Petrochemicals giant Sasol, which averted another storm by holding its 45th annual general meeting (AGM) virtually on Friday, told shareholders it will “relook” its emissions reduction roadmap due to a shortage of gas resources.
The group said it remained committed to its carbon emissions target, amid shareholder pushback over concerns about the pace at which the company is delivering on its climate change commitments.
Sasol CEO and president Simon Baloyi said the petrochemical giant was hard at work defining how it would look going forward, and the group would share more details at its Capital Markets Day in May 2025.
“We will make sure we strengthen this foundation [that] can allow us to create long-term shareholder value,” he said.
However, some of the minority shareholders were not convinced about the group’s carbon emissions plan. Speaking at the AGM, Tracey Davies, executive director of environmental advocacy group Just Share, asked the board whether the group’s commitment, set in 2021, to a 30% reduction in emissions by 2030 — and a net zero target by 2050 — were achievable.
“Did you genuinely think that they were achievable or were you being overly optimistic in an effort to appease shareholders and climate activists?”
Responding, Baloyi said the group would “relook” its emission reduction roadmap due to depleting gas reserves.
“When we set the [2021] target, were we overly ambitious? We did indicate ... the prevailing conditions of the market at that time. As you know, gas was one of those big components that you needed, and we did indicate that was not viable anymore. We have to relook our emission reduction roadmap to make sure we optimise it because we do not have gas, so we have to optimise that,” he said.
Davies told Business Times after the AGM that the potential problems with gas were apparent when the company released its 2021 emissions target. “It is disingenuous to state that there has been a material change in circumstances which warrants a ‘relook’.”
She said what Baloyi did not seem to realise was that his answer to this question contradicted Sasol’s repeated assertion that it is committed to its 30% emission reduction target by 2030.
“If some of the options for decarbonisation that it originally relied on are no longer available (for example, gas), and the company has not put any other options on the table as an alternative, then it seems obvious that the target is not feasible in current circumstances,” she said.
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Sasol sources offshore gas from the Pande-Temane region in Mozambique through a pipeline connecting the two countries.
However, according to their projections, these LNG deposits will run out in 2027. The group’s exploration efforts to find other sources of LNG have been unsuccessful, and importing it from elsewhere in the world at current prices is proving to be expensive.
Sasol said gas in the south of Mozambique is tapering and to close this gap, and in response to South Africa’s energy needs, it is investigating the potential for future LNG supply.
If some of the options for decarbonisation that it originally relied on are no longer available (for example, gas), and the company has not put any other options on the table as an alternative, then it seems obvious that the target is not feasible in current circumstances.
Baloyi said renewable energy is a key building block to cutting the group’s greenhouse gas emissions and Sasol was one of the largest private procurers of renewable energy in South Africa.
He said the group has signed renewable energy power purchase agreements of just over 750MW. The 69MW Msenge onshore wind project had reached commercial operation, and power had begun to flow into the group’s operations.
Davies also told the AGM that the group’s emissions had increased over the past two years, and were expected to increase again this year.
However, Sarushen Pillay, Sasol’s executive vice president for business building, strategy and technology, told the AGM the emissions were heavily related to production volumes over the past two years, and Sasol now had lower production volumes than where it would like to be.
“In this current financial year, we are striving for a higher production level. We do expect if we achieve those production volumes a slight increase in our emissions.”
Sasol had already started to see renewables coming online. “As the renewables start feeding into our facilities, we expect to see further reduction. You can start seeing that reflected from next year,” Pillay said.
Davies said the company hoped to increase production in the coming year, which would increase emissions. “It is very concerning that even when production levels have been low, the company has been unable to reduce emissions,” she said.
Mehluli Mncube, the principal consultant at ESG Insight SA, asked the board how it planned to address shareholder concerns regarding the pace and effectiveness of its decarbonisation efforts.
Sasol board chairperson Muriel Dube said the company had a decarbonisation roadmap and was tracking its implementation. “Sasol’s pace is in step with the country and available mitigation measures. We are accelerating renewable energy deployment and energy efficiency. Our roadmap is back-end loaded, with step change reductions expected towards the end of the decade,” she said.
After Eskom, Sasol is the second-biggest emitter of greenhouse gas in the country, mostly from its plant in Secunda, which converts coal into liquid fuels and chemicals.
In the 2024 financial year, Sasol generated a turnover of R275bn, 5% less than the prior year. Its gross margin grew from 44% to 46%, underscoring efforts to reduce the cost of sale.
Cash fixed costs increased 1% below inflation, reflecting cost containment initiatives. Adjusted ebitda was R60bn, 9% lower than 2023. The group reported a R27bn loss before interest and tax due mainly to increased asset impairments.
Mncube described the R27.3bn and significant impairments as “appalling to say the least” and asked how the board was addressing these financial challenges, particularly improving cash flow generation and reducing net debt to below the $4bn threshold.
Walt Bruns, chief financial officer, said Sasol was disappointed with the performance and the loss incurred in the 2024 financial year, and acknowledged the need to drive cash flow generation.
“We have a lot of spare capacity in a number of our plants that we can sell out, so we have this latent potential within our units. We will reduce our cost base, predominantly around the external spend, where we spend significantly on items within our procurement space.”
He said the group’s asset optimisation plan would focus on either turning around or selling non-performing assets.
“We will continue to look at assets that are nonperforming and make some decisions with regards to those assets, and in so doing we will lift the free cashflow generation in our business and use that free cashflow in line with our capital allocation framework to pay a dividend to shareholders, at least equal to 30% of that. Then we can make decisions to further reduce our net debt, allocating more to shareholders and/or potentially looking at some growth capital we might pursue,” Bruns said.
Sasol chose to conduct a virtual AGM on Friday; a physical meeting at its headquarters ended abruptly last time when it was disrupted by environmental activists.
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