Cracking value

Research evidence excerpt

Cracking value

IdeaMlower differential assumptions (even at relatively low valuations). For reference, we

have modelled a historical long-term real petrol/diesel product differential of $15/

bbl; over the June 2026 half (2HFY26 for Sasol), we estimate a blended white

product differential of $38/bbl for Natref – much depends on the duration for which

margins remain elevated. At 30 June 2025, Sasol reflected an attributable (64%)

~R4.4bn of liabilities relating to intercompany shareholder loans (majority) and

rehab liabilities (minority). We think the size of the ultimate environmental rehab

liability will be a further key factor in valuation.

Background. Natref (National Petroleum Refiners of South Africa) is South Africa's

only inland crude oil refinery, with a nameplate capacity of 108kbpd. Sasol holds a

63.64% interest and Prax Group 36.36%. Natref is critical to South Africa's fuel

security, supplying ~10-15% of the domestic fuels market and playing a key role in

supplying jet fuel to OR Tambo International Airport. In 2022, Sasol announced that

it had identified a creative, low-cost solution to comply with South Africa's Clean

Fuels 2 regulations, which come into effect on 1 July 2027. This involved an

optimisation of equipment, catalysts and crude feedstock, coupled with the

installation of 3 new low-carbon boilers. The plan also included a bio-feedstock

component – in 3QFY26, Natref also became the first refinery in Africa to attain

ISCC PLUS certification for Sustainable Aviation Fuel (SAF) and Renewable Diesel

produced through co-processing used cooking and vegetable oil feedstocks. Sasol

notes that, with no or low capital investment, up to 15% of Natref's capacity could

be deployed to produce HEFA fuels.