Sasol’s earnings recovery accelerated in FY26, with the chemicals and energy group guiding for a sharp improvement in earnings per share as stronger operational performance and higher refining margins offset currency headwinds and softer cash conversion.
For investors, the trading statement suggests that Sasol’s operational turnaround is beginning to translate into more resilient profitability, although higher working capital is expected to moderate the improvement in free cash flow.
Operational gains drive earnings recovery
Sasol expects headline earnings per share (HEPS) for the year ended 30 June 2026 to increase by between 2% and 14%, to R36–R40 per share.
Reported earnings per share are expected to rise much more sharply, to R17.50–R19.50, representing growth of between 65% and 84% from the prior year’s R10.60.
The stronger EPS performance reflects a combination of improved operating conditions and lower non-cash charges. Sasol expects adjusted EBITDA of between R58 billion and R62 billion, compared with R51.8 billion in FY25, while impairment charges declined to R16.8 billion before tax from R20.7 billion a year earlier.
Management attributed the improvement to stronger production, a 4% increase in sales volumes, higher average oil prices and significantly stronger refining margins. Earlier operational updates showed Secunda Operations achieving their highest production levels in five years, supporting higher liquid fuels sales and improved operating leverage.
Several factors nevertheless tempered the recovery. A stronger average rand against the US dollar reduced the value of dollar-denominated revenue, while the absence of the previous year’s R4.3 billion Transnet settlement created a difficult comparison. Sasol also recorded unrealised losses on monetary items and derivatives, compared with unrealised gains in FY25.
Cash flow remains the next key test
While earnings are recovering, management cautioned that free cash flow will not improve at the same pace.
Working capital increased during the second half of the year, reflecting higher commodity prices and a strategic build-up of fuel inventories ahead of the planned Natref refinery shutdown during the first quarter of FY27. Although these factors temporarily reduce cash generation, they are intended to support operational continuity and reduce supply risk during planned maintenance.
At the same time, Sasol continues to balance near-term earnings recovery with its longer-term transition strategy.
The company is expanding renewable energy capacity alongside its core fuels business, with more than 500MW of renewable capacity now operational and a further 700MW under construction. These investments form part of Sasol’s strategy to reduce emissions while maintaining the competitiveness of its core energy and chemicals operations.
For investors, the FY26 trading statement points to an important inflection point. Operational performance is improving, margins have strengthened and impairment pressure has eased. The next question is whether those gains translate into stronger free cash flow, lower leverage and sustainable returns as commodity prices and refining margins normalise.
Attention will now turn to Sasol’s full-year results on 1 September, where investors are expected to focus on cash generation, capital allocation, debt reduction and management’s outlook for FY27.
