Core Viewpoint - Sasol Limited (NYSE:SSL) has seen recent share gains, but these gains are masking weak free cash flow forecasts and long-term risks, leading Morgan Stanley to downgrade its rating from Overweight to Equal-weight [1][2]. Group 1: Financial Performance - Improved cash flow in the second half of the fiscal year, along with advancements in cost-cutting initiatives and optimism regarding potential policy changes in China, contributed to the stock's recent increase [2]. - A significant portion of the debt reduction anticipated in fiscal 2025 is attributed to short-term factors such as dividend revenues, working capital unwind, and a payment from Transnet [2]. - Refining margins provided some support, but longer-term risks are expected to negate some of Sasol's recent gains [2]. Group 2: Company Overview - Sasol Limited is a global integrated energy and chemical company operating in 33 countries, with its activities divided into two primary divisions: Energy and Chemical [3].

Group 1 - The XRG consortium, led by ADNOC, has withdrawn its $18.7 billion acquisition proposal for Australian energy giant Santos [1][3] - The acquisition proposal was initially submitted on June 16, and Santos had agreed to extend the exclusivity period multiple times to facilitate the agreement [3] - Santos' board indicated that the consortium failed to accept reasonable terms to protect shareholder value, particularly regarding regulatory risks and the timeline for transaction completion [3][4] Group 2 - Santos plans to continue executing its established strategy, focusing on low-cost operations to strengthen cash flow [3] - The company expects a 30% increase in production by 2027, driven by the Barossa and Pikka Phase 1 projects, which will enhance free cash flow generation [3] - The chairman of Santos emphasized the company's commitment to generating cash flow, shareholder returns, and reinvestment to maintain infrastructure and expand production [4]

Group 1 - The focus is on producing objective, data-driven research primarily about small- to mid-cap companies, which are often overlooked by many investors [1] - Occasionally, large-cap companies are analyzed to provide a broader perspective on the equity markets [1] Group 2 - There is no current stock, option, or similar derivative position in any of the companies mentioned, but there may be plans to initiate a beneficial long position in SSL within the next 72 hours [2] - The article expresses personal opinions and is not influenced by compensation from any company mentioned [2]

Currency and Economic Risks - The company is exposed to fluctuations in US dollar prices for oil, which may adversely affect revenues and financial performance [99]. - The South African rand is the principal functional currency, and fluctuations in the rand/US dollar exchange rate impact financial leverage and profitability [100]. - A significant portion of the company's turnover is influenced by US dollar-denominated pricing for petroleum and chemical products [101]. - The company faces risks related to asset impairment due to uncertainties in macroeconomic conditions, commodity prices, and currency fluctuations [107]. - High inflation risks may impact operational costs and financial stability [136]. Regulatory and Compliance Risks - Environmental regulations and carbon market instruments may lead to asset impairments, affecting financial results [108]. - Changes in government policies and regulations may adversely affect the company's operations and financial results [117]. - The company is subject to local content requirements in Mozambique, which, if not complied with, may lead to regulatory and reputational risks [119]. - Non-compliance with regulatory requirements, including anti-corruption laws, could result in significant fines and damage to Sasol's reputation [174]. - The company operates under strict South African exchange control regulations, which may restrict capital export and affect financial flexibility [184]. - Sasol's operations are subject to various tax laws globally, and unexpected tax disputes could materially impact financial position [187]. Operational and Market Risks - Political and social factors in operating regions, such as South Africa and Mozambique, could disrupt operations and impact financial performance [116]. - The service provider market in Mozambique is immature, leading to reliance on international contractors and potential cost increases due to local content requirements [140]. - Eskom's electricity generation costs have increased above the national inflation rate, impacting cash flows and leading to additional tariff increases [151]. - Water availability is becoming constrained in South Africa, which could increase operational costs and affect production [152]. - Unplanned rail and port outages in South Africa may negatively impact sales volumes and profitability [155]. - The company has experienced operational interruptions, such as a fire at the Natref refinery, which resulted in a two-month operational halt [158]. Financial Performance and Shareholder Impact - The company’s dividend policy is influenced by market conditions, financial position, and capital investment plans, which may affect future dividend payments [145]. - The parent company of Prax SA, a joint venture partner, has entered administration, introducing uncertainty regarding its financial obligations [144]. - Sasol identified material weaknesses in internal controls over financial reporting for the financial year ended June 30, 2025, which could adversely affect share price and investor confidence [166]. - Future share issuances could dilute existing shareholders' interests, particularly for those outside South Africa who may not participate in offerings [268]. - The liquidity of Sasol's shares on the JSE is historically low, which may restrict the ability to sell substantial amounts of shares in a timely manner [271]. Community and Social Risks - The company faces significant risks from community protests and social unrest in Southern Africa, which could disrupt operations and negatively impact financial results [165]. - New South African mining legislation, including the Upstream Petroleum Resources Development Act 23 of 2024, may lead to higher production and compliance costs [193]. - The Mining Charter has increased compliance criteria, resulting in higher production costs and increased risk of non-compliance for Sasol Mining [194]. Environmental and Climate Change Risks - The effectiveness of the company's climate change strategy is subject to uncertainties and could negatively impact competitiveness and stakeholder relations [222]. - Transitional risks related to GHG emissions from key manufacturing processes may challenge the company's ability to meet regulatory requirements and societal pressures [224]. - The carbon tax in South Africa has increased from R120/tCO2e in 2019 to R236/tCO2e in 2025, with projections to reach R308 by 2026 and R462 by 2030, significantly impacting operational costs [228]. - Sasol aims for a 30% reduction in scope 1 and 2 GHG emissions by 2030 from a 2017 baseline, contributing to South Africa's Nationally Determined Contribution (NDC) of 350-420 Mt CO2e by 2030 [236]. - The company has set a net zero ambition by 2050 for scope 1, 2, and 3 category 11 emissions, which account for approximately 80% of total scope 3 emissions [236]. Cybersecurity and Information Security Risks - The organization faces significant external threats, including state-sponsored and climate-activist cyber attacks, with AI-enhanced techniques increasing the risk of breaches [257]. - No material losses have been discovered related to information security, but the evolving nature of threats poses a risk of future breaches, potentially leading to significant environmental incidents or commercial losses [258]. - Disruptions to critical services due to cyber threats could adversely affect the company's financial position and operating results [259]. Talent and Workforce Challenges - The company may struggle to attract and retain critical talent due to a general scarcity of skilled individuals in the sectors it operates [260]. - Slow hiring times may impact the ability to attract talent with required skill sets, particularly in specialist roles necessary for the green economy [261]. - The company prioritizes employee development, but it may take time to build the necessary skills to support transition imperatives [262].

Core Viewpoint - NCS Multistage (NCSM) is currently outperforming its peers in the Oils-Energy sector, with a year-to-date performance of approximately 42.5% compared to the sector average of 4% [4]. Company Performance - NCS Multistage is part of the Oils-Energy sector, which consists of 240 individual stocks and holds a Zacks Sector Rank of 13 [2]. - The Zacks Rank for NCS Multistage is 1 (Strong Buy), indicating a positive outlook based on earnings estimates and revisions [3]. - Over the past three months, the Zacks Consensus Estimate for NCSM's full-year earnings has increased by 62%, reflecting improved analyst sentiment [4]. Industry Comparison - NCS Multistage belongs to the Oil and Gas - Field Services industry, which includes 23 companies and currently ranks 211 in the Zacks Industry Rank. This industry has seen a decline of about 5.4% year-to-date, highlighting NCSM's superior performance [6]. - In contrast, another Oils-Energy stock, Sasol (SSL), has returned 37.9% year-to-date and belongs to the Oil and Gas - Integrated - International industry, which ranks 39 and has increased by 6.1% this year [5][6]. Future Outlook - Investors interested in Oils-Energy stocks should monitor NCS Multistage and Sasol, as both companies are expected to maintain their strong performance [7].

Core Insights - The company is taking decisive actions to reshape its future, focusing on cost containment, optimized capital spending, and strengthening its balance sheet, despite a complex global environment [1] - Free cash flow after tax, interest, and capital expenditure increased by 75% to R12.6 billion, indicating strong financial performance [1] - Turnover decreased by 9% to R249 billion due to a 15% decline in Rand oil prices and lower sales volumes [2] - Adjusted EBITDA declined by 14% to R51.8 billion, reflecting the challenging market conditions [2] - Total impairments significantly decreased to R20.7 billion from R74.9 billion in the prior year, with management actions improving recoverable amounts [3] - Basic earnings per share increased by over 100% to R10.60, while headline earnings per share improved by 93% to R35.13 [4] - The balance sheet was strengthened with net debt declining by 13% to R65.0 billion (US$3.7 billion) [5] - Liquidity was enhanced through the successful closure of a R5.3 billion floating rate bond [6] Financial Metrics - Turnover: R249 billion, down 9% from the previous year [7] - Adjusted EBITDA: R51.8 billion, down 14% [7] - Basic EPS: R10.60, up over 100% from a loss of R69.94 [7] - Headline EPS: R35.13, up 93% [7] - Capital Expenditure: R25.4 billion, down 16% [7] - Free Cash Flow: R12.6 billion, up 75% [7] - Net Debt: R65.0 billion, down 13% [7] Asset and Liability Overview - Total assets decreased slightly to R359.6 billion, down 1% [8] - Total liabilities increased by 7% to R201.9 billion [8] - Total equity increased by 7% to R157.6 billion [8] Dividend Policy - No dividend was declared as net debt was above the sustainable threshold of US$3 billion [9] Board Changes - Ms. Xikongomelo Maluleke appointed to the Audit Committee and Safety, Social and Ethics Committee [10]

Financial Data and Key Metrics Changes - Adjusted EBITDA for FY 2025 decreased by 14% to R52 billion, reflecting a challenging macroeconomic environment [16][32] - Free cash flow improved by more than 70% compared to the prior year, reaching almost ZAR 12.6 billion, driven by disciplined capital spending and lower tax payments [35][36] - Net debt was reduced to $3.7 billion, achieving the target of staying under $4 billion, marking the lowest level since 2016 [12][33] Business Line Data and Key Metrics Changes - In the South African business, adjusted EBITDA increased by 15% in mining and 35% in gas, while fuels declined by 38% due to lower refining margins and production volumes [38] - International chemicals saw adjusted EBITDA increase to $411 million, with an improved margin from 6% to 9% [23][39] - The Southern Africa value chain's breakeven price ended at $59 per barrel, supported by disciplined cost management [12][34] Market Data and Key Metrics Changes - The macroeconomic environment was highly volatile, influenced by global tariffs and geopolitical tensions, impacting various business segments differently [34] - The chemical segments benefited from stronger U.S. ethylene margins and a 5% uplift in the overall chemicals basket price [34] Company Strategy and Development Direction - The company is focused on strengthening its foundation, growing, and transforming the business, with a particular emphasis on emission reduction and renewable energy [10][46] - Strategic initiatives include optimizing asset utilization, improving profitability through market focus, and cost efficiency [23][24] - The company aims to achieve a 30% reduction in greenhouse gas emissions by 2030, with significant progress in renewable energy projects [48][51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the operating environment but expressed confidence in the execution of strategic plans [10][30] - The company is committed to improving cash generation and accelerating deleveraging while focusing on safety and customer-centric solutions [28][30] Other Important Information - The company invested R600 million in social programs and contributed R44 billion in direct and indirect taxes globally [26][27] - Recent executive leadership changes were announced, with new appointments aimed at addressing both short and long-term goals [21][22] Q&A Session Summary Question: CapEx savings and future guidance - Management explained that CapEx came in below guidance due to a rigorous approach, deferring low-risk activities to the following year, and optimizing capital spending [56][64] Question: Gas volumes and impairment calculations - Management clarified that while gas volumes from Mozambique are expected to increase, the impairment was due to changes in the WACC rate linked to country risk [58][67] Question: Outlook for chemical prices - Management indicated that the chemical basket prices are expected to remain resilient, with ongoing efforts to optimize the commercial strategy [88][96] Question: Debt reduction strategy - The company plans to prioritize deleveraging by using excess cash to reduce gross debt and improve net debt position, targeting a net debt of $3 billion by FY 2027-2028 [91][96]

Financial Data and Key Metrics Changes - Adjusted EBITDA for the period decreased by 14% to R52 billion, reflecting a challenging macroeconomic environment [15][30] - Free cash flow improved by more than 70% compared to the prior year, reaching almost ZAR 12.6 billion, a 75% increase [33][34] - Net debt was reduced to $3.7 billion, achieving the target of staying under $4 billion, marking the lowest level since 2016 [12][31] Business Line Data and Key Metrics Changes - In the South African business, mining EBITDA increased by 15%, while gas EBITDA rose by 35% due to higher gas prices and sales volumes [37] - Fuels segment saw a decline of 38% due to weaker rand oil prices and lower refining margins [37] - International Chemicals increased its share of group adjusted EBITDA from 9% to 15%, driven by improved U.S. Ethylene margins and stronger palm kernel oil pricing [38] Market Data and Key Metrics Changes - The macroeconomic environment was highly volatile, influenced by global tariffs and geopolitical tensions, impacting various business segments differently [32] - The chemical segments benefited from stronger U.S. Ethylene margins and a 5% uplift in the overall chemicals basket price [32] Company Strategy and Development Direction - The company is focused on strengthening its foundation, resetting international chemicals, and restoring the South African value chain [8][26] - A commitment to a 30% reduction in greenhouse gas emissions by 2030 is part of the strategic roadmap, with significant progress in renewable energy initiatives [47][50] - The company aims to improve cash generation to accelerate deleveraging while advancing its growth and transformation agenda [27][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the operating environment but expressed confidence in the execution of strategic plans [9][26] - The focus remains on safety, operational reliability, and optimizing capital allocation to navigate ongoing macro volatility [28][41] - Future guidance includes maintaining cost and capital discipline while targeting further reductions in net debt [43][44] Other Important Information - The company invested R600 million in social programs globally, supporting over 250 students and contributing to community infrastructure projects [24][25] - The upcoming retirement of key executives marks a transition in leadership, with new appointments aimed at addressing both short and long-term goals [19][20] Q&A Session Summary Question: CapEx savings and guidance for FY 2026 - The company achieved CapEx below guidance due to a rigorous approach, deferring low-risk activities and optimizing capital spend [56][64] - Guidance for FY 2026 remains similar to FY 2025 despite no shutdown, with expectations for increased volumes from the destoning plant [56][64] Question: Gas volumes and impairment calculations - Gas volumes from Mozambique are expected to ramp up, but total recoverable gas volumes were revised down due to changes in the WACC rate [58][66] - The commissioning of the integrated processing facility is on track, but delays in the CTT project have been encountered [58][73] Question: Outlook for chemical prices and debt reduction - The company is focused on deleveraging, using excess cash to reduce gross debt and improve net debt position [92] - The effective tax rate has increased due to non-permissible deductions, impacting overall tax payments [80]

Financial Performance - Adjusted EBITDA decreased by 14% to R52 billion due to lower oil prices, weaker refining margins, a stronger Rand/USD exchange rate, lower production volumes, and a lower-for-longer chemicals outlook[17] - Free cash flow increased by 75% to R126 billion[17] - Capital expenditure decreased by 16% to R25 billion[17] - Net debt is at US$37 billion, targeting below US$4 billion[12, 27] Business Operations - Southern Africa operations are focused on improving cost competitiveness, with a target of US$55-60/bbl breakeven and 70-72mt SO production in FY26[19] - International Chemicals business saw an Adj EBITDA uplift of over US$120 million compared to FY24, with a FY26 target of US$450-550 million and an Adj EBITDA margin of 10-13%[20] - Mining saleable production is targeted at 28-30mt, with coal quality sinks at 12-14%[67] Sustainability and Social Contribution - Approximately R44 billion was paid in global direct and indirect tax[22] - Over R660 million was spent globally on social investment programs[22] - Net GHG emission reduction of approximately 20% off the FY17 baseline[75] FY26 Outlook - Capital expenditure is projected to be R24-26 billion[49] - Net debt is expected to remain below US$37 billion[49] - Working capital is targeted at 155-165%[49]

Core Viewpoint - Sasol (SSL) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [3][4]. - An increase in earnings estimates typically leads to higher fair value for a stock, prompting institutional investors to buy or sell, thus affecting stock prices [3]. Sasol's Earnings Outlook - Sasol's earnings estimates have been rising, with the Zacks Consensus Estimate for the fiscal year ending June 2026 projected at $1.83 per share, showing no year-over-year change [7]. - Over the past three months, the Zacks Consensus Estimate for Sasol has increased by 18.1%, reflecting a positive outlook for the company's earnings [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [6]. - The upgrade of Sasol to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [9].