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Aeci Limited - 1997 Audited Results

Release Date: 06/03/1998 14:39:12      Code(s): AFE AED5AFEP
AECI LIMITED
(REGISTRATION NUMBER 04/02590/06)
1997 AUDITED RESULTS
FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE AUDITED FINANCIAL RESULTS OF THE GROUP FOR THE YEAR
ENDED 31 DECEMBER 1997 AS FOLLOWS:
                                             1997           1996        %
                                                 R MILLIONS        CHANGE
TURNOVER            (1)                     8 275          7 536       10
NET TRADING PROFIT                          671            741         (9)
FINANCING COSTS                             145            242
NET PROFIT BEFORE ABNORMAL ITEMS            526            499         5
ABNORMAL ITEMS                              2              (118)
                                            528            381
TAXATION                                    120            33
NORMAL ACTIVITIES                           137            151
ABNORMAL ITEMS                              (17)           (118)
                                            408            348
INVESTMENT INCOME                           9              104
NET PROFIT                                  417            452         (8)
ATTRIBUTABLE TO PREFERENCE AND
OUTSIDE SHAREHOLDERS                        36             25
NET PROFIT ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS                                381            427         (11)
ORDINARY DIVIDENDS                          139            139
RETAINED PROFIT FOR THE YEAR                242            288         (16)
EARNINGS PER ORDINARY SHARE (CENTS)         246            276
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS)                      237            276         (14)
DIVIDENDS PER ORDINARY SHARE (CENTS)        90             90
NUMBER OF ORDINARY SHARES
IN ISSUE (MILLIONS)                         155            155
(1) INCLUDES EXPORTS OF R1 533 MILLION (1996: R1 453 MILLION).
HEADLINE EARNINGS
NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS                       381            427
NET GAIN FROM DISPOSAL
OF INVESTMENTS                              (20)           (210)
GAIN ARISING FROM RESTRUCTURING             (57)           (21)
COSTS RELATED TO RESTRUCTURING              55             103
PROVISION FOR POST-EMPLOYMENT
MEDICAL AID BENEFITS                        20             206
PROVISION FOR ENVIRONMENTAL
REMEDIATION                                 -              40
TAX EFFECT AND MINORITIES' SHARE OF
ABNORMAL ITEMS                             (13)            (118)
HEADLINE EARNINGS                          366             427
ABRIDGED BALANCE SHEET
                                           1997            1996
                                                 R MILLIONS
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST            3 107           2 870
MINORITIES' INTEREST                       139             102
SHAREHOLDERS' INTEREST                     3 246           2 972
DEFERRED TAXATION                          66              98
NET BORROWINGS                             662             409
                                           3 974           3 479
EMPLOYMENT OF CAPITAL
FIXED ASSETS                               2 886           2 633
INVESTMENTS                                116             135
CURRENT ASSETS                             2 931           2 782
TOTAL ASSETS                               5 933           5 550
NON INTEREST BEARING LIABILITIES           1 720           1 816
LONG-TERM PROVISIONS                       239             255
                                           3 974           3 479
GEARING %                                  20              14
CURRENT ASSETS TO CURRENT
LIABILITIES                                1,3             1,3
NET ASSET VALUE PER ORDINARY
SHARE (CENTS)                              2 009           1 856
NET CAPITAL EXPENDITURE
(R MILLIONS)                               463             369
DEPRECIATION (R MILLIONS)                  265             235
ABRIDGED CASH FLOW STATEMENT
                                           1997            1996
                                                 R MILLIONS
CASH GENERATED BY OPERATIONS               937             962
INVESTMENT INCOME                          20              52
FINANCING COSTS                            (145)           (242)
TAXES PAID                                 (132)           (145)
CHANGE IN WORKING CAPITAL                  (223)           1
EXPENDITURE RELATING TO PROVISIONS         (166)           63
EXPENDITURE RELATING TO
ABNORMAL ITEMS                             (5)             (46)
CASH AVAILABLE FROM
OPERATING ACTIVITIES                       286             645
DIVIDENDS PAID                             (153)           (135)
CASH RETAINED FROM
OPERATING ACTIVITIES                       133             510
CASH UTILISED IN INVESTING
ACTIVITIES                                 (560)           (386)
PROCEEDS FROM DISINVESTMENT
AND RESTRUCTURING                          204             894
NET CASH GENERATED (UTILISED)              (223)           1 018
CASH EFFECTS OF FINANCING ACTIVITIES       (16)            (712)
INCREASE (DECREASE) IN LIQUID FUNDS        (239)           306
INDUSTRY SEGMENT ANALYSIS
                              TURNOVER     TRADING PROFIT       ASSETS
                            1997    1996    1997    1996      1997    1996
                             R MILLIONS      R MILLIONS       R MILLIONS
AGRICULTURAL PRODUCTS AND
INDUSTRIAL CHEMICALS        2 257   2 178   67      234       815     514
COATINGS                    720     678     30      16        280     263
FIBRES                      1 230   1 144   111     65        511     543
MINING SOLUTIONS            528     457     66      63        198     159
MONOMERS, POLYMERS AND
RELATED PRODUCTS            1 543   1 357   370     328       992     909
OTHER BUSINESSES            571     546     11      9         317     352
SPECIALITY CHEMICALS        1 371   1 072   126     105       440     327
PROPERTY AND SITE SERVICES  435     376     (1)     18        741     727
CORPORATE RESEARCH                          (58)    (46)      42      45
INTERGROUP/CORPORATE        (380)   (272)   (51)*   (51)      (11)    (25)
                            8 275   7 536   671     741       4 325   3 814
*CONSISTS OF COMMUNITY RESPONSIBILITY R21 MILLION (1996: R20 MILLION) AND GROUP
SUPPORT R30 MILLION (1996: R31 MILLION).
ASSETS CONSIST OF NET FIXED ASSETS, STOCKS, ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE.
COMMENT
THE INTERIM REPORT DATED 1 AUGUST 1997 ADVISED THAT PROSPECTS FOR THE BALANCE
OF THE YEAR HAD BEEN IMPAIRED BY A SLOWDOWN IN THE DOMESTIC ECONOMY AND
PREVAILING WEAKNESS IN GLOBAL MARKETS FOR NITROGEN FERTILIZERS. NONETHELESS, IT
WAS THE BOARD'S VIEW AT THE TIME THAT, PROVIDED INTEREST RATES WERE SOON
ALLOWED TO REFLECT THE LOWER LEVELS OF ECONOMIC ACTIVITY AND GIVEN REASONABLE
AGRICULTURAL CONDITIONS, THE GROUP REMAINED WELL POSITIONED TO ACHIEVE REAL
GROWTH IN EARNINGS FOR THE YEAR.
IN AN ANNOUNCEMENT TO SHAREHOLDERS ON 1 OCTOBER 1997, IT WAS REPORTED THAT
DOMESTIC ECONOMIC ACTIVITY HAD CONTINUED TO WEAKEN AND THAT THE PERFORMANCE OF
KYNOCH LIMITED WAS LIKELY TO BE SUBSTANTIALLY BELOW THAT ACHIEVED IN 1996. THE
BOARD EXPRESSED THE VIEW THAT EARNINGS FOR THE YEAR WERE UNLIKELY TO MATCH THE
LEVEL ACHIEVED IN 1996.
IN THE EVENT, THE RESULTS OF KYNOCH LIMITED WERE WORSE THAN EXPECTED WITH
TRADING PROFIT IN THE NITROGEN BUSINESS R187 MILLION LOWER THAN IN 1996. OF
THIS DECLINE, R110 MILLION WAS ATTRIBUTABLE TO LOSS OF MARGIN CONSEQUENT UPON
THE UNEXPECTED COLLAPSE IN INTERNATIONAL NITROGEN, AND PARTICULARLY UREA,
PRICES. THE PROTRACTED BIENNIAL MAINTENANCE SHUTDOWN OF THE AMMONIA AND UREA
PLANTS AT MODDERFONTEIN, TOGETHER WITH THE LOSS OF THREE WEEKS' PRODUCTION ON
THE MAIN NITRIC ACID PLANT FOLLOWING A PIPE RUPTURE, ACCOUNTED FOR THE BALANCE
OF R77 MILLION. SINCE THE SHUTDOWN, PRODUCTION OF AMMONIA AND UREA HAS BEEN AT
A CONSISTENTLY HIGH RATE.
EXCLUDING NITROGEN, GROUP BUSINESSES ACHIEVED AN INCREASE OF R117 MILLION OR
23% IN AGGREGATE TRADING PROFIT WITH DULUX AND SANS FIBRES RECORDING
PARTICULARLY NOTEWORTHY GAINS AND POLIFIN CONTRIBUTING A COMMENDABLE
IMPROVEMENT OF 13%. THIS WAS A PLEASING RESULT IN THE CONTEXT OF A WEAKENING
DOMESTIC ECONOMY. REALISATIONS OF LAND SURPLUS TO OPERATING REQUIREMENTS WERE
DISAPPOINTING, HOWEVER, WITH GAINS OVER REVALUED BOOK VALUE OF R5 MILLION
COMPARED TO R26 MILLION IN 1996.
AGAINST THE BACKGROUND OF A RAPIDLY CHANGING GLOBAL CHEMICAL INDUSTRY, FURTHER
INITIATIVES TO RATIONALISE AND FOCUS THE GROUP'S PORTFOLIO OF BUSINESSES WILL
CONTINUE TO BE PURSUED AGGRESSIVELY. IN 1997 AECI'S 50% INTEREST IN ANIKEM
(PTY) LIMITED, A LONG-STANDING JOINT VENTURE WITH NALCO CHEMICAL COMPANY OF THE
USA IN THE FIELD OF SPECIALITY WATER TREATMENT, WAS ACQUIRED BY CHEMICAL
SERVICES LIMITED WHICH IS SEEN AS THE PREFERRED PARENT FOR MORE
SERVICE-INTENSIVE, SPECIALITY BUSINESSES. CONSOLIDATION OF THE GROUP'S
INTERESTS IN THIS FIELD IN THE COMPANY NALCO-CHEMSERVE WILL ENABLE THE GROWTH
POTENTIAL OF THE BUSINESS TO BE REALISED MORE FULLY.
IN SIMILAR VEIN, THE DECISION BY CHEMICAL SERVICES TO ENTER THE FIELD OF
AGROCHEMICAL FORMULATION THROUGH THE ACQUISITION OF APPLIED CHEMICAL PRODUCTS
PROVIDED AN OPPORTUNITY TO CONSOLIDATE GROUP INTERESTS IN THIS AREA BY DISPOSAL
OF KYNOCH AGROCHEMICALS (PTY) LIMITED TO CHEMICAL SERVICES. A CONSEQUENCE OF
CHEMSERVE'S ACQUISITION OF APPLIED CHEMICAL PRODUCTS HAS BEEN A REDUCTION IN
AECI'S EQUITY INTEREST IN CHEMICAL SERVICES TO 61%.
THE DECISION BY ICI OF THE UK TO WITHDRAW FROM THE EXPLOSIVES BUSINESS GLOBALLY
ENABLED THE GROUP TO SECURE ITS POSITION IN THE AFRICAN EXPLOSIVES MARKET BY
PURCHASING ICI'S 51% INTEREST IN THE AECI EXPLOSIVES PARTNERSHIP. THE EFFECTIVE
DATE OF THE TRANSACTION WAS 1 JANUARY 1998. WITH MANUFACTURING SITES IN GHANA
AND ZAMBIA, THE EXPLOSIVES BUSINESS IS WELL POSITIONED TO BENEFIT FROM THE
EXPECTED EXPANSION IN MINING OF LARGELY UNDERDEVELOPED MINERAL RESOURCES IN
AFRICA. DISCUSSIONS WITH POTENTIAL TECHNOLOGY AND JOINT VENTURE PARTNERS HAVE
BEEN INITIATED.
RESTRUCTURING COSTS ASSOCIATED WITH THE ABOVE TRANSACTIONS HAVE BEEN SET OFF
AGAINST THE GAINS REALISED THEREFROM AND INCLUDED AS ABNORMAL ITEMS TOGETHER
WITH AN INCREASE IN THE PROVISION FOR POST-EMPLOYMENT MEDICAL LIABILITIES AND
THE GAIN ARISING FROM DISPOSAL OF THE GROUP'S INTEREST IN EDS AFRICA.
THE REDUCTION IN FINANCING COSTS AND INVESTMENT INCOME REFLECTS THE REALISATION
OF THE GROUP'S INVESTMENT IN AFEX HOLDINGS (PTY) LIMITED DURING OCTOBER 1996.
RESULTS FOR 1996 HAVE BEEN RESTATED TO REFLECT THE CONSOLIDATION OF FOREIGN
SUBSIDIARIES OTHER THAN IN ZIMBABWE.
HEADLINE EARNINGS PER ORDINARY SHARE DECLINED BY 14% TO 237 CENTS. THE BOARD
DECIDED TO DECLARE A FINAL DIVIDEND OF 62,5 CENTS PER SHARE, THEREBY
MAINTAINING THE TOTAL DISTRIBUTION FOR THE YEAR AT 90 CENTS PER SHARE. DIVIDEND
COVER REDUCED TO 2,6 TIMES.
WHILE THE CONSEQUENCES OF RECENT TURMOIL IN ASIAN MARKETS AND THE OUTLOOK FOR
INTERNATIONAL NITROGEN PRICES REMAIN KEY UNCERTAINTIES IN THE YEAR AHEAD,
FURTHER GAINS IN MOST BUSINESSES SHOULD ENABLE THE GROUP TO ACHIEVE MODERATE
REAL GROWTH IN EARNINGS IN 1998.
L BOYD      CHAIRMAN
M P SMITH   MANAGING DIRECTOR                            6 MARCH 1998
DECLARATION OF ORDINARY DIVIDEND NO. 127
NOTICE IS HEREBY GIVEN THAT A FINAL DIVIDEND OF 62,5 CENTS PER SHARE, IN
RESPECT OF THE YEAR ENDED 31 DECEMBER 1997, HAS BEEN DECLARED TO HOLDERS OF
ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS
ON 27 MARCH 1998.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 28 APRIL 1998. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS TO
APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 27 MARCH 1998. THE
TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 28 MARCH TO 9 APRIL
1998, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD                                  6 MARCH 1998
MJF POTGIETER
SECRETARY
TRANSFER SECRETARIES:
CONSOLIDATED SHARE REGISTRARS LIMITED AND THE ROYAL BANK OF SCOTLAND PLC
41 FOX STREET                                 SECURITIES SERVICES
JOHANNESBURG                                  REGISTRARS
                                              P O BOX 82
                                              CAXTON HOUSE
REGISTERED OFFICE:                            REDCLIFFE WAY
1ST FLOOR, AECI PLACE,                        BRISTOL BS 99 7 KH
24 THE WOODLANDS, WOODLANDS DRIVE,            ENGLAND
WOODMEAD, SANDTON



                                        
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