Sasol Narrows Breakeven Below Target Amid Cost Discipline and Lower CapEx

Date of Call: Feb 23, 2026

Financials Results

• Gross Margin: Declined by 6% YOY, reflecting a 17% lower rand oil price and chemical pricing pressure.

Guidance:

• Reduced FY26 capital expenditure guidance to ZAR 22-24 billion (ZAR 2 billion lower).
• Net debt target below USD 3.7 billion by year-end; aiming for USD 3 billion between FY27 and FY28.
• Southern Africa cash breakeven price of USD 53 per barrel for H1, target range USD 60-55 per barrel for FY26.
• Revised FY26 adjusted EBITDA guidance for International Chemicals to USD 375-450 million; margin outlook 8%-10%.
• Targeting FY28 adjusted EBITDA of USD 750-850 million for International Chemicals.

Business Commentary:

Operational and Financial Performance:

• Sasol Limited reported a Southern Africa value chain cash breakeven price of USD 53 per barrel, ahead of their full-year target range of USD 60 to USD 55 per barrel.
• The improvement was due to higher production and sales volume, disciplined cost and capital management.

Safety and Operational Delivery:

• The company experienced a tragic fatality in September 2025, prompting a review and improvement in safety protocols.
• Actions included strengthening leadership accountability, reinforcing safety standards, and focusing on high-risk activities.

International Chemicals and Market Challenges:

• Despite softer chemical pricing, Sasol's International Chemicals segment saw a 10% year-on-year increase in adjusted EBITDA.
• The improvement was supported by structural cost reductions and actions to position the business for recovery despite tougher market conditions.

Capital Expenditure and Cash Flow:

• Capital expenditure was 43% lower year-on-year, primarily due to the absence of a Secunda phase shutdown and lower PSA spend in Mozambique.
• The company generated positive free cash flow, enhancing its cash flow resilience amidst challenging macroeconomic conditions.

Renewable Energy and Sustainability Initiatives:

• Sasol secured an additional 300 megawatts of renewable energy, bringing the total to over 1.2 gigawatts, advancing their target of 2 gigawatts by 2030.
• These efforts align with their strategy to lower emissions and create a scalable platform for new markets.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges a 'challenging macro environment' with 'weaker macro conditions' impacting earnings. However, they highlight 'disciplined delivery' with positive free cash flow, improved operational performance, and progress on cost control and safety. The tone balances current headwinds with execution on controllable levers and long-term strategic progress.

Q&A:

• Question from Adrian Hammond (SBG Securities): Concerns about Secunda volume guidance potentially being achieved sooner, carbon tax suspension proposal, and MRG pricing submission impact.
  Response: CEO clarified that while H1 run rate suggests high end of annual guidance, they are not adjusting guidance until gasifier restoration program progresses; carbon tax recycling is preferred over punitive measures; MRG pricing submission will be public, with CapEx included in existing profile.

• Question from Gerhard Engelbrecht (Absa Bank): Concerns around degearing guidance given H2 headwinds, CapEx deferral impact, and rationale for repaying medium-term notes.
  Response: CFO stated they will generate free cash flow in H2 to meet net debt target; H2 CapEx increase due to mining investments and projects; repayment of small maturing DMTN was made, with proactive capital structure management ongoing.

• Question from Chris Nicholson (Morgan Stanley): Details on PSA gas volumes and impairment, and Prax SA liquidation impact on Natref.
  Response: CEO clarified PSA volumes are intact but impairment due to rand-dollar exchange rate and gas flow timing; Prax SA business rescue allows utilization of their Natref share until M&A process concludes, with benefits flowing to Sasol.

• Question from Alex Comer (JPMorgan): Volume details for e-SAF project grant and EBITDA to cash flow reconciliation.
  Response: EVP of Business Building explained project is ~2,000 barrels per day (~40,000 tonnes SAF) with FID pending offtake; CFO noted non-cash movements in EBITDA-cash flow gap and offered offline reconciliation.

Contradiction Point 1

Secunda Gasifier Restoration Program Timeline and CapEx

Conflicting statements on the completion timeline and capital requirements for a key restoration program, impacting guidance and investor expectations.

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2026Q2: Achieving the top-end guidance would require doubling current run rates, but it's premature to adjust guidance without completing the gasifier restoration program. The ramp-up plan targets 40% restoration by year-end FY26, progressing toward the FY28 target. - Simon Baloyi(CEO), Victor Bester(EVP of Operations & Projects)

How did Secunda volumes reach the top end of guidance earlier than expected? What's the status of gasifier refurbishments? - Gerhard G. Engelbrecht (Absa CIB)

2025Q4: The FY26 CapEx guidance... factoring in the absence of a shutdown and ongoing optimization." "The FY26 CapEx guidance remains at ZAR 24-26 billion, factoring in the absence of a shutdown and ongoing optimization. - Walt P. Bruns(CFO), Victor Bester(EVP of Operations & Projects)

Contradiction Point 2

FY28 EBITDA Guidance and Dependency on Market Conditions

Inconsistent messaging on whether the FY28 EBITDA target is insulated from or dependent on external market conditions.

What are your thoughts on the current market conditions? - Sashank Lanka (Bank of America)

2026Q2: The FY28 target is based on controllable actions; the company will double down on execution regardless of market conditions. - Simon Baloyi(CEO), Antje Gerber(EVP of International Chemicals)

Does the FY26 guidance cut pose a risk to FY28 EBITDA guidance? - Adrian Spencer Hammond (SBG Securities)

2025Q4: The focus is on self-help measures... with a very gradual recovery expected into the 2030s." "FY26 guidance assumes lower ethylene margins and lower palm kernel oil prices. - Antje G M Gerber(EVP of International Chemicals)

Contradiction Point 3

Destoning Project Timeline and Coal Intake Capacity

Contradiction on the operational benefits timeline and resulting coal intake capacity post-project completion.

What are your key questions for the earnings call? - Chris Nicholson (Morgan Stanley)

2026Q2: The PSA impairment is due to... delayed gas flow from the CTT project. Gas guidance was revised due to lower external demand, internal gas displacement, and well licensing/flooding issues. - Victor Bester(EVP of Operations & Projects)

Explain the Gas from PSA downgrade and its link to CTT volumes? How long can Prax's Natref share be utilized, and does Sasol receive all the benefits? - Jesse Armstrong (Fairtree)

2024Q4: The destoning project... will improve coal quality, with benefits starting upon commissioning in H1 FY26. - Simon Baloyi(CEO)

Contradiction Point 4

Secunda Assets Impairment and Value Outlook

Contradiction on the current impairment status versus potential value upside of the Secunda assets.

What are your thoughts on the recent earnings report? - Sashank Lanka (Bank of America)

2026Q2: The FY28 target is based on controllable actions; the company will double down on execution regardless of market conditions. - Simon Baloyi(CEO)

Is the FY28 EBITDA guidance at risk due to the FY26 guidance cut? - Chris Nicholson (RMB Morgan Stanley)

2024Q4: The Secunda Synref CGU saw a value uplift from the optimized ERR but remains impaired slightly due to lower macroeconomic assumptions... Impairment reversal is a focus. - Simon Baloyi(CEO)

Contradiction Point 5

Outlook and Strategy for European Chemicals Operations

Contradicts the previous assessment of European chemical market conditions and the company's strategic focus there.

What is Tabo Pato's question from Katalyst Partners? - Tabo Pato (Katalyst Partners)

2026Q2: The European chemical environment remains tough. Sasol operates on a value-over-volume basis, optimizes its portfolio, and will divest underperforming assets. - Antje Gerber(EVP of International Chemicals)

How does Sasol view its European operations amid plant closures? - Dmitry Ivanov (Jefferies)

2021Q4: The outlook for FY 2022 is for very decent performance in North America, with polyethylene prices around $1,000–$1,100/ton in Northeast Asia. - Brad Griffith(EVP-Chemicals)