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Aeci Limited - Audited Financial Results

Release Date: 27/02/2001 10:44:06      Code(s): AFE AFEP
AECI LIMITED
Registration number 1924/002590/06
HIGHLIGHTS
* Buy-back enhances pro forma EPS by 34%
* Transformation well advanced
* Growth strategy gaining momentum
* Headline earnings marginally down
* Dividend unchanged
Audited financial results for the year ended 31 December 2000
Income statement for the year ended 31 December
                                                     2000         1999
                                        Note         R millions   R millions
Revenue                                 (1)          6 009        7 311
Net trading profit                                   474          568
Net financing costs                                  (27)         (120)
Income from associates and investments               10           20
                                                     457          468
Exceptional items                                    (30)         683
Amortisation of goodwill                             (30)         (25)
Net profit before taxation                           397          1 126
Taxation                                             (123)        (117)
 Normal activities                                   (139)        (134)
 Exceptional items                                   16           17
Net profit                                           274          1 009
Attributable to preference and
outside shareholders                                 (32)         (35)
 Normal activities                                   (35)         (35)
 Exceptional items                                   3            -
Net profit attributable to ordinary
shareholders                                         242          974
Headline earnings are derived from:
Net profit attributable to ordinary shareholders     242          974
Net exceptional items                                11           (700)
Amortisation of goodwill                             30           25
                                                     283          299
Headline earnings per ordinary share (cents)         183          193
Attributable earnings per ordinary share (cents)     156          630
Dividend per ordinary share (cents)
  Normal                                             80           80
  Special                                            -            600
Number of ordinary shares (millions)                 155          155
Note:
(1) Includes exports of R1 189 million (1999 - R1 334 million).
Balance sheet at 31 December
                                                     2000         1999
                                                     R millions   R millions
Assets
Non-current assets                                   2 482        2 657
Property, plant and equipment                        1 798        1 933
Goodwill                                             428          386
Investments                                          256          338
Current assets                                       3 291        3 079
Inventory                                            1 035        939
Accounts receivable                                  1 219        1 251
Cash and cash equivalents                            1 037        889
Total assets                                         5 773        5 736
Equity and liabilities
Ordinary capital and reserves                        3 012        2 843
Preference capital and outside
shareholders' interest                               177          145
Total shareholders' interest                         3 189        2 988
Non-current liabilities                              184          233
Deferred taxation                                    (182)        (215)
Long-term borrowings                                 38           95
Long-term provisions                                 328          353
Current liabilities                                  2 400        2 515
Accounts payable                                     1 160        1 193
Provision for restructuring                          62           282
Short-term borrowings                                1 073        918
Taxation                                             58           45
Dividend declared                                    47           77
Total equity and liabilities                         5 773        5 736
Cash flow statement for the year ended 31 December
                                                     2000         1999
                                                     R millions   R millions
Cash generated by operations                         608          897
Investment income                                    10           11
Net financing costs                                  (27)         (120)
Taxes paid                                           (64)         (62)
Changes in working capital                           (149)        (207)
Expenditure relating to long-term provisions         (20)         (36)
Expenditure relating to restructuring                (190)        (206)
Cash available from
operating activities                                 168          277
Normal dividends paid                                (134)        (99)
Cash retained from
operating activities                                 34           178
Cash utilised in investment activities               (212)        (199)
Proceeds from disinvestment and restructuring        224          2 432
Special dividend and STC paid                        -            (1 044)
Net cash generated                                   46           1 367
Cash effects of financing activities                 97           (679)
Increase in liquid funds                             143          688
Statement of changes in shareholders' equity
for the year ended 31 December
                                                     2000         1999
                                                     R millions   R millions
Headline earnings                                    283          299
Exceptional items net of taxation and outside
shareholders' interest                               (11)         700
Amortisation of goodwill                             (30)         (25)
Dividends                                            (93)         (1 051)
Foreign currency translation differences             19           3
Other                                                1            -
Net increase/(decrease) in equity for the year       169          (74)
Equity at the beginning of the year                  2 843        2 917
Equity at the end of the year                        3 012        2 843
Made up as follows:
Share capital and share premium                      228          228
Non-distributable reserves                           608          596
Retained income                                      2 176        2 019
                                                     3 012        2 843
Industry segment analysis
for the year ended 31 December
                          Revenue    Net trading profit    Assets
                        2000    1999    2000    1999    2000    1999
                         R millions      R millions      R millions
Mining solutions       1 254   1 225     116     195     821     861
Specialty chemicals    1 982   1 885     203     196     686     637
Specialty fibres       1 355   1 210     128     125     688     458
Property                   -       -      30       4     640     644
Other businesses       1 286   1 713      28    (14)     487     417
Group services, development
and intergroup          (90)   (507)    (57)    (65)       1     (7)
                       5 787   5 526     448     441   3 323   3 010
Businesses sold          222   1 785      26     127     (3)     306
                       6 009   7 311     474     568   3 320   3 316
Assets consist of property, plant, equipment and goodwill, inventory, accounts
receivable and accounts payable.
Other salient features
                                                     2000         1999
                                                     R millions   R millions
Capital expenditure                                  271          231
- expansion                                          147          104
- replacement                                        124          127
Capital commitments                                  235          181
- contracted for                                     143          57
- not contracted for                                 92           124
Future rentals on property,
 plant and equipment leased                          162          173
- payable within one year                            42           45
- payable thereafter                                 120          128
Contingent liabilities and guarantees                289          169
Net borrowings                                       74           124
Gearing (%)                                          2            4
Current assets to current liabilities                1.4          1.2
Net asset value per ordinary share (cents)           1 947        1 838
Net capital expenditure                              141          155
Depreciation and amortisation                        235          311
COMMENTARY
Operating results
Headline earnings per ordinary share at 183 cents were marginally lower than in
1999.
The special dividend of R6.00 per share paid to shareholders in November 1999
reduced the capital base of the Company by R1 billion with material effects on
year 2000 results. Had this distribution been retained in the Company, headline
earnings in 2000 would have shown an increase of some 20 per cent.
Revenue of continuing operations increased by some 5 per cent, reflecting muted
volume growth in the subdued manufacturing and mining sectors of the domestic
economy. An unchanged operating margin of 7.8 per cent is considered a
reasonable result in a year of steep increases in oil and energy-based raw
material costs, not least being an almost trebling in the price of ammonia,
compounded by the negative impact of a strong US dollar and weak euro.
AECI's ability to weather a most difficult year for the global chemical
industry can be ascribed to the benefits of the two-year transformation
programme, which has resulted in the emergence of a leaner, focused performance
chemicals Group.
Of the three core clusters, the results of Chemical Services and SANS Fibres
were commendable. Further successful acquisitions and strong cash flow enabled
Chemserve to record a 25 per cent increase in headline earnings per share. SANS
Fibres achieved improved results in a dismal year for the global fibres
industry. African Explosives was unable to pass the aforementioned surge in
ammonia costs on to its final product markets, resulting in a 40 per cent
decline in its operating profit. A highlight of the year was the R26 million
increase in profit contributed by the Group's property operations.
Pleasing progress in the strategic expansion of SANS Fibres' operations was
marked by the implementation of a joint venture with a leading world-class
fibres producer for the manufacture of specialty nylon industrial yarns in the
United States. This investment represents a significant first step by AECI in
establishing a strategic presence internationally. SANS Fibres also completed
the highly successful commissioning of the R60 million PET bottle polymer
extension in record time with the full output of prime quality product sold out
from the day of startup.
Transformation
Further steps towards achieving clear focus on the core business clusters
included the disposal of the Group's interest in the Fedmis phosphates
partnership with effect from July 2000, and the sale to Chemical Services
Limited of the 80.1 per cent interest in AECI Coatings and the business
operations of Kynochem and Industrial Urethanes with effect from January 2001.
The consideration for the latter transaction, which has been treated as a
post-balance sheet event, was determined at R272 million and was settled by the
payment of R168 million in cash and the issue to AECI of eight million ordinary
shares in Chemical Services. In consequence, the Group's holding in Chemical
Services has increased to 71 per cent from 68 per cent at year-end.
While further transformation cash costs amounting to R190 million were incurred
during the year, proceeds from disposals and sound asset management enabled the
Group to record a net debt to equity ratio at year-end of only 2 per cent.
Buy-back
The strong balance sheet facilitated the specific buy-back of 40 per cent of
AECI's ordinary shares from Anglo American for an initial consideration of
R11.49 per share, which was approved by shareholders on 10 January 2001.
Details of this transaction have been announced in previous circulars. On a pro
forma basis, had the buy-back been effective 1 January 2000, headline earnings
per share for the year under review would have amounted to 245 cents as opposed
to 183 cents (an enhancement of 34 per cent), and total net borrowings at
year-end would have been R870 million, representing a gearing ratio of 36 per
cent.
Dividend policy and gearing
An unchanged annual dividend of 80 cents per share has been declared for the
full year, resulting in a dividend cover of 2.3 times. The Group's dividend
policy will be to increase dividend cover to at least three times over the next
few years while reducing the debt to equity ratio from its current level.
Prospects
Although global economies show signs of slowing, a modest recovery is
anticipated in the domestic manufacturing sector, with the possibility of
short-term interest rates declining during the year. Decreasing energy-based
raw material prices are also supportive of an improved trading outlook which,
coupled with the benefits of transformation and market focus in the operating
businesses, is encouraging for the Group's earnings prospects, particularly
from the second half of 2001.
Alan Pedder                             Lex van Vught
Chairman                                Chief Executive
Declaration of ordinary dividend No. 134
Notice is hereby given that a final dividend of 50 cents per share, in respect
of the year ended 31 December 2000, has been declared to holders of ordinary
shares registered in the books of the Company at the close of business on 16
March 2001.
Payment will be made from the offices of the transfer secretaries in
Johannesburg on 25 April 2001. Changes of address or dividend instructions to
apply to this dividend must be received not later than 16 March 2001. The
transfer books and register of members will be closed from 17 March 2001 to 30
March 2001, both days inclusive.
By order of the Board
M J F Potgieter
Secretary
26 February 2001
Transfer secretaries                    Registered office
Computershare Services Limited          First Floor
41 Fox Street                           AECI Place
Johannesburg                            24 The Woodlands
and                                     Woodlands Drive
Computershare Services plc              Woodmead
PO Box 82                               Sandton
The Pavilions
Bridgewater Road
Bristol BS99 7NH
England
Registration number 1924/002590/06
www.aeci.co.za



                                        
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