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Aeci Limited - Interim Report For The Half Year Ended 30 June 1998

Release Date: 03/08/1998 17:05:34      Code(s): AED5AFE AFEP
AECI LIMITED
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 1998
COMMENT
FURTHER WEAKENING IN DOMESTIC DEMAND FOR MOST GROUP PRODUCTS, REFLECTING THE
GENERAL DOWNTURN IN THE SOUTH AFRICAN ECONOMY, CONSTRAINED GROWTH IN LOCAL
SALES. EXPORT SALES WERE SUSTAINED DESPITE DECLINING DEMAND IN EAST ASIAN
MARKETS.
PLEASING IMPROVEMENTS IN PROFIT PERFORMANCE WERE RECORDED IN SANS FIBRES AND
AECI EXPLOSIVES. FOLLOWING THE PURCHASE OF ICI'S 51% INTEREST IN AECI
EXPLOSIVES ON 1 JANUARY, GROUP RESULTS FOR THE PERIOD INCLUDE 100% OF THE
EXPLOSIVES BUSINESS AS AGAINST 49% IN THE SAME PERIOD LAST YEAR. CONTINUING
ACTIONS TO ENHANCE PRODUCTIVITY AND REDUCE COSTS ARE BEING VIGOROUSLY PURSUED
IN ALL BUSINESSES.
WHILE THE AMMONIA AND UREA PLANTS AT MODDERFONTEIN ACHIEVED RECORD LEVELS OF
PRODUCTION FOLLOWING LAST YEAR'S SHUTDOWN, LOW INTERNATIONAL NITROGEN PRICES
AND REDUCED REGIONAL DEMAND FOR FERTILIZERS IMPACTED SEVERELY ON THE
PERFORMANCE OF KYNOCH LIMITED.
NET EXPENDITURE ON INVESTMENTS AND FIXED ASSETS OF R805 MILLION INCLUDED R570
MILLION IN RESPECT OF THE PURCHASE OF 51% OF THE EXPLOSIVES BUSINESS.
ADDITIONAL BORROWING TO FINANCE THIS INVESTMENT WAS THE MAIN CONTRIBUTOR TO THE
INCREASE IN FINANCE COSTS. DISCUSSIONS WITH POTENTIAL INTERNATIONAL JOINT
VENTURE PARTNERS REGARDING EQUITY PARTICIPATION IN THE EXPLOSIVES BUSINESS WERE
DISCONTINUED FOLLOWING THE ANNOUNCEMENT OF SASOL'S INTENDED OFFER FOR THE
COMPANY. ACCORDINGLY, NO PROCEEDS FROM SUCH PARTICIPATION WERE REALISED IN THE
PERIOD AND GEARING INCREASED TO 54% COMPARED TO 29% AT JUNE 1997.
HEADLINE EARNINGS PER ORDINARY SHARE IN THE HALF YEAR ENDED 30 JUNE 1998 AT 80
CENTS WERE 23% LOWER THAN IN THE FIRST HALF OF 1997. THE BOARD DECIDED TO
MAINTAIN THE DIVIDEND AT 27.5 CENTS PER SHARE.
DOCUMENTS RELATING TO SCHEMES OF ARRANGEMENT, PROPOSED BY SASOL LIMITED,
BETWEEN THE COMPANY AND ITS ORDINARY AND PREFERENCE SHAREHOLDERS WERE ISSUED TO
SHAREHOLDERS ON 16 JULY 1998. SEPARATE SCHEME MEETINGS OF ORDINARY SHAREHOLDERS
AND PREFERENCE SHAREHOLDERS HAVE BEEN CONVENED FOR FRIDAY 7 AUGUST 1998. THE
BOARD HAS RECOMMENDED THAT SHAREHOLDERS VOTE IN FAVOUR OF THE SCHEMES. THE
SCHEMES ARE SUBJECT TO THE APPROVAL OF THE COMPETITION BOARD WHICH INITIATED A
FORMAL INVESTIGATION OF THE PROPOSED TRANSACTION ON 26 JUNE 1998. THIS
INVESTIGATION IS EXPECTED TO TAKE APPROXIMATELY THREE MONTHS TO COMPLETE AND
THE BOARD LOOKS FORWARD TO A SUCCESSFUL OUTCOME.
OTHER KEY UNCERTAINTIES AFFECTING THE BALANCE OF THE YEAR INCLUDE THE FURTHER
CONSEQUENCES OF CONTINUING TURBULENCE IN ASIAN MARKETS, THE LEVEL OF THE
EXCHANGE RATE AND LOCAL INTEREST RATES, AND THE EFFECTS THEREOF ON DOMESTIC
ECONOMIC ACTIVITY. IN ADDITION, THE EXTENT TO WHICH CURRENT INDUSTRIAL ACTION
IN THE CHEMICAL INDUSTRY, AND THE UNCERTAINTY AMONG CUSTOMERS AND EMPLOYEES
PENDING THE COMPETITION BOARD RULING, WILL IMPACT PERFORMANCE IN THE SECOND
HALF YEAR REMAINS UNCLEAR. IN THE CIRCUMSTANCES, HOWEVER, IT IS LIKELY THAT
EARNINGS FOR THE YEAR WILL BE BELOW THE LEVEL ACHIEVED IN 1997.
L BOYD                CHAIRMAN
M P SMITH             MANAGING DIRECTOR              3 AUGUST 1998
DECLARATION OF ORDINARY DIVIDEND NO. 128
NOTICE IS HEREBY GIVEN THAT AN INTERIM DIVIDEND OF 27.5 CENTS PER SHARE, IN
RESPECT OF THE YEAR ENDING 31 DECEMBER 1998, HAS BEEN DECLARED TO HOLDERS OF
ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS
ON 21 AUGUST 1998.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 18 SEPTEMBER 1998. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS
TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN
21 AUGUST 1998. THE TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM
22 AUGUST TO 4 SEPTEMBER 1998, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD
M J F POTGIETER
SECRETARY
3 AUGUST 1998
TRANSFER SECRETARIES:
CONSOLIDATED SHARE REGISTRARS LIMITED
41 FOX STREET
JOHANNESBURG
AND
COMPUTERSHARE SERVICES PLC
P O BOX 82
CAXTON HOUSE
REDCLIFFE WAY
BRISTOL BS 99 7 KH
ENGLAND
FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE UNAUDITED FINANCIAL RESULTS OF THE GROUP FOR
THE SIX MONTHS ENDED 30 JUNE 1998 AS FOLLOWS:
                                1998        1997                  1997
                          FIRST HALF  FIRST HALF        %         YEAR
                                 R MILLIONS        CHANGE   R MILLIONS
TURNOVER (1)                  4 075       3 875    5        8 275
TRADING PROFIT                304         326      (7)      671
FINANCING COSTS               121         68                145
                              183         258      (29)     526
ABNORMAL ITEMS                (17)        -                 2
                              166         258               528
TAXATION                      54          87                120
NORMAL ACTIVITIES             54          87                137
ABNORMAL ITEMS                -           -                 (17)
                              112         171               408
INVESTMENT INCOME             7           4                 9
DIVIDENDS RECEIVED            3           2                 5
SHARE OF ASSOCIATED
COMPANIES' INCOME             4           2                 4
NET PROFIT                    119         175               417
ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS      13          14                36
TOTAL NET PROFIT              106         161      (34)     381
EARNINGS PER ORDINARY
SHARE (CENTS)                 69          104               246
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS)        80          104               237
DIVIDEND PER ORDINARY
SHARE (CENTS)                 27.5        27.5              90
NUMBER OF ORDINARY
SHARES (MILLIONS)             155         155               155
(1) INCLUDES EXPORTS OF R641 MILLION (1997 - R651 MILLION)
ABRIDGED BALANCE SHEET
                                        1998          1997          1997
                                     30 JUNE       30 JUNE        31 DEC
                                          R MILLIONS          R MILLIONS
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS'
INTEREST                               2 771         2 990         3 107
PREFERENCE CAPITAL                     6             6             6
OUTSIDE SHAREHOLDERS'
INTEREST IN SUBSIDIARIES               113           104           133
TOTAL SHAREHOLDERS'
INTEREST                               2 890         3 100         3 246
DEFERRED TAXATION                      80            100           66
LONG-TERM BORROWINGS                   774           204           174
                                       3 744         3 404         3 486
EMPLOYMENT OF CAPITAL
FIXED ASSETS                           3 060         2 739         2 886
INVESTMENTS                            123           154           116
NET CURRENT ASSETS                     836           766           723
INVENTORY                              1 663         1 420         1 396
ACCOUNTS RECEIVABLE                    1 653         1 598         1 535
ACCOUNTS PAYABLE                       1 566         1 432         1 492
NET SHORT-TERM BORROWINGS              774           693           488
INTEREST FREE LIABILITIES              140           127           228
LONG-TERM PROVISIONS                   275           255           239
                                       3 744         3 404         3 486
CASH FLOW STATEMENT
                                        1998          1997          1997
                                  FIRST HALF    FIRST HALF          YEAR
                                          R MILLIONS          R MILLIONS
CASH GENERATED BY
OPERATIONS                               460           455          937
INVESTMENT INCOME                        3             4            20
FINANCING COSTS                         (121)          (68)         (145)
TAXES PAID                              (90)           (115)        (132)
CHANGES IN WORKING
CAPITAL                                 (232)          (395)        (366)
EXPENDITURE RELATING TO
LONG-TERM PROVISIONS                    -              -            (23)
EXPENDITURE RELATING
TO ABNORMAL ITEMS                       -              -            (5)
CASH AVAILABLE FROM (ABSORBED BY)
OPERATING ACTIVITIES                    20             (119)        286
DIVIDENDS PAID                          (101)          (106)        (153)
CASH RETAINED FROM (ABSORBED BY)
OPERATING ACTIVITIES                    (81)           (225)        133
CASH UTILISED IN
INVESTMENT ACTIVITIES                   (805)          (263)        (356)
CASH EFFECTS OF FINANCING
ACTIVITIES                              827            188          (16)
DECREASE IN CASH AND
CASH EQUIVALENTS                        (59)           (300)        (239)
OTHER SALIENT FEATURES
                                        1998          1997          1997
                                   HALF YEAR     HALF YEAR          YEAR
                                     30 JUNE       30 JUNE        31 DEC
GEARING (%)                               54            29            20
CURRENT ASSETS TO
CURRENT LIABILITIES                       1.3           1.3           1.3
NET ASSET VALUE PER
ORDINARY SHARE (CENTS)                    1 792         1 933         2 009
                                           R MILLIONS         R MILLIONS
DEPRECIATION                              158           128           265
CAPITAL EXPENDITURE                       838           304           607
- EXPANSION                               749           180           333
- REPLACEMENT                             89            124           274
CAPITAL COMMITMENTS                       240           279           426
- CONTRACTED FOR                          171           83            242
- NOT CONTRACTED FOR                      69            196           184
FUTURE RENTALS ON PROPERTY, PLANT
AND EQUIPMENT LEASED                      149           174           160
- PAYABLE WITHIN
  ONE YEAR                                27            26            31
- PAYABLE THEREAFTER                      122           148           129
CONTINGENT LIABILITIES
AND GUARANTEES                            30            32            97
INDUSTRY SEGMENT ANALYSIS FOR THE HALF YEAR ENDED JUNE
                            TURNOVER     TRADING PROFIT       ASSETS
                          1998   1997    1998      1997    1998    1997
                          R MILLIONS       R MILLIONS       R MILLIONS
AGRICULTURAL PRODUCTS
AND INDUSTRIAL CHEMICALS   948  1 005      23)       33     926    868
COATINGS                   342    340      (1)        7     327    319
FIBRES                     588    615      71        62     582    533
MINING SOLUTIONS           552    252      90        28     413    168
MONOMERS, POLYMERS AND
RELATED PRODUCTS           710    745     175       189   1 017    893
OTHER BUSINESSES           251    250      (7)        8     338    320
SPECIALITY CHEMICALS       695    624      62        60     506    399
PROPERTY AND SITE SERVICES 209    208       3        (3)    711    740
CORPORATE RESEARCH                        (32)      (25)     49     44
INTERGROUP/CORPORATE      (220)  (164)    (34)      (33)    (59)    41
                         4 075  3 875     304       326   4 810  4 325
ASSETS CONSIST OF NET FIXED ASSETS, INVENTORY, ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE.
REGISTRATION NO: 04/02590/06
REGISTERED OFFICE:
FIRST FLOOR, AECI PLACE
24 THE WOODLANDS
WOODLANDS DRIVE
WOODMEAD, SANDTON



                                        
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