Moody’s downgrades Sasol on weak chems, oil markets

LONDON (ICIS)–Moody’s has cut its rating for Sasol from stable to negative on the back of “continued operating performance deterioration” in the face of weak chemicals and oil markets, the agency said on Thursday.

The firm, which assesses the creditworthiness of company debt issuance, expects the South Africa-based major’s adjusted debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow from 2.2 times to 3.0.

“The weak performance of Sasol’s chemical business during the last 18 months has been characterized by falling prices, subdued demand, and continued capacity growth,” Moody’s said in a ratings note.

“This has resulted in high levels of asset impairments as well as continued margin deterioration.”

Sasol recently set out a performance programme to improve operational performance, with its chemicals business substantially underperforming peers over the last few years.

“Performance over the last four years has not lived up to our own expectations,” said Sasol CEO Simon Baloyi, speaking earlier this month.

Earlier this year, the company booked a South African Rand (R) 58.9 billion ($3.3 billion) impairment on its chemicals Americas ethane value chain as a result of softer market conditions, as well as R5.3 billion on its Africa polyethylene chlor-alkali and polyvinyl chain and R7.8 billion on its Secunda, South Africa, liquid fuels refinery.

The company has also set out plans to mothball or close four units across its US and European operations by the end of the calendar year 2025, due in most cases to high costs and little expectation of a substantial market recovery.

Moody’s projects that Sasol’s EBITDA margin will fall to 20% in 2025 and 2026, compared to 22.5% in 2024 and 25% in 2023.

“Sustained low oil prices will result in challenges in Sasol’s fuels business, however, the company’s hedging program will partly mitigate the downside risk,” Moody’s said.

Sasol had not responded to requests for comment at the time of publication.

Thumbnai; photo: Sasol’s headquarters in Sandton, South Africa (Source: Shutterstock)