Sasol Integrated Report 2024 - Book - Page 16
INTRODUCTION
STRATEGIC OVERVIEW
ABOUT SASOL
BUSINESSES
ESG
DATA AND ASSURANCE / ADMINISTRATION
REMUNERATION REPORT
OPERATING REALITY continued
PROFIT
DRIVER: Economic growth
DRIVER: Crude oil price
Global growth has been steady, and inflation continued to decrease in the past financial year. We expect
these trends to continue in the coming year even as ongoing geopolitical tensions and election outcomes,
particularly in the United States, still cloud the global economic outlook. In South Africa, long-standing
structural constraints, including unreliable electricity supply and transport bottlenecks, continue to weigh
on growth. Although there are early positive signs of an improvement in electricity supply, it will likely take
some time before most structural growth constraints are lifted. Consequently, South Africa’s near-term
growth outlook remains weak, and business conditions will likely remain challenging.
Subdued global demand conditions combined with OPEC supply management activities contributed
to an almost 3% decline in the average Brent crude oil price between FY23 and FY24. It is expected
that continuing restrained demand growth and non-OPEC supply gains could overwhelm OPEC supply
management, resulting in a further decline in the oil price. Refining margins remained healthy during
FY24, supported by constrained refining capacity. However, it is expected that new refinery start-ups,
combined with modest demand growth, will lead to downward pressure on margins in FY25.
In managing our business, we apply scenario analysis and robustness testing to mitigate the
impact of external economic and market developments over which we have no control.
6,5
World and South African GDP growth (%)
(2)
18
19
20
21
22
23
18
24*
19
Source: S&P Global
South Africa
20
21
22
23
Year
Source: IMF, StatsSA, SARB, *Sasol forecast
DRIVER: Exchange rate
DRIVER: Chemicals
The weak economic conditions in South Africa, generalised US dollar strength and domestic election
outcome uncertainties contributed to depreciation pressures on the rand exchange rate and led
to periods of elevated volatility. Overall, the rand lost about 5% of its value against the US dollar.
The easing of some domestic risks could lead to a modest appreciation of the exchange rate in the
coming months, but volatility is likely to remain elevated.
Global chemical demand growth has not kept pace
with significant capacity additions and was lower
than expected in FY24, which has contributed to
weak chemical margins. Over the short to medium
term, further capacity additions and modest
demand growth will likely result in ongoing
pressure on commodity chemical prices and
margins.
Risks related to exchange rate volatility and cash flow management are mitigated to an extent
through derivative financial instruments and engaging in hedging activities.
17,8
20
14
15,2
15,4
15,7
14,2
12,9
R/US$
18
18,7
Average exchange rate (R/US$)
16
We manage our business with a clear
understanding of global product supply/
demand imbalances and hence we develop
a robust portfolio by considering mitigation
strategies such as leveraging our global sales
footprint, supplying our wide portfolio of
products across various end-use applications,
developing sales into higher margin
differentiated markets and applying commercial
excellence principles in serving our customers.
12
18
19
Source: Reuters
84,7
87,3
40
Year
World
92,1
50
-6,2
(8)
68,6
60
-2,7
(4)
(6)
70
51,2
0
63,6
R/US$
80
54,2
3,2
90
0,9
3,3
3,5
5,0
2,8
1,9
0,7
2
Average Brent crude oil price (US$/bbl))
100
0,3
4
1,6
% year-over-year
6
3,6
8
Similar to the exchange rate, downside oil price risks are managed to an extent through derivative
financial instruments and hedging activities. However, these do not protect against differing
correlations between oil and ethane and chemicals and petroleum products.
20
21
22
23
24
Year
SASOL INTEGRATED REPORT 2024
14
24
