Sasol Trend Reversal? Debt Progress, Crude Oil Spike Lift JSE: SOL Share Price
After six weeks of relentless selling, Sasol (JSE: SOL) has staged an impressive turnaround, powered by rising crude oil prices...
Quick overview
- Sasol has rebounded over 21% following a sharp selloff, driven by rising crude oil prices and renewed investor confidence.
- Despite recent operational improvements, concerns remain about the company's long-term sustainability and debt management after a downgrade by Morgan Stanley.
- Sasol's financial health shows progress, with significant increases in EPS and free cash flow, but reliance on favorable market conditions raises caution.
- The company's future stability depends on maintaining operational efficiency and managing debt, as the dividend remains suspended.
After six weeks of relentless selling, Sasol (JSE: SOL) has staged an impressive turnaround, powered by rising crude oil prices and renewed investor confidence. The rebound follows a sharp selloff triggered by a Morgan Stanley downgrade that briefly erased optimism around the company’s improving balance sheet and operational recovery.
Market Reversal After a Steep Slide
Sasol’s shares have soared more than 21% from Tuesday’s lows, with a 17% gain on Thursday alone, signaling renewed buying interest. The rally came as oil prices surged following Donald Trump’s sanctions on Russian oil exports, which pushed WTI crude up over $5 despite an increase in OPEC output.
Adding further support, the U.S. administration’s plans to rebuild its Strategic Petroleum Reserve (SPR) have boosted expectations for stronger global oil demand — a tailwind that has directly benefited Sasol’s share price.
Analyst Downgrade Still Haunts Long-Term Outlook
Last week, Sasol shares fell 8.14% on Friday to close at R95, marking nearly 20% in monthly losses after Morgan Stanley cut its rating from Overweight to Equal Weight. The downgrade reflected concerns about operational sustainability and debt management, despite near-term improvements in free cash flow and cost efficiency.
Earlier in 2025, Sasol had been among the JSE’s best performers, doubling from R55 in April to R127 in September, but the rally stalled as oil prices softened and profit-taking accelerated. Now, with shares back above R110, the rebound signals a potential shift in sentiment — though sustained gains may depend on breaking above key resistance levels.
Technical Snapshot: Resistance in Play
Sasol’s long-term chart shows decade-long weakness, with moving averages repeatedly capping upside moves. But the price is climbing above them, breaking the 50-day SMA in August but buyers failed to break above the 100 weekly SMA (green) and the pride returned to the 50 SMA which held firm as support this week, fueling a sharp rebound that’s now testing the 100-week moving average again.
SOLJ Chart Weekly – The 50 SMA HAs Turned Into Support, Bullish Signal
That’s a positive sign for a trend reversal, A decisive breakout above the 100 weekly SMA and above R115 could confirm a trend reversal and pave the way for renewed bullish momentum. On the monthly chart below, buyers pushed the share price above the 20 SMA (gray) which has also turned into support.
SOLJ Chart Monthly – The Price Is Above the 20 SMA Now
Operational Update: Strong Q1 FY26 Performance
- Sasol’s Q1 FY26 Business Performance Metrics highlighted solid operational progress:
- Mining Division: Saleable production up 18% QoQ, supported by successful destoning plant ramp-up.
- Secunda Operations: Output up 4% QoQ and 9% YoY, showing improved reliability.
- International Chemicals: Revenue rose despite weaker U.S. chemical prices.
- Fuel Sales: Outperformed last year, driven by higher-margin mobility channel demand.
These improvements, the company said, translated into higher revenue and adjusted EBITDA than Q1 FY25, indicating steady recovery in underlying operations.
Financial Health: Improvement, But Still Fragile
For FY2025, Sasol reported significant financial progress:
- Headline EPS: Up 93% YoY to R35.13
- Free Cash Flow: Up 75% to R12.6 billion
- Net Debt: Down 13% to R64.96 billion
- Liquidity Boost: From a R4.3 billion Transnet settlement
However, turnover fell 9% to R249.1 billion, and EBITDA declined 14%, underscoring the company’s reliance on favorable market conditions rather than structural strength.
Strategy and Outlook: Stabilization Over Expansion
Management continues focusing on operational efficiency, emissions reduction, and project execution outlined in its Capital Markets Day 2025 roadmap.
But analysts caution that much of Sasol’s debt progress stems from non-recurring factors, such as working capital releases and settlements, which may not repeat.
The dividend remains suspended, as the company prioritizes debt reduction below $3 billion — a prudent move that disappointed income-focused investors.
Conclusion: Rebound with Caution
Sasol’s rally this week offers relief after weeks of decline, fueled by stronger oil prices and encouraging operational results. Yet, beneath the rebound lies a fragile balance — the company’s recovery hinges on sustained crude demand, disciplined cost control, and continued debt reduction.
Unless Sasol proves that its turnaround is rooted in fundamentals rather than short-term oil moves, the latest surge could end up being another temporary spike in a long and volatile recovery story.
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