 30% by 2030, with a refined emission reduction roadmap.
• Sasol Ltd (NYSE:SSL) has made significant progress in its International Chemicals segment, with an 80% increase in adjusted EBITDA.

Negative Points

• Adjusted EBITDA for the period was 15% lower than the previous year due to macroeconomic challenges.
• The company faced elevated safety incidents in the first half of the financial year, particularly during the Secunda shutdown.
• Sasol Ltd (NYSE:SSL) has decided to mothball three underperforming assets in Germany, Italy, and the US, indicating operational challenges.
• The company has passed the interim dividend due to a free cash flow deficit and net debt exceeding the dividend trigger.
• Sasol Ltd (NYSE:SSL) continues to face coal quality challenges, impacting gasifier availability at Secunda operations.

Q & A Highlights

Q: How much would the destoning project add in terms of coal volumes, revenue uplift, cost savings, or EBITDA uplift? Were other options considered to improve mining volumes? A: The destoning project aims to improve coal quality, not necessarily increase volumes. It will reduce stone content in coal, enhancing gasifier efficiency. This project is expected to cost under ZAR1 billion and will be operational in the first half of FY '26. Other options, like establishing a new mine, are considered but take time. (Simon Baloyi, CEO; Victor Bester, EVP of Operations and Projects)

Q: How do you plan to maintain Secunda volumes beyond 2028 when gas volumes are expected to decline while reaching your 30% CO2 reduction target? A: Beyond 2028, as gas declines, Sasol plans to reposition and reset its business to maintain profitability. The focus is on transitioning to LNG for the South African market. The company is also optimizing its Emission Reduction Roadmap (ERR) to ensure compliance and value protection. (Simon Baloyi, CEO; Sarushen Pillay, EVP of Business Building Strategy and Technology)

Q: Why haven't we seen a write-back of impairments now that the destoning project and emission reduction roadmap have been taken? A: Despite the uplift from the ERR, macroeconomic assumptions like lower oil prices and a stronger rand have impacted valuations. The Synref CGU still has a small gap, and efforts are ongoing to optimize capital and cost spend to potentially reverse impairments in the future. (Simon Baloyi, CEO; Walt Bruns, CFO)

Q: What are the plans for the Richards Bay coal terminal allocation now that export coal is being redirected to Secunda operations? A: The export quality of coal from Thubelisha is declining, making exports less viable. Sasol plans to repurpose the Twistdraai export plant for destoning. The Richards Bay coal terminal shareholding will be retained and leased out in the short to medium term. (Hermann Wenhold, EVP of Mining)

Q: Can you elaborate on the reasons for mothballing some international assets instead of divesting them? A: Mothballing is a strategic decision to stop losses from underperforming assets due to demand or capacity issues. This allows for potential future reactivation or sale if market conditions improve. The focus is on restoring profitability and operational efficiency. (Antje Gerber, EVP of International Chemicals)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.