Sasol(US:SSL)2025-08-29 10:03Currency 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].