Investors Eye Sasol’s Debt Plan as Morgan Stanley Downgrades JSE: SOL Share Price
Sasol Share price dived 8% yesterday, threatening to resume the larger downtrend after being downgraded by Morgan Stanley.
Quick overview
- Sasol's share price fell 8% following a downgrade by Morgan Stanley from overweight to equal weight.
- Despite a recent earnings recovery and improved fundamentals, the company withheld its dividend to prioritize reducing net debt.
- Sasol's stock has shown volatility, with a significant rally followed by a sharp pullback, indicating potential trend shifts.
- Management is focused on operational improvements and maintaining cash flow, while the market watches for a break above long-term resistance.
Sasol Share price dived 8% yesterday, threatening to resume the larger downtrend after being downgraded by Morgan Stanley.
Sasol Shares Slide After Rating Downgrade
Sasol Ord Shs (JSE:SOL) came under heavy pressure ahead of Monday’s trade after Morgan Stanley downgraded the stock from overweight to equal weight. Shares closed at R107.70, down more than 8% from the previous session’s R117.30, with 532,428 shares changing hands. The stock opened weaker and continued to retreat throughout the session.
Technical Picture: From Strong Rally to Pullback
After bouncing off the 200-day SMA, Sasol delivered an impressive 50% rally in just one month. But last week’s reversal, followed by this week’s steep drop, pushed the price back to the 50-day SMA (yellow). While this level briefly held as support, the move signals a potential shift in trend momentum.
SOLJ Chart Daily – The 200 SMA Has Turned Into Support
On the longer-term weekly chart, buyers failed to break above the 100-SMA (green) in September. Despite this, the 20-SMA (gray) and 50-SMA (yellow)—which had capped prices for years—were recently broken, pointing to the possibility of a broader bullish reversal if sustained.
SOLJ Chart Weekly – Buyers Will Likely Break the 100 SMA Too
Financial Performance: Earnings Recovery in Focus
Sasol’s fundamentals have improved despite operational headwinds. Basic earnings returned to positive territory, while headline EPS surged 93% year-over-year. The rebound was supported by stronger free cash flow, lower impairments, debt reduction efforts, and a one-off R4.3 billion settlement with Transnet.
Strategic and Operational Progress
Management highlighted structural improvements tied to Capital Markets Day 2025 commitments. Even though turnover and EBITDA slipped, profitability strengthened thanks to enhanced cash generation and tighter cost discipline.
Free cash flow rose 75% to R12.6 billion (after tax, interest, and capex). Efforts to improve coal quality and restore Secunda Operations are ongoing, with the destoning facility expected to be fully operational by year-end.
Dividend Policy: Caution Over Payouts
Despite the earnings recovery, Sasol once again withheld its dividend. Management emphasized that reducing net debt below the $3 billion threshold remains the top priority. Until the balance sheet is strengthened further, shareholder distributions will remain limited.
In summary: Sasol’s downgrade triggered a sharp pullback, highlighting investor sensitivity despite improving fundamentals. With earnings recovery underway and key operational upgrades in progress, the market’s focus will remain on whether Sasol can break above long-term resistance and return to sustainable growth.
Sasol Limited: FY2025 Audited Financial Results
Key Metrics (Year Ended 30 June 2025)
- Turnover: R249,096m (↓9% YoY)
- Adjusted EBITDA: R51,764m (↓14%)
- EBIT: R18,819m (vs. LBIT of R27,305m in FY2024)
- Basic EPS: R10.60 (vs. -R69.94 in FY2024)
- HEPS: R35.13 (↑93% YoY)
- Capital Expenditure: R25,413m (↓16%)
- Free Cash Flow: R12,558m (↑75%)
- Net Debt (excl. leases): R64,964m (↓13%)
- Dividend: No interim or final dividend declared (vs. R2.00 interim in FY2024)
Net Asset Value
- Total Assets: R359,555m (↓1%)
- Total Liabilities: R201,944m (↓7%)
- Total Equity: R157,611m (↑7%)
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