Sasol(SSL) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The overall financial performance showed a decline in Adjusted EBITDA year-on-year, reflecting weaker macro conditions, with a gross margin decrease of 6% due to a 17% lower Rand oil price and continued pressure in chemicals pricing [8][24][25] - Net debt ended at $3.8 billion, slightly above the full-year target, but the company remains on track to achieve net debt below $3.7 billion by year-end [6][23] - Free cash flow ended positive for the first time in four years, with a more than 100% improvement from the prior period [24] Business Line Data and Key Metrics Changes - In the Southern Africa value chain, mining EBITDA was lower due to the phaseout of export coal sales, but additional income was realized from leasing coal terminal capacity [26] - Fuels EBITDA increased, supported by higher refining margins and product differentials, with improved operational performance at Secunda and increased utilization at Natref [27] - Chemicals EBITDA generation remains under pressure across Africa and America, reflecting lower prices and weaker margins, while Eurasia saw margin improvement due to a value-over-volume strategy [27] Market Data and Key Metrics Changes - The Brent crude oil price was down 14% year-on-year, contributing to a 17% decline in the Rand oil price, with the oil market remaining in surplus [16][17] - The macroeconomic environment remains volatile, with geopolitical uncertainty expected to persist, impacting oil price volatility [16][17] Company Strategy and Development Direction - The company follows a two-pillar strategy: strengthening the foundation business and positioning for long-term growth and transformation [2][3] - Progress has been made in renewable energy, securing over 1.2 gigawatts in South Africa, with a target of 2 gigawatts by 2030 [6][31] - The focus is on decarbonization while safeguarding energy security and affordability, with a commitment to value-accretive pathways [31][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment but emphasized improvements in cash flow generation and operational execution [16][24] - The company is optimistic about achieving its ramp-up towards FY 2028, with ongoing restoration programs for gasifiers showing promising results [48] - There is cautious optimism for recovery in the chemicals market, with selective end markets stabilizing [17][27] Other Important Information - The company invested approximately ZAR 200 million in social programs over the past six months, reflecting its commitment to long-term value creation and positive social impact [14] - The company has secured a EUR 350 million grant for a sustainable aviation fuel project in Germany, supporting its growth in sustainable businesses [34] Q&A Session Questions and Answers Question: Can you comment on Synfuels volumes and guidance for the next financial year? - Management indicated that the annualized run rate in the second quarter was about 7.6 million tons, with maintenance scheduled next year, and emphasized the importance of coal quality and gasifier maintenance in achieving guidance [40][42] Question: What is the company's view on the proposed carbon tax suspension? - Management expressed that while the carbon tax was instituted to protect against external tariffs, they advocate for a recycling mechanism to support the transition to lower emissions [44] Question: How does the company plan to manage its de-gearing guidance amidst a stronger rand and lower refining margins? - Management confirmed the commitment to reducing net debt below $3.7 billion by year-end, emphasizing free cash flow generation and strict cost control [56][62]