Sasol has a rule about when it pays its owners, and this year the rule said no again. The company earned more, sold more, cut its debt and watched its share price rise 83%, and the board still declared no final dividend.
The policy is specific rather than vague. Sasol hands back 30% of the cash left over once the business has paid for itself, but only once net debt sits sustainably below $3 billion. Net debt fell 11% over the year, comfortably beating the company's own target. It finished at $3.3 billion, which is $300 million short of the number that opens the tap.
What a war does to a coal-to-liquids plant
Sasol makes fuel and chemicals out of coal and gas rather than crude, which is an unusual position when oil goes up: the cost of its raw material barely moves while the price of what it sells does. Its Southern African operation needed Brent at $49 a barrel to break even last year. Brent averaged $79.47. Refining margins at Natref, the crude refinery it part-owns, went from $5.76 a barrel to $25.10.
Adjusted operating earnings rose 17%, to R61 billion, on turnover of R272 billion. Secunda, which turns coal into liquid fuel at up to 160,000 barrels a day, had its best year in five, helped by a destoning plant that cleans up the coal going in. Cash fixed costs stayed flat at R70 billion for a third year running.
The cash that did not follow the earnings
Free cash flow went the other way. It fell 5%, to R11.9 billion, in a year when earnings rose. The same Middle East pricing that lifted those earnings also lifted the value of the fuel sitting in Sasol's tanks, and working capital ran at 18.3% of turnover against the 15.5% to 16.5% the company guides to.
Last year's figure also had help that did not repeat. A once-off Transnet settlement put R3.1 billion after tax into the prior year's cash flow. Take it out of both years and free cash flow improved 26%.
The result still carried R16.8 billion of write-downs, R7.7 billion of it against the Secunda liquid fuels refinery, which stays fully impaired on Sasol's books even while it runs at its best rate in five years. Chief executive Simon Baloyi called the year a decisive one of delivery against the commitments set at the company's capital markets day.
Sasol wants net debt lower again in 2027 and has set itself a breakeven oil price of $50 a barrel by 2028. The dividend waits on the same number it waited on this year.
