How does Sasol make money?

Sasol primarily generates its earnings from its energy businesses, with a significant majority stemming from the production and sale of synthetic fuels in South Africa.

Sasol's Core Revenue Streams

Sasol's financial fortunes are largely determined by its operations in the energy sector. More than 90% of the company's earnings originate from its South African energy businesses, with synthetic fuels being the main driver. This involves processes such as coal-to-liquids (CTL), where coal is converted into valuable liquid fuels like petrol and diesel, alongside other chemical products.

Despite substantial investment over decades into diversification efforts and the establishment of advanced chemical plants, Sasol's profitability remains heavily tied to these core energy operations.

Dependence on Key Market Factors

The profitability of Sasol's energy businesses, and consequently its overall earnings, is significantly influenced by external market forces. Two critical factors that determine its financial performance are:

• Oil prices: As a major producer of synthetic fuels, Sasol's revenue is highly sensitive to global crude oil prices. Higher oil prices generally lead to increased profitability for its fuel products.
• Exchange rates: Fluctuations in exchange rates, particularly between the South African Rand and major international currencies like the US Dollar, also play a crucial role. This impacts the cost of raw materials and the value of international sales.

The Dominance of South African Energy Operations

Even with strategic expansion into chemicals and international ventures, the foundational strength of Sasol's earnings continues to be rooted in its domestic energy production. This long-standing reliance on the South African synthetic fuels market underscores its business model.

Key Revenue Determinants Summary

To summarize the primary factors influencing Sasol's earnings: