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Aeci: Group Interim Results

Release Date: 31/07/2001 07:59:35      Code(s): AFE
AECI
Group interim results for the half-year ended 30 June 2001
HIGHLIGHTS
* HEADLINE EARNINGS PER SHARE UP 30%
* PROFIT OF CONTINUING OPERATIONS UP 25%
* SALE OF FERTILIZER BUSINESS COMPLETED
* RESTRUCTURING CONTINUES
Income statement
                                        2001         2000         2000
                                        First half   First half   Year
                                        Unaudited    Unaudited    Audited
                                 Note   R millions   R millions   R millions
Revenue                           (1)   3 246        2 913        6 009
Net trading profit                      200          210          474
Continuing operations                   200          160          414
Discontinued operations                 -            50           60
Net financing costs                     (68)         (20)         (27)
Income/(loss) from associates
  and investments                       14           (7)          10
                                        146          183          457
Exceptional items                       (114)        -            (30)
Amortisation of goodwill                (21)         (14)         (30)
Net profit before taxation              11           169          397
Taxation                                (30)         (54)         (121)
Normal activities                       (41)         (54)         (137)
Exceptional items                       11           -            16
Net (loss)/profit after taxation        (19)         115          276
Attributable to preference and
  outside shareholders                  (11)         (16)         (32)
Normal activities                       (17)         (16)         (35)
Exceptional items                       6            -            3
Net (loss)/profit attributable to
  ordinary shareholders                 (30)         99           244
Headline earnings are derived from:
Net (loss)/profit attributable to
  ordinary shareholders                 (30)         99           244
Net exceptional items                   97           -            11
Amortisation of goodwill                21           14           30
                                        88           113          285
Headline earnings per ordinary
  share (cents)                         95           73           184
Attributable (loss)/earnings per
  ordinary share (cents)                (32)         64           158
Dividend per ordinary share (cents)
Paid during the period                  50           50           80
Number of ordinary shares in
issue (millions)                   (2)  93           155          155
Notes
(1) Includes exports of R833 million (2000 - R601 million).
(2) In January 2001 the Company re-purchased 61 866 725 of its own ordinary
shares, representing 40% of the issued share capital, from Anglo South
Africa (Pty) Limited.
Industry segment analysis
for the half-year ended 30 June
                          Revenue    Net trading profit    Assets
                        2001    2000    2001    2000    2001    2000
                        Unaudited       Unaudited       Unaudited
                        R millions      R millions      R millions
Mining solutions        683    580      60     50       851    851
Specialty chemicals     1 121  941      101    93       787    643
Specialty fibres        874    628      78     58       733    608
Property                -       -       3      9        681    627
Other businesses        581    572      (11)   (20)     414    430
Group services,
development and
intergroup              (13)   (130)    (31)   (30)     41     34
                        3 246  2 591    200    160      3 507  3 193
Discontinued operations -      322      -      50       -      249
                        3 246  2 913    200    210     3 507   3 442
Assets consist of property, plant, equipment and goodwill, inventory,
accounts receivable and accounts payable.
Balance sheet
                                        2001         2000         2000
                                        30 June      30 June      31 Dec
                                        Unaudited    Unaudited    Audited
                                 Note   R millions   R millions   R millions
Assets
Non-current assets                      2 487        2 576        2 482
Property, plant and equipment           1 832        1 856        1 798
Goodwill                                491          446          428
Investments                             164          274          256
Current assets                          2 788        3 222        3 291
Inventory                               1 042        996          1 035
Accounts receivable                     1 290        1 252        1 219
Cash and cash equivalents               456          974          1 037
Total assets                            5 275        5 798        5 773
Equity and liabilities            (3)
Ordinary capital and reserves           2 215        2 946        3 061
Preference capital and outside
shareholders' interest in
subsidiaries                            182          165          177
Total shareholders' interest            2 397        3 111        3 238
Non-current liabilities                 195          208          184
Deferred taxation                       (185)        (194)        (182)
Long-term borrowings                    59           50           38
Long-term provisions                    321          352          328
Current liabilities                     2 683        2 479        2 351
Accounts payable                        1 148        1 104        1 160
Provision for restructuring             44           106          62
Short-term borrowings                   1 450        1 249        1 073
Taxation                                41           20           56
Total equity and liabilities            5 275        5 798        5 773
(3) Accounting policies are consistent with those applied in the previous
financial year other than the introduction of AC 107 (Revised) in regard to
accounting for dividends declared. Comparative figures have been restated.
Statement of changes in shareholders' equity
                                        2001         2000         2000
                                        First half   First half   Year
                                        Unaudited    Unaudited    Audited
                                        R millions   R millions   R millions
Headline earnings                       88           113          285
Exceptional items net of taxation and
outside shareholders' interest          (97)         -            (11)
Amortisation of goodwill                (21)         (14)         (30)
Dividends paid                          (46)         (77)         (123)
Foreign currency
  translation differences               2            -            20
Other                                   2            4            -
Net (decrease)/increase in equity
  for the period                        (72)         26           141
Equity at the beginning of the year     3 061        2 920        2 920
Repurchase of own shares                (775)        -            -
Ordinary shares issued                  1            -            -
Equity at the end of the period         2 215        2 946        3 061
Made up as follows:
Ordinary share capital
  and share premium                     94           228          228
Non-distributable reserves              503          581          608
Retained income                         1 618        2 137        2 225
                                        2 215        2 946        3 061
Cash flow statement
                                        2001         2000         2000
                                        First half   First half   Year
                                        Unaudited    Unaudited    Audited
                                        R millions   R millions   R millions
Cash generated by operations            300          300          608
Investment income                       2            -            10
Net financing costs                     (68)         (20)         (27)
Taxes paid                              (47)         (53)         (64)
Changes in working capital              (103)        (126)        (149)
Expenditure relating to long-term
provisions                              (8)          (1)          (20)
Expenditure relating to restructuring   (24)         (141)        (190)
Cash available from operating
  activities                            52           (41)         168
Dividends paid                          (53)         (83)         (134)
Cash (absorbed by)/retained
from operating activities               (1)          (124)        34
Cash utilised in investment
  activities                            (212)        (159)        (212)
Proceeds from disinvestment and
  restructuring                         8            86           224
Expenditure on repurchasing own shares  (775)        -            -
Net cash (utilised)/generated           (980)        (197)        46
Cash effects of financing activities    398          282          97
Proceeds from issue of new shares       1            -            -
(Decrease)/increase in cash and
  cash equivalents                      (581)        85           143
Other salient features
                                        2001         2000         2000
                                        First half   First half   Year
                                        Unaudited    Unaudited    Audited
                                        R millions   R millions   R millions
Capital expenditure                     137          113          271
Expansion                               65           64           147
Replacement                             72           49           124
Capital commitments                     106          151          235
Contracted for                          86           68           143
Not contracted for                      20           83           92
Future rentals on property, plant
  and equipment leased                  147          166          162
Payable within one year                 32           38           42
Payable thereafter                      115          128          120
Net contingent liabilities and
  guarantees                            180          169          289
Net borrowings                          1 053        325          74
Gearing (%)                             44           11           2
Current assets to current liabilities   1.1          1.3          1.4
Net asset value per ordinary
share (cents)                           2 383        1 875        1 947
Depreciation and amortisation           128          117          235
Overview
Headline earnings per ordinary share at 95 cents were 30 per cent higher
than in the first half of 2000. This result reflects a resilient performance
by the core businesses of the Group in particularly difficult trading
conditions, augmented by the significant effect of the share buy-back which
took place in January this year. An increased interim dividend of 32 cents
per ordinary share has been declared (2000 - 30 cents).
  Had the share buy-back not taken place, it is estimated that headline
earnings would have been 75 cents per ordinary share, an improvement of 2
cents on the prior year.
Operating results
In the midst of a major slowdown in the world chemical industry,
characterised by lower volumes, higher energy related raw material costs and
a widespread decline in earnings, the sustained performance of the Group's
core business clusters was commendable.
  Revenue and trading profit of continuing operations increased by some 25
per cent year on year as additional PET capacity at SANS Fibres and
acquisitions by Chemical Services offset flat to lower demand in most
sectors of the domestic economy. Export revenue increased by 39 per cent,
boosted by the weaker Rand exchange rate. However, the widening effects of
the economic downturn in the United States became progressively evident in
the second quarter with sharp cutbacks in international demand for
industrial yarns from SANS Fibres.
  Higher raw material costs in Rand terms could still not be fully recovered
from local markets and the operating margin in continuing operations was
unchanged from the 6.2 per cent recorded in the same period last year.
Initiatives to lift margins through enhanced efficiencies and lower
operating costs continue to be pursued aggressively.
  The highlight of the period was the performance of SANS Fibres where local
demand for both industrial yarns and PET exceeded expectations. An unplanned
outage of the SANS polyester polymer plant at Bellville in July is not
expected to have a material effect on Group results for the year. African
Explosives achieved a pleasing result with an increased contribution from
foreign operations. Solid gains in most of the Chemical Services' portfolio
were offset by continued underperformance of the technical coatings
business. A weakening market for industrial land adversely affected the
Group's property operations, although the uptake of land for residential use
remained buoyant.
  Net capital and investment expenditure of R204 million, together with the
R775 million disbursement of cash resources on the share buy-back,
contributed to an increased net debt to equity ratio of 44 per cent at mid-
year. Cash interest cover at 4.5 times in the period is expected to be
higher in the seasonally stronger second half.
Restructuring
During July the sale of AECI's 50 per cent interest in Kynoch Fertilizer to
Norsk Hydro was finalised. The transaction, effective 1 January 2001,
completes the Group's exit from the non-core retail fertilizer business. A
book loss on disposal of R60 million has been recognised as an exceptional
item in the period. The disposal has reduced the contingent liabilities of
the Group by R90 million.
  Chemical Services has decided to discontinue non-core components of the
technical coatings business to focus on technology and service intensive
sectors. A provision of R54 million in respect of this and other closures
and restructuring was recognised as an exceptional item in the period.
  All businesses in the Group have identified significant further
opportunities for restructuring and rationalisation in the ongoing drive for
world class competitive performance.
  Notwithstanding widespread interest in the course of a formal tender
process, indicative offers received for the Dulux decorative business did
not approach the Board's estimate of fair value. Accordingly the business
will be retained and restructured with a view to the realisation of fair
value in future years. Discussions are continuing with various parties
regarding the remaining, relatively minor non-core operations of the Group.
Prospects
Trading conditions in the second half now appear likely to be less
favourable than envisaged in the previous report to shareholders as the
global slowdown takes hold. Nonetheless, given the further benefits of
restructuring, the Group remains well positioned to achieve an improvement
in headline earnings per share in the second half-year.
STRATE
The conversion of the Company's shares to the STRATE system commenced on 2
July 2001 with the dematerialisation of such shares. Electronic trading
commenced on 23 July with the first electronic settlement date being 30 July
2001.
  Alan Pedder       Lex van Vught
  Chairman          Chief Executive
Declaration of Ordinary Dividend No. 135
Notice is hereby given that an interim dividend of 32 cents per share has
been declared in respect of dividend No. 135 for the financial year ending
31 December 2001.
  Shareholders are advised that the last day to trade cum dividend will be
Friday, 17 August 2001. The shares will trade ex dividend as from Monday, 20
August 2001. The record date will be Friday, 24 August 2001 and the dividend
will be payable on Tuesday, 25 September 2001.
  By order of the Board
  M J F POTGIETER
  Secretary
30 July 2001
Transfer secretaries
Computershare Services Limited
41 Fox Street
Johannesburg
2001
and
Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgewater Road
Bristol BS99 7NH
England      Registration number 1924/002590/06
www.aeci.co.za
AEL                  CS                      SANS FIBRES
MINING SOLUTIONS     SPECIALTY CHEMICALS     SPECIALTY FIBRES



                                        
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