Sasol lost more than R6bn in market value after its shares fell almost 12% following a downgrade by JPMorgan, which shifted its rating on the energy and chemicals group from neutral to underweight. The sell-off reflects growing concern among investors about Sasol’s earnings outlook, balance sheet resilience and exposure to global commodity and currency cycles at a time of subdued demand and volatile prices.
According to JPMorgan, a key risk to Sasol’s near-term performance is the strengthening rand, which has appreciated by close to 13% against the US dollar over the past year. Sasol generates a large portion of its revenue in foreign currencies, particularly from chemicals and energy operations priced in dollars. While a weaker rand typically inflates rand-denominated earnings, currency strength has the opposite effect, compressing margins even when operational volumes are stable.
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This currency pressure comes against a challenging backdrop for the global chemicals sector. As reported by Moody’s Ratings, demand for chemicals remains weak across major markets due to slower industrial activity, cautious capital spending and excess capacity, particularly in Asia and Europe. For Sasol, which relies on both energy and chemical value chains, the combination of soft pricing and currency headwinds has limited its ability to translate production into stronger profits.
Investor scepticism has intensified over the past year, with several institutions reassessing their exposure to the stock. Morgan Stanley and Bank of America Securities have both downgraded Sasol in recent months, reflecting concerns about earnings sustainability and balance sheet flexibility. Sasol’s share price has declined by more than 65% over the past three years, underperforming both the broader JSE and global energy peers, despite periodic rebounds linked to oil price movements.
Credit metrics have also come under scrutiny. As noted by S&P Global Ratings, Sasol faces continued pressure on core earnings and leverage ratios in the 2026 and 2027 financial years, driven by persistently low oil and chemical prices. While the company has reduced debt from pandemic-era highs, its cash generation remains sensitive to external variables largely beyond management’s control, including commodity prices, exchange rates and global economic growth.
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Sasol attempted to reset the investment narrative last year by outlining a three-year strategy focused on cost containment, operational discipline and further debt reduction. The group has prioritised restoring financial resilience to enable the eventual return of dividends, a key concern for long-term shareholders. It has also signalled plans to stabilise its core operations while selectively investing in areas that can deliver predictable cash flows.
At the same time, Sasol has scaled back its capital commitments to emissions reduction, cutting its greenhouse gas roadmap budget by about 70% to a ceiling of R7bn. The company maintains that it can still achieve a 30% reduction in global emissions by 2030 while preserving capital. However, investors remain cautious about execution risk and the balance between sustaining legacy assets, funding the energy transition and navigating an increasingly volatile operating environment.