Credit ratings agency Moody’s Ratings has revised Sasol’s outlook to negative from stable, citing continued deterioration in the group’s operating performance due to weak demand dynamics in the chemicals market and low oil prices.
The SA chemicals and energy company faces increased financial pressure, with Moody’s warning that these challenges could weigh on its credit metrics over the next two years.
“Moody’s has today [Friday] changed the outlook on Sasol and Sasol Financing US to negative from stable,” it said in a statement. “Concurrently, we have affirmed Sasol’s Ba1 long-term corporate family rating (CFR), Ba1-PD probability of default rating, NP short-term issuer rating, P-1.za national scale rating short-term issuer rating, the Aaa.za long term NSR CFR and Ba1 on all backed senior unsecured instrument ratings issued by Sasol Financing USA LLC.”
The downgrade in outlook comes as Sasol faces challenges in the market environment. Weak demand for chemicals and low oil prices have resulted in falling prices and subdued demand, leading to high levels of asset impairments and margin deterioration.
According to Moody’s, the margin on Sasol’s earnings before interest, taxes, depreciation and amortisation (ebitda) is expected to weaken further to about 20% in 2025 and 2026, down from 22.5% in the 12 months to December 2024.
Sasol’s financial struggles are expected to lead to increased debt levels, with Moody’s projecting the company’s leverage ratio to rise to about 3 times by 2025-26, up from 2.2 times in 2024.
Moody’s said the recent implementation of US tariffs was unlikely to directly affect Sasol due to its limited exports to the US, though “they present indirect risks, such as a potential slowdown in GDP growth and weakened consumer confidence”.
“Weaker economic growth will maintain the negative pressure on the chemicals industry with low demand. Sustained low oil prices will result in challenges in Sasol’s fuels business, however, the company’s hedging programme will partly mitigate the downside risk,” it said.
The global oil price decline has been driven by a combination of oversupply from major producers, slower demand growth amid economic uncertainties, and ongoing geopolitical tensions affecting market stability.
In response to these pressures, part of Sasol’s new strategy targets a nominal break-even crude oil price of $50 a barrel and aims to produce more than 7.4-million tonnes at its Secunda operations by 2028.
Sasol’s liquidity position remains sound, with available cash balances and bank facilities sufficient to offset forecasted negative free cash flow generation and debt repayments, Moody’s said.
The company has also committed to suspending dividend payments until net debt falls below $3bn, a strategy intended to strengthen the company’s balance sheet over the medium term.
Despite the negative outlook, Moody’s affirmed Sasol’s Ba1 long-term corporate family rating, citing the company’s strong domestic market position in SA’s liquid fuels and chemicals sectors, its integrated business model supported by proprietary technology, and prudent financial management.
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