Sasol Share Price JSE: SOL Extends the Fall, Testing Major Support Pre Q3 Earnings
Sasol shares plunged once again this week, with investor sentiment souring after a Morgan Stanley downgrade erased optimism surrounding...
Quick overview
- Sasol shares fell 8.14% this week after a downgrade by Morgan Stanley, extending monthly losses to nearly 20%.
- Despite a 93% year-on-year increase in headline earnings per share, concerns about long-term operational risks persist.
- The company has suspended its dividend to focus on reducing net debt, disappointing income investors.
- Analysts warn that recent financial improvements may not be sustainable, raising doubts about Sasol's recovery.
Sasol shares plunged once again this week, with investor sentiment souring after a Morgan Stanley downgrade erased optimism surrounding the company’s recent earnings rebound and cost-cutting progress.
Sasol Under Pressure After Analyst Downgrade
Sasol (JSE: SOL) ended the week deep in negative territory, dropping 8.14% on Friday to close at R95, extending its monthly losses to almost 20%. The decline followed Morgan Stanley’s downgrade from Overweight to Equal Weight, citing growing long-term operational risks despite near-term improvements in cash flow and debt reduction.
Earlier in 2025, Sasol had been one of the JSE’s strongest performers, doubling in value from April lows of R55 to September highs near R127. However, the rebound quickly lost steam as profit-taking, lower oil prices, and renewed skepticism about the company’s long-term outlook pulled the stock back into correction territory.
Technical Picture: Rally Reverses at Key Resistance
Technically, Sasol’s price momentum has weakened significantly. The 100-week SMA (green line) acted as a critical ceiling in September, where buyers failed to push higher, triggering a reversal.
SOLJ Chart Weekly – Sellers Testing the 50 SMA
The stock has now fallen roughly 20% from its recent peak, but investors are watching whether it can hold the 50-day SMA (yellow) as support. A decisive break below that level could open the door to a deeper slide toward R85–R88.
SOLJ Chart Monthly – The 20 SMA Rejected the Price
Financial Recovery: Encouraging but Fragile
Despite the stock’s drop, Sasol’s financial results for FY2025 showed real improvement. Headline earnings per share (HEPS) jumped 93% year-on-year to R35.13, and basic EPS turned positive at R10.60, compared to a steep loss of R69.94 in FY2024.
Key drivers of this rebound included:
- Free cash flow up 75% to R12.6 billion after tax and interest.
- Net debt cut by 13% to R64.96 billion.
- A R4.3 billion Transnet settlement that boosted liquidity.
- Lower impairments and stricter cost controls offsetting weaker turnover.
However, turnover slipped 9% to R249.1 billion, and adjusted EBITDA fell 14% to R51.8 billion, underscoring that profitability still relies heavily on external tailwinds.
Strategy and Operations: Focus on Stabilization
Management reiterated its focus on long-term structural improvements, especially around Secunda Operations, where destoning upgrades are expected to complete by year-end. The company continues to streamline operations, reduce emissions, and advance projects tied to its Capital Markets Day 2025 roadmap.
Nevertheless, analysts warn that much of the company’s debt reduction came from non-recurring sources, including short-term working capital releases and the Transnet payment—raising doubts about the sustainability of its balance sheet progress.
Dividend Policy: Prudence Over Payouts
Despite stronger earnings, Sasol maintained its dividend suspension, citing a continued focus on reducing net debt below $3 billion. While this approach may strengthen long-term financial stability, it disappointed income investors hoping for capital returns after years of volatility.
Morgan Stanley’s note echoed this cautious view, stating that while recent gains in refining margins and liquidity are positive, structural risks and cyclical headwinds could limit upside potential for Sasol in the coming quarters.
Conclusion: Sasol’s latest selloff underscores investor unease despite visible financial improvements. The company’s turnaround efforts are gaining traction, but questions about sustainability, profitability, and debt reliance persist. Unless momentum returns and confidence rebuilds, Sasol’s recovery story may remain overshadowed by skepticism and market downgrades.
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