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Aeci - 1998 Financial Results

Release Date: 23/02/1999 12:10:47      Code(s): AFE AFEPAED5
WE ARE COMMITTED TO REBUILDING VALUE THROUGH ENERGETIC TRANSFORMATION
AECI LIMITED 1998 FINANCIAL RESULTS
FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE FINANCIAL RESULTS OF THE GROUP BASED ON AUDITED
FIGURES FOR THE YEAR ENDED 31 DECEMBER 1998 AS FOLLOWS:
                                             1998        1997       %
                                             R MILLIONS            CHANGE
TURNOVER                              (1)    8 646       8 275     4
NET TRADING PROFIT                           644         671       (4)
FINANCING COSTS                              318         145
                                             326         526
TAXATION                                     102         137
                                             224         389
INVESTMENT INCOME                            18           9
NET HEADLINE PROFIT                          242         398
ATTRIBUTABLE TO PREFERENCE AND
OUTSIDE SHAREHOLDERS                         35          32
NET HEADLINE PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS                        207         366       (43)
NET EXCEPTIONAL CHARGE                       313         (15)
GROSS EXCEPTIONAL CHARGE              (2)    425         (2)
ATTRIBUTABLE TO OUTSIDE
SHAREHOLDERS                                 (7)         4
TAX EFFECTS                                  (105)       (17)
AMORTISATION OF GOODWILL                     21           -
NET (LOSS)/PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS                        (127)        381
HEADLINE EARNINGS PER ORDINARY
SHARE (CENTS)                                134         237       (43)
ATTRIBUTABLE (LOSS)/EARNINGS PER
ORDINARY SHARE (CENTS)                       (82)        246
DIVIDENDS PER ORDINARY SHARE (CENTS)         55          90
NUMBER OF ORDINARY SHARES
IN ISSUE (MILLIONS)                          155         155
(1)  INCLUDES EXPORTS OF R1 449 MILLION
     (1997 - R1 553 MILLION)
(2)  CLOSURE OF OPERATIONS                   220         -
     RESTRUCTURING OF OPERATIONS             181         37
     PROVISION FOR POST-EMPLOYMENT
     HEALTH CARE BENEFITS                    24          20
     NET GAIN ON DISPOSAL OF
     BUSINESSES AND INVESTMENTS              -           (59)
                                             425         (2)
ABRIDGED BALANCE SHEET
                                             1998        1997
                                                 R MILLIONS
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST              2 917       3 107
MINORITIES' INTEREST                         128         139
TOTAL SHAREHOLDERS' INTEREST                 3 045       3 246
DEFERRED TAXATION                            (67)        66
NET BORROWINGS                               1 522       662
                                             4 500       3 974
EMPLOYMENT OF CAPITAL
FIXED ASSETS AND GOODWILL                    3 484       2 886
INVESTMENTS                                  115         116
CURRENT ASSETS                               3 110       2 931
TOTAL ASSETS                                 6 709       5 933
NON INTEREST-BEARING LIABILITIES             1 911       1 720
LONG-TERM PROVISIONS                         298         239
                                             4 500       3 974
GEARING %                                    50          20
CURRENT ASSETS TO CURRENT LIABILITIES        1.2         1.3
NET ASSET VALUE PER ORDINARY SHARE (CENTS)   1 886       2 009
NET CAPITAL EXPENDITURE (R MILLIONS)         385         463
DEPRECIATION AND AMORTISATION (R MILLIONS)   358         265
ABRIDGED CASH FLOW STATEMENT
                                             1998        1997
                                                R MILLIONS
CASH GENERATED BY OPERATIONS                 986         937
INVESTMENT INCOME                            10          20
FINANCING COSTS                              (318)       (145)
TAXES PAID                                   (234)       (132)
CHANGE IN WORKING CAPITAL                    (14)        (366)
EXPENDITURE RELATING TO PROVISIONS           (25)        (23)
EXPENDITURE RELATING TO EXCEPTIONAL ITEMS    (106)       (5)
CASH AVAILABLE FROM OPERATING ACTIVITIES     299         286
DIVIDENDS PAID                               (149)       (153)
CASH RETAINED FROM OPERATING ACTIVITIES      150         133
CASH UTILISED IN INVESTMENT ACTIVITIES       (1 003)     (560)
PROCEEDS FROM DISINVESTMENT AND RESTRUCTURING 14         204
NET CASH UTILISED                            (839)       (223)
CASH EFFECTS OF FINANCING ACTIVITIES         837         (16)
DECREASE IN LIQUID FUNDS                     (2)         (239)
INDUSTRY SEGMENT ANALYSIS
                              TURNOVER   TRADING PROFIT   NET ASSETS
                              1998   1997   1998   1997   1998   1997
                              R MILLIONS    R MILLIONS    R MILLIONS
AGRICULTURAL PRODUCTS
AND INDUSTRIAL CHEMICALS      2 168  2 257  25     67     748     815
COATINGS                      711    720    14     30     276     280
FIBRES                        1 177  1 230  115    111    553     511
MINING SOLUTIONS*             1 142  528    188    66     822     198
MONOMERS, POLYMERS AND
RELATED PRODUCTS              1 453  1 543  283    370    1 068   992
OTHER BUSINESSES              555    571    (22)   11     339     317
SPECIALITY CHEMICALS          1 500  1 371  151    126    479     440
PROPERTY AND SITE SERVICES    413    435    -      (1)    703     741
CORPORATE RESEARCH                          (62)   (58)   66      42
INTERGROUP/CORPORATE/SOCIAL
RESPONSIBILITY                (473)  (380)  (48)   (51)   (41)    (11)
                              8 646  8 275  644    671    5 013   4 325
*1997 - 49% SHARE
ASSETS CONSIST OF NET FIXED ASSETS, INVENTORY, ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE.
COMMENT
IN THE ANNOUNCEMENT OF A TRANSFORMATION STRATEGY ON 21 OCTOBER 1998,
SHAREHOLDERS WERE ADVISED THAT HEADLINE EARNINGS FOR THE YEAR WOULD BE
SIGNIFICANTLY LOWER THAN IN 1997. IN ADDITION, THE BOARD STATED ITS INTENT TO
MAKE APPROPRIATE PROVISION IN THE 1998 FINANCIAL YEAR FOR THE ESTIMATED COSTS
ASSOCIATED WITH THE TRANSFORMATION STRATEGY.
IN THE EVENT, HEADLINE EARNINGS AT 134 CENTS PER SHARE WERE 43 PER CENT LOWER
THAN IN 1997. WEAK DOMESTIC DEMAND FOR MOST GROUP PRODUCTS, TOGETHER WITH
EXCEPTIONALLY LOW INTERNATIONAL PRICES FOR UREA, AMMONIA AND COMMODITY
PLASTICS, SEVERELY CONSTRAINED LOCAL SALES AND MARGINS. EXPORT SALES REFLECTED
GENERALLY LOWER PRICES AS WELL AS LOWER DEMAND IN DEVELOPING COUNTRIES.
KYNOCH AND POLIFIN WERE PARTICULARLY AFFECTED BY THESE ADVERSE MARKET
CONDITIONS WHILE MOST OF THE GROUP'S SMALLER BUSINESSES ALSO POSTED
DISAPPOINTING RESULTS. PLEASING IMPROVEMENTS IN PERFORMANCE WERE RECORDED IN
AECI EXPLOSIVES, CHEMICAL SERVICES AND SANS FIBRES. FOLLOWING THE PURCHASE OF
ICI'S 51 PER CENT INTEREST IN AECI EXPLOSIVES ON 1 JANUARY 1998, GROUP
FINANCIAL RESULTS INCLUDE 100 PER CENT OF THE EXPLOSIVES BUSINESS AS AGAINST 49
PER CENT IN 1997.
FINANCING COSTS INCREASED SHARPLY TO R318 MILLION REFLECTING ADDITIONAL
BORROWING TO FINANCE ACQUISITION OF THE EXPLOSIVES BUSINESS AND THE STEEP RISE
IN DOMESTIC INTEREST RATES IN THE SECOND HALF OF THE YEAR. TRADE WORKING
CAPITAL WAS CONTAINED TO 17.5 PER CENT OF ANNUAL SALES AT YEAR END AGAINST 17.4
PER CENT IN 1997.
THE EXCEPTIONAL CHARGE AGAINST INCOME INCLUDES R401 MILLION OF ESTIMATED COSTS
ASSOCIATED WITH THE GROUP'S TRANSFORMATION STRATEGY. OF THIS AMOUNT, R137
MILLION WAS INCURRED IN 1998 WITH R106 MILLION BEING EXPENDED IN CASH WHILE
PROVISION HAS BEEN MADE FOR FURTHER COSTS OF R264 MILLION OF WHICH CASH
EXPENDITURES ARE PROJECTED TO COMPRISE R193 MILLION.
CONSIDERABLE PROGRESS HAS BEEN MADE WITH INTERNAL IMPLEMENTATION OF THE
TRANSFORMATION STRATEGY, INCLUDING THE CLOSURE OF CERTAIN UNDERPERFORMING
FACILITIES AND EXTENSIVE RATIONALISATION OF OVERHEAD COSTS AT MODDERFONTEIN,
KYNOCH AND IN GROUP SUPPORT FUNCTIONS. AS A RESULT, AN ANNUALISED ENHANCEMENT
TO TRADING PROFIT IN EXCESS OF R150 MILLION IS PROJECTED ONCE ALL COSTS HAVE
BEEN INCURRED.
THE GROUP IS ENGAGED IN PRELIMINARY DISCUSSIONS WITH VARIOUS PARTIES REGARDING
POTENTIAL JOINT VENTURES IN STRATEGIC BUSINESSES AND THE DISPOSAL OF CERTAIN
NON-CORE OPERATIONS. SHAREHOLDERS WILL BE ADVISED WHEN ANY OF THESE DISCUSSIONS
REACH A MORE SUBSTANTIVE STAGE.
IN LIGHT OF THE CASH EFFECTS OF RESTRUCTURING AND THE STEEP DECLINE IN
EARNINGS, THE BOARD HAS DECLARED A REDUCED FINAL DIVIDEND OF 27.5 CENTS PER
SHARE, MAKING A TOTAL DISTRIBUTION OF 55 CENTS FOR THE YEAR (1997 - 90 CENTS).
PROSPECTS
KEY DETERMINANTS OF EARNINGS IN THE CURRENT YEAR INCLUDE THE TIMING AND EXTENT
OF RECOVERY IN INTERNATIONAL CHEMICAL DEMAND AND PRICING, THE LEVEL OF INTEREST
RATES AND GROWTH IN THE LOCAL ECONOMY, AND THE RATE OF PROGRESS ACHIEVED IN
IMPLEMENTATION OF THE GROUP'S TRANSFORMATION STRATEGY. WHILE ONLY A LIMITED
IMPROVEMENT IN EXTERNAL MARKET CONDITIONS IS PROJECTED TO DEVELOP LATER IN THE
YEAR, CONTINUED GOOD PERFORMANCE IS EXPECTED FROM THE GROUP'S MORE SPECIALISED
BUSINESSES AND THE GROUP IS BUDGETING FOR INCREASED HEADLINE EARNINGS IN 1999.
YEAR 2000 COMPLIANCE
THE GROUP IS WELL ADVANCED IN IMPLEMENTATION OF A PROGRAMME TO ENSURE THAT ALL
RELEVANT PLANT AND BUSINESS SYSTEMS ARE YEAR 2000 COMPLIANT BY JULY 1999. THE
COST IS NOT EXPECTED TO EXCEED R10 MILLION.
A J TRAHAR            CHAIRMAN
L C VAN VUGHT         MANAGING DIRECTOR
22 FEBRUARY 1999
DECLARATION OF ORDINARY DIVIDEND NO. 129
NOTICE IS HEREBY GIVEN THAT A FINAL DIVIDEND OF 27.5 CENTS PER SHARE, IN
RESPECT OF THE YEAR ENDED 31 DECEMBER 1998, HAS BEEN DECLARED TO HOLDERS OF
ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS
ON 19 MARCH 1999.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 28 APRIL 1999. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS TO
APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 19 MARCH 1999. THE
TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 20 MARCH TO 2 APRIL
1999, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD
M J F POTGIETER
SECRETARY
22 FEBRUARY 1999
TRANSFER SECRETARIES
CONSOLIDATED SHARE REGISTRARS LIMITED
41 FOX STREET
JOHANNESBURG
AND
COMPUTERSHARE SERVICES PLC
PO BOX 82
CAXTON HOUSE
REDCLIFFE WAY
BRISTOL BS 99 7 KH
ENGLAND
REGISTERED OFFICE
1ST FLOOR, AECI PLACE,
24 THE WOODLANDS, WOODLANDS DRIVE,
WOODMEAD, SANDTON
WWW.AECI-HQ.CO.ZA
REGISTRATION NUMBER 04/02590/06



                                        
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