Petrochemical major Sasol’s market value has gained about R2.5bn a day since the outbreak of the war in the Middle East, which has pushed oil prices sharply higher and weakened the rand, creating fertile ground for further gains in the company’s shares.
Sasol, which has added R56.3bn to its JSE market capitalisation since February 27, is now valued at more than R136bn.
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The group’s stock has doubled since the beginning of the year, with most of the increase occurring in the past three weeks.
Sasol has been an outlier on the JSE, which is down about 10% since the US launched the first missiles at Iran, sparking a regional war. The petrochemicals group generates significant revenue in hard currency from its global operations, whose products are primarily priced in dollars. The effect is that a weaker rand boosts the group’s rand-denominated earnings while a stronger rand can lower earnings despite strong sales volumes.
The rand has weakened since the start of the Iran war and was more than 1.5% weaker at R17.13/$ on Friday.
The increase in the oil price has also boosted Sasol. Crude prices topped $112 a barrel on Friday after Iraq declared force majeure at all oilfields operated by foreign companies. Oil prices have risen more than 40% since the war.
The shift in Sasol’s fortunes marks a stunning turnaround in sentiment from earlier in the year. JPMorgan in January downgraded the group from neutral to underweight.
One of the concerns the US financial services firm had raised was the strengthening rand at the time, saying it would be a growing headwind for earnings given the group’s substantial exposure to foreign-currency revenues.
Morgan Stanley downgraded Sasol from overweight to equal weight in September last year while Bank of America Securities cut its rating to neutral from buy.
Credit ratings agency Moody’s also revised Sasol’s outlook to negative from stable last year, citing continued deterioration in the group’s operating performance due to weak demand in the chemicals market and low oil prices.
S&P Global Ratings revised its outlook on Sasol from stable to negative in October, reflecting its expectation that the group’s core earnings and credit metrics would remain weak in financial years 2026 and 2027 due to persistently low oil and chemicals prices.
Sasol last month reported lower earnings for the six months to end-December as weaker oil and chemical prices and impairment charges weighed on profitability.
However, strict cost controls and lower capital spending helped the group generate free cash flow for the first time in four years. The surge in the oil price and a weaker rand are likely to boost second-half earnings.
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