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Aeci Limited 1999 Financial Results

Release Date: 28/02/2000 11:47:11      Code(s): AFE AFEP
AECI LIMITED
TRANSFORMATION...........PAYING OFF
*HEADLINE EARNINGS UP 44%
*FINAL DIVIDEND INCREASED TO 50 CENTS
*GEARING DOWN TO 4%
*RESTRUCTURING WELL ADVANCED
*IMPROVED EARNINGS IN PROSPECT
COMMENT
OPERATING RESULTS
IT IS PLEASING TO REPORT THAT AECI MADE SUBSTANTIAL PROGRESS WITH ITS
TRANSFORMATION PROGRAMME AND, DESPITE DIFFICULT TRADING CONDITIONS, HEADLINE
EARNINGS PER ORDINARY SHARE AT 193 CENTS WERE 44% HIGHER THAN IN 1998.
SIGNIFICANT CHANGES IN THE GROUP'S PORTFOLIO OF BUSINESSES, IN LINE WITH ITS
TRANSFORMATION PROGRAMME, IMPACTED MATERIALLY ON CONSTITUENT PARTS OF THE
FINANCIAL STATEMENTS. THE DISPOSAL FOR R2.1 BILLION OF THE 40% INTEREST IN
POLIFIN LIMITED TO SASOL LIMITED AT MID-YEAR, AND THE SALE OF A CONTROLLING 50%
INTEREST IN KYNOCH FERTILIZER TO NORSK HYDRO WITH THE RETAINED INTEREST
EQUITY-ACCOUNTED FROM JULY, TOGETHER HAD THE EFFECT OF REDUCING GROUP TURNOVER
AND NET TRADING PROFIT IN THE SECOND HALF. EXCLUDING THESE BUSINESSES, THE
GROUP RECORDED A HEALTHY 25% INCREASE IN TRADING PROFIT IN 1999.
MOST OF THIS GAIN REFLECTED THE TANGIBLE BENEFITS OF MAJOR COST REDUCTIONS
DELIVERED BY THE TRANSFORMATION PROGRAMME. CASH EXPENDITURE ON RESTRUCTURING
INITIATIVES AMOUNTED TO R206 MILLION IN THE YEAR IN ADDITION TO THE R106
MILLION EXPENDED IN 1998. RESULTANT SAVINGS, ON AN ANNUALISED BASIS, WERE
ESTIMATED AT R250 MILLION BY YEAR-END.
PERFORMANCE OF THE GROUP'S THREE CORE CLUSTERS - MINING SOLUTIONS, SPECIALTY
FIBRES AND SPECIALTY, FINE AND INDUSTRIAL CHEMICALS - WAS VERY SATISFACTORY,
DESPITE A WEAK DOMESTIC ECONOMY AND SUBDUED GLOBAL DEMAND FOR PERFORMANCE
CHEMICALS IN GENERAL. SOME IMPROVEMENT IN DOMESTIC DEMAND BECAME APPARENT IN
THE LAST QUARTER.
PROCEEDS FROM DISPOSALS AMOUNTING TO R2.4 BILLION IN THE YEAR WERE APPLIED IN
THE FIRST INSTANCE TO REDUCING GROUP BORROWINGS, WHICH STOOD AT R1.7 BILLION AT
MID-YEAR. INTEREST EARNED ON SURPLUS FUNDS IN THE SECOND HALF REDUCED NET
FINANCING COSTS FOR THE YEAR TO R120 MILLION - SOME R200 MILLION LOWER THAN IN
1998. INTEREST COVER IMPROVED TO 4.8 TIMES.
NET CAPITAL EXPENDITURE WAS WELL CONTAINED AT R155 MILLION. THE LESS CAPITAL
INTENSIVE NATURE OF THE RESTRUCTURED GROUP PORTFOLIO ENABLED A RETURN OF
SURPLUS FUNDS TO SHAREHOLDERS AND IN NOVEMBER A SPECIAL DIVIDEND OF R928
MILLION OR R6 PER ORDINARY SHARE WAS PAID.
THE NET EFFECT OF DISPOSALS, CASH RESTRUCTURING COSTS, OPERATING CASH FLOW AND
THE SPECIAL DIVIDEND WAS TO REDUCE NET BORROWINGS AT YEAR-END TO R124 MILLION,
REPRESENTING A DEBT TO EQUITY RATIO OF 4%.
TRANSFORMATION AND RESTRUCTURING
THE MAJOR STEPS IN THE GROUP'S TRANSFORMATION PROGRAMME HAVE BEEN ACHIEVED.
VARIOUS FURTHER DISPOSALS OF NON-CORE INTERESTS WILL BE PURSUED WITH A VIEW TO
REALISING OPTIMAL VALUE FOR SHAREHOLDERS. PARTICULAR EMPHASIS WILL BE PLACED IN
2000 ON ACCELERATING THE REALISATION OF PROPERTY SURPLUS TO OPERATING
REQUIREMENTS AND ON FURTHER DEVELOPING THE GROWTH STRATEGIES OF THE GROUP'S
CORE CLUSTERS. EVOLUTION OF A GROUP CULTURE APPROPRIATE TO A LEAN,
CUSTOMER-FOCUSED, NIMBLE AND MOTIVATED ORGANISATION WILL REMAIN A PRIORITY.
YEAR 2000 COMPLIANCE
NO DISRUPTIVE EVENTS RELATED TO THE ADVENT OF THE YEAR 2000 HAVE BEEN
EXPERIENCED BY THE GROUP. THE COST OF ACHIEVING COMPLIANCE WAS ESTIMATED AT
LESS THAN R10 MILLION.
PROSPECTS
EXTERNAL CONDITIONS APPEAR FAVOURABLE, WITH MANY INDICATORS POINTING TO A
PERIOD OF REASONABLE GLOBAL AND DOMESTIC ECONOMIC GROWTH. THE BENEFITS OF
TRANSFORMATION AND AN IMPROVING ECONOMIC ENVIRONMENT SHOULD ENABLE THE GROUP TO
INCREASE HEADLINE EARNINGS IN 2000, NOTWITHSTANDING A LOWER ASSET BASE.
ACCORDINGLY, THE BOARD HAS DECIDED TO INCREASE THE FINAL DIVIDEND TO 50 CENTS
PER ORDINARY SHARE.
TONY TRAHAR                       LEX VAN VUGHT
CHAIRMAN                          MANAGING DIRECTOR
24 FEBRUARY 2000
1999 FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE AUDITED FINANCIAL RESULTS OF THE GROUP FOR THE YEAR
ENDED 31 DECEMBER 1999 AS FOLLOWS:
INCOME STATEMENT
                                                 1999       1998        %
                                                 R MILLIONS        CHANGE
TURNOVER                               (1)      7 311      8 646      (15)
NET TRADING PROFIT                                568        644      (12)
FINANCING COSTS                                  (120)     (318)
INVESTMENT INCOME                                  20         18
                                                  468        344       36
EXCEPTIONAL ITEMS                      (2)        683      (425)
AMORTISATION OF GOODWILL                          (25)      (21)
NET PROFIT / (LOSS) BEFORE TAXATION             1 126      (102)
TAXATION                                         (117)         3
NORMAL ACTIVITIES                                (134)     (102)
EXCEPTIONAL ITEMS                                  17        105
NET PROFIT / (LOSS)                             1 009       (99)
ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS                          (35)      (28)
NET PROFIT / (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS                             974      (127)
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS)                 (3)        193        134      44
ATTRIBUTABLE EARNINGS / (LOSS)
PER ORDINARY SHARE (CENTS)                        63        (82)
DIVIDENDS PER ORDINARY SHARE (CENTS) - NORMAL     80          55
                                     - SPECIAL    600          -
NUMBER OF ORDINARY SHARES IN ISSUE (MILLIONS)     155        155
(1) INCLUDES EXPORTS OF R1 334 MILLION
(1998 - R1 449 MILLION)
(2) CLOSURE OF OPERATIONS                        (299)     (220)
    RESTRUCTURING OF OPERATIONS                  (104)     (181)
    PROVISION FOR POST-EMPLOYMENT
    HEALTH CARE BENEFITS                          (29)      (24)
    PROVISION FOR ENVIRONMENTAL REMEDIATION       (54)         -
    NET GAIN ON DISPOSAL OF BUSINESSES
    AND INVESTMENTS                             1 169          -
                                                  683      (425)
(3) HEADLINE EARNINGS ARE DERIVED FROM:
    NET PROFIT / (LOSS) ATTRIBUTABLE
    TO ORDINARY SHAREHOLDERS                      974      (127)
    EXCEPTIONAL ITEMS NET OF TAX                 (700)       320
    EXCEPTIONAL ITEM ATTRIBUTABLE TO
    OUTSIDE SHAREHOLDERS                            -        (7)
    AMORTISATION OF GOODWILL                       25         21
                                                  299        207
ABRIDGED BALANCE SHEET
                                                      1999            1998
                                                          R MILLIONS
CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST                       2 843          2 917
PREFERENCE CAPITAL AND OUTSIDE SHAREHOLDERS' INTEREST   145            128
TOTAL SHAREHOLDERS' INTEREST                          2 988          3 045
DEFERRED TAXATION                                      (215)           (67)
NET BORROWINGS                                          124          1 522
                                                      2 897          4 500
EMPLOYMENT OF CAPITAL
PROPERTY, PLANT, EQUIPMENT AND GOODWILL               2 319          3 484
INVESTMENTS                                             338            115
CURRENT ASSETS                                        2 190          3 110
TOTAL ASSETS                                          4 847          6 709
NON INTEREST-BEARING LIABILITIES                      1 597          1 911
LONG-TERM PROVISIONS                                    353            298
                                                      2 897          4 500
ABRIDGED CASH FLOW STATEMENT
                                                       1999           1998
                                                            R MILLIONS
CASH GENERATED BY OPERATIONS                            897            986
INVESTMENT INCOME                                        11             10
FINANCING COSTS                                        (120)          (318)
TAXES PAID                                             (178)          (234)
CHANGE IN WORKING CAPITAL                              (207)           (14)
EXPENDITURE RELATING TO LONG-TERM PROVISIONS            (36)           (25)
EXPENDITURE RELATING TO EXCEPTIONAL ITEMS              (206)          (106)
CASH AVAILABLE FROM OPERATING ACTIVITIES                161            299
NORMAL DIVIDENDS PAID                                   (99)          (149)
CASH RETAINED FROM OPERATING ACTIVITIES                  62            150
CASH UTILISED IN INVESTMENT ACTIVITIES                 (199)        (1 003)
PROCEEDS FROM DISPOSAL OF INVESTMENTS AND BUSINESSES  2 432             14
                                                      2 295           (839)
SPECIAL DIVIDEND PAID                                  (928)             -
NET CASH GENERATED / (UTILISED)                       1 367           (839)
CASH EFFECTS OF FINANCING ACTIVITIES                   (679)           837
INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS      688             (2)
OTHER SALIENT FEATURES
                                                       1999           1998
                                                            R MILLIONS
CAPITAL EXPENDITURE                                     231            479
- EXPANSION                                             104            268
- REPLACEMENT                                           127            211
CAPITAL COMMITMENTS                                     181            175
- CONTRACTED                                             57            107
- NOT CONTRACTED FOR                                    124             68
                                                       1999           1998
                                                           R MILLIONS
FUTURE RENTALS ON PROPERTY, PLANT AND EQUIPMENT LEASED  173            230
- PAYABLE WITHIN ONE YEAR                                45             45
- PAYABLE THEREAFTER                                    128            185
CONTINGENT LIABILITIES AND GUARANTEES                   169             22
GEARING (%)                                               4             50
CURRENT ASSETS TO CURRENT LIABILITIES (RATIO)           1.2            1.2
NET ASSET VALUE PER ORDINARY SHARE (CENTS)            1 838          1 886
NET CAPITAL EXPENDITURE                                 155            385
DEPRECIATION                                            286            337
INDUSTRY SEGMENT ANALYSIS
                                   TURNOVER  NET TRADING PROFIT  ASSETS
                                 1999     1998   1999  1998    1999   1998
                                  R MILLIONS     R MILLIONS    R MILLIONS
MINING SOLUTIONS                1 225    1 142    195    188    861    822
SPECIALTY, FINE AND INDUSTRIAL
CHEMICALS                       1 885    1 957    196    194    637    645
SPECIALTY FIBRES                1 210    1 177    125    115    458    553
PROPERTY                           21        -      4     (6)   644    615
OTHER BUSINESSES                2 252    2 119     42     21    720    724
GROUP SERVICES, DEVELOPMENT
AND INTERGROUP                   (529)    (301)   (64)  (114)    (4)   102
                                6 064    6 094    498    398  3 316  3 461
BUSINESSES SOLD / EQUITY
-ACCOUNTED                      1 247    2 552     70    246      -  1 552
                                7 311    8 646    568    644  3 316  5 013
ASSETS CONSIST OF NET PROPERTY, PLANT, EQUIPMENT, GOODWILL, INVENTORY, ACCOUNTS
RECEIVABLE AND ACCOUNTS PAYABLE.
REGISTERED OFFICE: 1ST FLOOR, AECI PLACE, 24 THE WOODLANDS, WOODLANDS DRIVE,
WOODMEAD, SANDTON. WWW.AECI.CO.ZA. REGISTRATION NUMBER 04/02590/06



                                        
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