Sasol shares gain as coal feedstock strength boosts margins

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Sasol shares coal margin boost

Highlights

Sasol benefits from Brent crude price rising to about $114 per barrel from below $60 since early 2025, significantly boosting earnings and cash flow.
Sasol cut external coal purchases by 12% for the year to June 2026 and by 33% quarter-on-quarter in Q1 2027, aided by higher own production and new de-stoning plant commissioning.
Fuel sales accounted for R116.3 billion of R124.2 billion total revenue in 2026, with Q1 liquid fuels volumes up due to customer buying shifts and inventory drawdowns.

Coal operations deepen the earnings uplift

As reported by Moneyweb, investors largely link Sasol’s rally to higher crude prices, with Brent crude rising to about $114 per barrel from below $60 at the start of 2025 after the U.S. attack on Iran at the end of February. That supports Sasol’s earnings and cash flow, but analysts say the company’s coal-based operating model is also playing a major role in the scale of the rebound.

Because Sasol uses coal as feedstock rather than imported crude oil in its fuel production process, the gap between coal and oil price moves is improving profitability. Coal prices have risen by about 50% since the start of the Middle East war, compared with roughly 90% for oil, while Sasol also owns its own coal mines, limiting its effective input cost to production costs rather than market prices.

In annual results for the year to end June 2026, Sasol says it cut purchases from third-party coal mines by 12%, helped by higher own production and the rerouting of volumes previously sold externally into internal operations. The company also says a new de-stoning plant, which reached beneficial operation in December 2025 within schedule and cost guidance, improved coal quality and helped reduce external coal purchases.

That trend continues into the new financial year. In its production update for the quarter to end September, Sasol says saleable coal production in the first quarter of financial 2027 rises 15% from the previous quarter and 18% from the first quarter of financial 2026, while external coal purchases fall 33% quarter on quarter and 48% year on year.

Higher fuel margins support market re-rating

Sasol’s financial statements underline the importance of its synthetic fuels platform to group performance. In the 2026 financial year, most fuel production comes from Secunda synfuels operations, and fuel sales account for nearly 94% of total revenue, contributing R116.3 billion out of R124.2 billion.

Liquid fuels sales volumes also increase in the first quarter, mainly due to changes in customer buying behaviour and the planned drawdown of inventory built at the end of the previous financial year. That leaves Sasol well positioned to benefit as long as oil prices remain elevated.

Abdul Davids, head of SA research at Camissa Asset Management, says the Brent oil price is a key driver of Sasol’s earnings and cash flow, while Craig Pheiffer, chief investment strategist at Otto1890, says the share move reflects a "perfect alignment" of higher fuel margins, stronger coal production, and firmer gas and chemicals prices. With oil remaining above $100 per barrel and no near-term catalyst for a sharp decline identified by analysts, Sasol continues to benefit from expanded margins across its fuels business.

In our earlier article on the conflict-driven surge in oil shipping costs, we explained how attacks and rerouting risks around key corridors such as the Strait of Hormuz and the Red Sea have pushed tanker and insurance rates sharply higher, making freight a much larger component of the delivered oil price. We also noted that these added transport costs can filter through into pump prices and broader consumer inflation, hitting import-dependent markets and squeezing refiners while boosting tanker owners’ earnings.

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