Sasol Shares (JSE:SOL) Jump on Promising Operational Update

Sasol shares (JSE:SOL) experienced a significant surge on the Johannesburg Stock Exchange, climbing 15% following the release of a trading update that signaled substantial operational improvements within the company. The double-digit gain reflects growing confidence in Sasol's ability to overcome recent challenges and deliver on its financial targets.

The market responded positively to Sasol's reported progress in its Southern Africa operations. Key to this improvement is the successful ramp-up of the destoning plant. This has resulted in a reduction of average sinks to below 14% during the first quarter of the 2026 fiscal year. This improvement has allowed for the phased reopening of previously closed low coal quality sections, subsequently boosting coal production for the quarter.

Enhanced equipment availability at Secunda Operations also played a crucial role in achieving higher production levels. Natref and Sasolburg facilities further contributed to the positive results with improved operational performance. Fuels sales volumes experienced an uptick, with higher-margin mobility channels continuing to expand in line with the company's sales mix optimisation strategy.

While Chemicals Africa sales volumes remained consistent with the prior year and quarter, revenue experienced a decline due to lower sales prices amid persistent market softness. However, the International Chemicals business showed promise, with revenue increasing in Q1 FY26 compared to the previous quarter. This growth was attributed to self-help margin optimisation initiatives, supported by increased sales volumes in the US and stronger pricing in Eurasia, driven by robust Palm Kernel Oil (PKO) prices.

These gains partially offset lower average sales prices in the US, stemming from weaker Base Chemicals pricing and product mix. Revenue and adjusted EBITDA figures were significantly higher compared to Q1 FY25, reflecting improved unit margins and the continued execution of commercial and operational excellence initiatives.

Sasol reported that performance across all business segments remains within market guidance, and the company is making significant strides towards achieving its FY26 financial targets. The Southern Africa value chain breakeven oil price for Q1 FY26 is aligned with market guidance, falling within the range of US$55 – 60/bbl, supported by higher production volumes and disciplined cost and capital management. International Chemicals is on track to meet its adjusted EBITDA target of US$450 – 550 million.

Despite the positive operational momentum, Sasol acknowledges ongoing macroeconomic headwinds, including recent tariff changes, which are impacting financial performance. The company is actively assessing the potential impacts of these changes on its operations, supply chain, and pricing strategies, and is engaging with industry partners and policymakers to mitigate any adverse effects. Sasol remains focused on factors within its control and on executing its Capital Markets Day plans.

The recent share price increase follows a period of mixed sentiment. While Sasol reported a 93% year-over-year increase in headline earnings per share and a 75% rise in free cash flow to R12.6 billion, the company faced a downgrade from Morgan Stanley, which shifted its rating from Overweight to Equal Weight, citing concerns over long-term risks. This downgrade contributed to an 18% monthly retreat in share price at the time.

From a technical standpoint, Sasol's share price previously encountered resistance at the 100-week simple moving average in September, initiating a downward trend. However, the latest trading update and operational improvements have acted as a positive catalyst, fueling the current double-digit share price gain and reversing this downtrend.