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Aeci Limited - Financial Results

Release Date: 04/08/1999 12:01:06      Code(s): AFE AED5AFEP
(REGISTRATION NO. 04/02590/06)
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 1999
FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE FINANCIAL RESULTS OF THE GROUP FOR THE SIX MONTHS
ENDED 30 JUNE 1999 AS FOLLOWS:
                           1999         1998                1998
                           FIRST HALF   FIRST HALF  %       YEAR
                           UNAUDITED    UNAUDITED   CHANGE  AUDITED
                           R MILLIONS   R MILLIONS          R MILLIONS
TURNOVER (1)               4047         4075        (1)     8646
NET TRADING PROFIT         315          304         4       644
FINANCING COSTS            (156)        (121)               (318)
INVESTMENT INCOME          7            7                   18
                           166          190         (13)    344
EXCEPTIONAL ITEMS (2)      -            (17)                (425)
AMORTISATION OF GOODWILL   (11)         -                   (21)
NET  PROFIT BEFORE TAXATION 155         173                 (102)
TAXATION                   (45)         (54)                3
NORMAL ACTIVITIES          (45)         (54)                (102)
EXCEPTIONAL ITEMS          -            -                   105
NET  PROFIT / (LOSS)       110          119                 (99)
ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE  SHAREHOLDERS  (14)         (13)                (28)
NET PROFIT / (LOSS)
ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS               96           106                 (127)
HEADLINE EARNINGS ARE
DERIVED FROM:
NET PROFIT / (LOSS)
ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS               96           106                 (127)
ADD: NET EXCEPTIONAL
ITEMS                      -            17                  313
  AMORTISATION OF GOODWILL 11           -                   21
                           107          123                 207
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS)     69           80          (14)    134
ATTRIBUTABLE EARNINGS /
(LOSS) PER ORDINARY SHARE
(CENTS)                    62           69                  (82)
DIVIDEND PER ORDINARY
SHARE (CENTS)              30.0         27.5        9       55
NUMBER OF ORDINARY SHARES
(MILLIONS)                 155          155                 155
1. INCLUDES EXPORTS OF R 712 MILLION (1998 - R 641 MILLION)
2. A RESTRUCTURING PROVISION OF R 264 MILLION WAS ESTABLISHED AS AN EXCEPTIONAL
ITEM AT 31 DECEMBER 1998 OF WHICH R 126 MILLION
WAS UTILISED DURING THE PERIOD , LEAVING A BALANCE OF R 138 MILLION AT 30 JUNE
1999. IN ADDITION, CONDITIONAL ON SHAREHOLDER APPROVAL, DISPOSAL OF AECI'S
INTEREST IN POLIFIN WILL RESULT IN AN EXCEPTIONAL GAIN OF APPROXIMATELY R 1150
MILLION BEING RECOGNISED IN THE SECOND HALF YEAR. THE GAIN WILL BE PARTIALLY
OFFSET BY A PROVISION, ESTIMATED AT R 150 MILLION, IN RESPECT OF THE PLANNED
CLOSURE OF THE AMMONIA COMPLEX AT MODDERFONTEIN IN APRIL 2000, TOGETHER WITH
ANY ADDITIONAL CHARGES WHICH MAY ARISE FROM FURTHER RESTRUCTURING ELSEWHERE IN
THE GROUP.
ABRIDGED BALANCE SHEET
                               1999         1998         1998
                               30 JUNE      30 JUNE      31 DEC
                               UNAUDITED    UNAUDITED    AUDITED
                               R MILLIONS   R MILLIONS   R MILLIONS
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS'
INTEREST                       2973         3204         2917
OUTSIDE SHAREHOLDERS'
INTEREST IN SUBSIDIARIES       130          113          128
TOTAL SHAREHOLDERS' INTEREST   3103         3317         3045
DEFERRED TAXATION              (43)         80           (67)
NET BORROWINGS                 1728         1548         1522
                               4788         4945         4500
EMPLOYMENT OF CAPITAL
FIXED ASSETS AND GOODWILL      3373         3487         3484
INVESTMENTS                    140          123          115
CURRENT ASSETS                 3176         3316         3110
TOTAL ASSETS                   6689         6926         6709
NON INTEREST BEARING
LIABILITIES                    1609         1706         1911
LONG-TERM PROVISIONS           292          275          298
                               4788         4945         4500
CASH FLOW STATEMENT
                               1999         1998         1998
                               FIRST HALF   FIRST HALF   YEAR
                               UNAUDITED    UNAUDITED    AUDITED
                               R MILLIONS   R MILLIONS   R MILLIONS
CASH GENERATED BY OPERATIONS   487          460          986
INVESTMENT INCOME              5            3            10
FINANCING COSTS                (156)        (121)        (318)
TAXES PAID                     (74)         (90)         (234)
CHANGES IN WORKING CAPITAL     (204)        (232)        (14)
EXPENDITURE RELATING TO LONG-
TERM PROVISIONS                (8)          -            (25)
EXPENDITURE RELATING TO
EXCEPTIONAL ITEMS              (115)        -            (106)
CASH AVAILABLE (ABSORBED BY)
FROM OPERATING ACTIVITIES      (65)         20           299
DIVIDENDS PAID                 (48)         (101)        (149)
CASH RETAINED (ABSORBED BY)
FROM OPERATING ACTIVITIES      (113)        (81)         150
CASH UTILISED IN INVESTMENT
ACTIVITIES                     (93)         (805)        (989)
NET CASH UTILISED              (206)        (886)        (839)
CASH EFFECTS OF FINANCING
ACTIVITIES                     276          827          837
INCREASE / (DECREASE) IN
LIQUID FUNDS                   70           (59)         (2)
INDUSTRY SEGMENT ANALYSIS FOR THE SIX MONTHS ENDED JUNE
                      TURNOVER        TRADING PROFIT     ASSETS
                 1999       1998      1999      1998   1999  1998
                 UNAUDITED  UNAUDITED UNAUDITED UN-    UN-   UN-
                                                AUDITED AUDITED AUDITED
                 R MILL     R MILL    R MILL    R MILL R MILL  R MILL
MINING SOLUTIONS     586    552       97        90     853     841
SPECIALITY ,
FINE AND INDUSTRIAL
CHEMICALS            906    919       88        78     655     691
SPECIALITY FIBRES    594    588       66        71     472     581
MONOMERS, POLYMERS
AND RELATED PRODUCTS 746     710      136       175    1041    1003
AGRICULTURAL
PRODUCTS AND
INTERMEDIATES        950     987      (23)      (35)   783     821
COATINGS             343     342      0         (1)    329     326
OTHER BUSINESSES     184     183      (17)      (16)   904     895
GROUP SERVICES AND
INTERGROUP           (262)   (206)    (32)      (58)   47      79
                     4047    4075     315       304    5084    5237
ASSETS CONSIST OF NET FIXED ASSETS AND GOODWILL, INVENTORY, ACCOUNTS RECEIVABLE
AND ACCOUNTS PAYABLE.
OTHER SALIENT FEATURES
                                 1999         1998            1998
                                 FIRST HALF   FIRST HALF      YEAR
                                 UNAUDITED    UNAUDITED       AUDITED
                                 R MILLIONS   R MILLIONS      R MILLIONS
CAPITAL EXPENDITURE              183          838             1108
-EXPANSION                       92           749             897
-REPLACEMENT                     91           89              211
CAPITAL COMMITMENTS  (1)         372          240             243
-CONTRACTED FOR                  289          171             175
-NOT CONTRACTED FOR              83           69              68
FUTURE RENTALS ON
PROPERTY, PLANT AND
EQUIPMENT LEASED                 222          149             230
-PAYABLE WITHIN ONE YEAR         43           27              45
-PAYABLE THEREAFTER              179          122             185
CONTINGENT LIABILITIES AND
GUARANTEES                       28           30              22
GEARING                          56%          47%             50%
CURRENT ASSETS TO CURRENT
LIABILITIES                      1.2          1.3             1.2
NET ASSET VALUE PER ORDINARY
SHARE (CENTS)                    1922         2071            1886
NET INVESTMENT EXPENDITURE
(R MILLIONS)                     93           805             385
DEPRECIATION AND AMORTISATION
(R MILLIONS)                     183          158             358
(1)  INCLUDES R269 MILLION IN RESPECT OF COMMITMENTS BY POLIFIN LIMITED AT 30
JUNE 1999.
OPERATING RESULTS
HEADLINE EARNINGS PER ORDINARY SHARE AT 69 CENTS WERE 14% LOWER THAN IN THE
SAME PERIOD LAST YEAR BUT 28% HIGHER THAN IN THE SECOND HALF OF 1998.
LOCAL SALES VOLUMES IN MANY SEGMENTS WERE MARKEDLY LOWER THAN A YEAR AGO AS THE
SLUMP IN THE SOUTH AFRICAN ECONOMY INTENSIFIED.  EXPORTS OF POLYMERS AND
SPECIALITY FIBRES HELD UP WELL DESPITE DISRUPTIONS IN ASIA AND SOUTH AMERICA.
GROSS MARGINS WERE PRESSURED BY LOW PRICES INTERNATIONALLY AND INTENSE
COMPETITIVE ACTIVITY.  SUBSTANTIAL REDUCTIONS IN FIXED COSTS RESULTING FROM THE
GROUP'S WIDE-RANGING TRANSFORMATION AND RESTRUCTURING PROGRAMME ENABLED SOME
IMPROVEMENT IN TRADING MARGINS.
THE PERFORMANCE OF THE GROUP'S THREE CORE CLUSTERS - MINING SOLUTIONS,
SPECIALITY FIBRES AND SPECIALITY, FINE AND INDUSTRIAL CHEMICALS - WAS PLEASING
IN DIFFICULT CIRCUMSTANCES. THE NITROGEN PRODUCTS AND RETAIL FERTILIZER
BUSINESSES CONTINUED TO SUFFER THE EFFECTS OF LOW INTERNATIONAL PRICES AND
AGGRESSIVE PRICE DISCOUNTING IN A WEAK LOCAL MARKET.  POLIFIN'S RESULTS WERE
ALSO IMPACTED BY LOWER POLYMER PRICES ON AVERAGE IN THE PERIOD ALBEIT WITH AN
ENCOURAGING FIRMER TREND IN RECENT MONTHS.
TRADING CASH FLOW (OR EBITDA) INCREASED BY 8% TO R498 MILLION.  WHILE NET
CAPITAL AND INVESTMENT EXPENDITURE WAS CONTAINED AT R93 MILLION, THE SEASONAL
INCREASE IN WORKING CAPITAL WAS EXACERBATED BY THE SEVERELY DEPRESSED LOCAL
ECONOMIC CONDITIONS WHICH RESULTED IN HIGHER THAN PLANNED LEVELS OF INVENTORY
AND ACCOUNTS RECEIVABLE.
NET BORROWINGS ACCORDINGLY INCREASED BY R206 MILLION FROM DECEMBER 1998 TO
R1728 MILLION AT 30 JUNE.  THE HIGHER AVERAGE LEVEL OF BORROWINGS TOGETHER WITH
HIGHER INTEREST RATES RESULTED IN A SUBSTANTIAL INCREASE IN FINANCING COSTS
RELATIVE TO THE FIRST HALF OF 1998.
TRANSFORMATION AND RESTRUCTURING
CONSIDERABLE PROGRESS HAS BEEN MADE REGARDING INTERNAL RESTRUCTURING AND
RATIONALISATION ASPECTS OF THE GROUP'S TRANSFORMATION PROGRAMME. CASH
EXPENDITURE ON RESTRUCTURING INITIATIVES AMOUNTED TO R115 MILLION IN THE
PERIOD.  MAJOR MILESTONES IN THE PERIOD UNDER REVIEW INCLUDE:-
- CONCLUSION OF AN AMMONIA SUPPLY AGREEMENT WITH SASOL LIMITED, THE CONSEQUENT
CLOSURE OF THE MILNERTON AMMONIA PLANT AND THE DECISION TO CLOSE THE
MODDERFONTEIN NITROGEN COMPLEX IN APRIL 2000;
- AGREEMENT SUBJECT TO CERTAIN CONDITIONS WITH NORSK HYDRO AGRI INTERNATIONAL
TO ESTABLISH A 50:50 JOINT VENTURE WITH KYNOCH FERTILIZER IN SOUTHERN AFRICA.
DETAILED ARRANGEMENTS RELATING TO THE JOINT VENTURE ARE NEARING COMPLETION;
- THE DECISION TO CEASE MANUFACTURE OF TEXTURED POLYESTER YARNS FOR APPAREL
END-USES AND THE CONSEQUENT CLOSURE OF SANS FIBRES' HAMMARSDALE FACTORY;
- OUTSOURCING, RESTRUCTURING AND DOWNSIZING OF RESEARCH, ENGINEERING, FACTORY
SERVICES, HEAD OFFICE AND GROUP SUPPORT FUNCTIONS.
YEAR 2000 COMPLIANCE
IMPLEMENTATION OF A PROGRAMME TO ENSURE THAT ALL RELEVANT PLANT AND BUSINESS
SYSTEMS ARE YEAR 2000 COMPLIANT IS NEAR COMPLETION.  FOUR OUTSTANDING ITEMS
WILL BE COMPLETED BY END SEPTEMBER.
THE COST OF ACHIEVING COMPLIANCE IS NOT EXPECTED TO EXCEED R10 MILLION.
POST BALANCE SHEET EVENT
AS ANNOUNCED ON 2 AUGUST, AECI HAS UNDERTAKEN TO SUPPORT AN OFFER WHICH WILL BE
MADE BY SASOL LIMITED TO ACQUIRE ALL OF THE ORDINARY SHARES OF POLIFIN LIMITED
NOT OWNED BY SASOL AT A PRICE OF R9.70 PER POLIFIN SHARE WITH EFFECT FROM 26
JUNE 1999.  AECI'S ACCEPTANCE OF SUCH AN OFFER IN RESPECT OF ITS 40%
SHAREHOLDING IN POLIFIN IS CONDITIONAL ON THE APPROVAL OF SHAREHOLDERS.  A
CIRCULAR SETTING OUT DETAILS OF THE PROPOSED TRANSACTION AND CONVENING A
GENERAL MEETING OF SHAREHOLDERS WILL BE POSTED AS SOON AS POSSIBLE.
THE PROPOSED DISPOSAL OF THE INTEREST IN POLIFIN IS CONSISTENT WITH AECI'S
STATED STRATEGY AND WILL BE A MAJOR ENABLING STEP IN THE TRANSFORMATION PROCESS
COMPLETION OF THE OFFER WILL RESULT IN AECI RECEIVING CASH PROCEEDS OF R2135
MILLION, OR R13.80 PER AECI SHARE, IN CONSIDERATION FOR ITS 40% INTEREST IN
POLIFIN.  AN EXCEPTIONAL GAIN ON DISPOSAL OF APPROXIMATELY R1150 MILLION WILL
BE RECOGNISED ON COMPLETION.  INTEREST ON THE PURCHASE CONSIDERATION IS PAYABLE
BY SASOL FROM 26 JUNE 1999 TO THE DATE OF PAYMENT, AS DETAILED IN THE
ANNOUNCEMENT OF 2 AUGUST. IN CONSEQUENCE, IT IS ESTIMATED THAT THE TRANSACTION
WILL ENHANCE EARNINGS IN THE SECOND HALF YEAR BY APPROXIMATELY 10%.
PROSPECTS
RECENT DECLINES IN LOCAL INTEREST RATES ARE AN EARLY INDICATION THAT ECONOMIC
CONDITIONS SHOULD IMPROVE IN THE SECOND HALF-YEAR. THIS POSITIVE DEVELOPMENT,
TOGETHER WITH THE FURTHER BENEFITS EXPECTED FROM RESTRUCTURING, SHOULD BE
SUFFICIENT TO SUPPORT AN IMPROVEMENT IN HEADLINE EARNINGS FOR THE YEAR.
ACCORDINGLY, THE INTERIM DIVIDEND HAS BEEN INCREASED TO 30 CENTS PER ORDINARY
SHARE (1998:27.5 CENTS).
TONY TRAHAR        CHAIRMAN
LEX VAN VUGHT      MANAGING DIRECTOR
3 AUGUST 1999.
DECLARATION OF ORDINARY DIVIDEND NO. 130
NOTICE IS HEREBY GIVEN THAT AN INTERIM DIVIDEND OF 30 CENTS PER SHARE, IN
RESPECT OF THE YEAR ENDING 31 DECEMBER 1999, HAS BEEN DECLARED TO SHAREHOLDERS
OF ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF
BUSINESS ON 20 AUGUST 1999.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 23 SEPTEMBER 1999.  CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS
TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 20 AUGUST 1999.  THE
TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 21 AUGUST 1999 TO 3
SEPTEMBER 1999, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD
M J F POTGIETER
SECRETARY
3 AUGUST 1999
                                       COMPUTERSHARE SERVICES PLC
TRANSFER OF SECRETARIES                PO BOX 82
COMPUTERSHARE SERVICES LIMITED         CAXTON HOUSE
41 FOX STREET                          REDCLIFFE WAY
JOHANNESBURG                           BRISTOL BS 99 7 KH
AND                                    ENGLAND



                                        
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