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Aeci - Group Interim Results For The Six Months Ended 30 June 2002

Release Date: 30/07/2002 08:10:02      Code(s): AFE
AECI - GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002              
AECI LIMITED                                                                    
Incorporated in the Republic of South Africa                                    
(Registration No. 1924/002590/06)                                               
Share code: AFE  ISIN No: ZAE000000220                                          
*    Net trading profit up 64%                                                  
*    Headline earnings per share up 53%                                         
*    Interim dividend up 25%                                                    
*    Return on invested capital (ROIC)                                          
up to 15%                                                                       
*    Outlook positive                                                           
specialty                                                                       
product and                                                                     
service solutions                                                               
Commentary                                                                      
The Group has achieved a most pleasing result, benefiting from the completion of
the transformation strategy and stronger than expected demand in most domestic  
markets.                                                                        
Performance                                                                     
Headline earnings of 145 cents per ordinary share were 53 per cent higher than  
in the first half of 2001, extending the strong growth trend established since  
1999. An increased interim dividend of 40 cents per ordinary share has been     
declared (2001 - 32 cents).                                                     
Revenue increased by 19 per cent year on year as moderate volume growth in local
markets and the weaker rand exchange rate more than offset lower international  
demand and the impact of disposals. Higher raw material costs in rand terms     
could not be fully recovered in selling prices. However, the benefits of        
restructuring, together with a continuing focus on enhanced efficiencies and    
lower operating costs, delivered a 64 per cent gain in net trading profit. The  
operating margin improved to 8.5 per cent from 6.2 per cent in the same period  
last year. The annualised return on invested capital (ROIC) for the Group,      
excluding revaluation of land, at 15 per cent approached an acceptable level for
the first time in many years.                                                   
All businesses improved their performance. Highlights included the turnaround of
the technical coatings business in Chemical Services; growth in holes drilled by
the South African mining industry, after many years of decline, to the benefit  
of AEL; and markedly better performances by Dulux and Heartland Properties.     
Commissioning of the joint venture (Unifi-SANS) nylon industrial yarn plant in  
Stoneville, North Carolina, USA was completed in the period. However, customer  
product approvals are taking longer than planned and could delay profitability  
of the joint venture into next year.                                            
The weaker level of the rand exchange rate year on year had a net positive      
impact on earnings in the period although the modest recovery in the exchange   
rate did diminish this impact during the second quarter. The translation        
differences arising on the Group`s net investment in activities outside South   
Africa were recognised, as in 2001, through reserves and not through the income 
statement.                                                                      
Financial                                                                       
The final payment of R206 million was made in terms of the share buy-back       
agreement approved by shareholders in January 2001.                             
Net investment and capital expenditure at R93 million in the period was         
significantly lower than in recent years with the completion of the new nylon   
spinning platform by SANS Fibres the only notable component of the total.       
Working capital was tightly managed to 17 per cent of sales.                    
The Group`s net borrowings were well contained to R1 047 million at mid-year and
benefited from strong cash flow from the businesses. Cash interest cover        
improved to 5.3 times whilst gearing increased marginally from year-end to 46   
per cent of shareholder funds.                                                  
Portfolio                                                                       
Disposal of the Group`s 40 per cent equity-accounted interest in Huntsman       
Tioxide SA, effective January 2002, was concluded during the period and the     
proceeds of R79 million were received in June. Disposal of the animal feeds     
business Kynoch Feeds, effective April 2002, was also finalised in the period   
although the proceeds of R70 million had not been received by mid-year.         
Chemical Services has concluded an agreement in principle to acquire the mining 
and alkylate chemicals businesses of Dow Sentrachem for a cash consideration of 
approximately R140 million. The purchase is subject to Board and regulatory     
approvals.                                                                      
Outlook                                                                         
The hesitant recovery in a volatile global economy is not expected to gain much 
momentum in the second half. However, the new AECI with its more specialised    
business portfolio is well positioned to sustain its recent track record and    
expects continued real growth in headline earnings for the full 2002 financial  
year, albeit at a lower rate than that achieved in the first half year.         
Dividend                                                                        
A formal announcement of the dividend declared by the Board is published        
separately from this announcement.                                              
Alan Pedder    Lex van Vught                                                    
Chairman       Chief Executive                                                  
Sandton                                                                         
29 July 2002                                                                    
Income statement                                                                
                           First half  First half       Year                    
%   Unaudited   Unaudited    Audited                    
R millions         Change        2002        2001       2001                    
Revenue (Note         +19       3 849       3 246      6 745                    
1)                                                                              
Net trading           +64         328         200        492                    
profit                                                                          
Net financing                    (84)        (68)      (141)                    
costs                                                                           
Income from                         4          14         25                    
associates and                                                                  
investments                                                                     
                                  248         146        376                    
Provision for                    (12)           -       (20)                    
post-employment                                                                 
medical                                                                         
benefits                                                                        
Amortisation of                  (29)        (21)       (56)                    
goodwill                                                                        
Exceptional                         -       (114)      (371)                    
items                                                                           
Net                               207          11       (71)                    
profit/(loss)                                                                   
before taxation                                                                 
Taxation                         (75)        (30)          3                    
Normal                           (75)        (41)       (85)                    
activities                                                                      
Exceptional                         -          11         88                    
items                                                                           
Net                               132        (19)       (68)                    
profit/(loss)                                                                   
Attributable to                  (20)        (11)       (20)                    
preference and                                                                  
outside                                                                         
shareholders                                                                    
Normal                           (26)        (17)       (45)                    
activities                                                                      
Amortisation of                     6           -         12                    
goodwill                                                                        
Exceptional                         -           6         13                    
items                                                                           
Net                               112        (30)       (88)                    
profit/(loss)                                                                   
attributable to                                                                 
ordinary                                                                        
shareholders                                                                    
Headline                                                                        
earnings are                                                                    
derived from:                                                                   
Net                               112        (30)       (88)                    
profit/(loss)                                                                   
attributable to                                                                 
ordinary                                                                        
shareholders                                                                    
Amortisation of                    23          21         44                    
goodwill                                                                        
Net exceptional                     -          97        270                    
items                                                                           
                                  135          88        226                    
Headline              +53         145          95        243                    
earnings per                                                                    
ordinary share                                                                  
(cents)                                                                         
Diluted                           139          91        235                    
headline                                                                        
earnings per                                                                    
ordinary share                                                                  
(cents)                                                                         
Attributable                      120        (32)       (95)                    
earnings/(loss)                                                                 
per ordinary                                                                    
share (cents)                                                                   
Dividends             +25          40          32         87                    
declared per                                                                    
ordinary share                                                                  
(cents)                                                                         
Dividends paid                     55          50         82                    
per ordinary                                                                    
share (cents)                                                                   
Ordinary shares                                                                 
(millions)                                                                      
- in issue                         93          93         93                    
- weighted                         93          93         93                    
average number                                                                  
of shares                                                                       
- diluted                          97          96         96                    
weighted                                                                        
average number                                                                  
of shares                                                                       
Notes                                                                           
(1)  Includes exports of R987 million (2001 - R833 million).                    
(2)  Accounting policies are in accordance with South African Statements of     
Generally Accepted Accounting Practice and are consistent with those applied in 
the previous financial year.                                                    
Industry segment analysis                                                       
for the six months ended 30 June                                                
                              Net trading                                       
Revenue        profit          Assets                            
               Unaudited      Unaudited       Unaudited                         
R millions  2002    2001    2002    2001     2002    2001                       
Mining      912     683     83      60       823     851                        
solutions                                                                       
Specialty   1 470   1 121   149     101      962     787                        
chemicals                                                                       
Specialty   1 038   874     91      78       944     733                        
fibres                                                                          
Property    83      74      10      3        650     681                        
Other       402     507     12      (11)     157     414                        
businesses                                                                      
Group                                                                           
services,                                                                       
development                                                                     
and         (56)    (13)    (17)    (31)     5       41                         
intergroup                                                                      
            3 849   3 246   328     200       3 541  3 507                      
Assets consist of property, plant, equipment and goodwill, inventory, accounts  
receivable and accounts payable. Assets in the property segment include land    
revaluation of R509 million (2001 - R509 million).                              
Balance sheet                                                                   
                       30 Jun         30 Jun          31 Dec                    
                    Unaudited      Unaudited         Audited                    
R millions               2002           2001            2001                    
Assets                                                                          
Non-current             2 410          2 487           2 606                    
assets                                                                          
Property,               1 829          1 832           1 910                    
plant and                                                                       
equipment                                                                       
Goodwill                  496            491             525                    
Investments                85            164             171                    
Current                 3 301          2 788           3 277                    
assets                                                                          
Inventory               1 252          1 042           1 231                    
Accounts                1 523          1 290           1 469                    
receivable                                                                      
Cash and cash             526            456             577                    
equivalents                                                                     
Total assets            5 711          5 275           5 883                    
Equity and                                                                      
liabilities                                                                     
Ordinary                2 050          2 215           2 264                    
capital and                                                                     
reserves                                                                        
Preference                                                                      
capital and                                                                     
outside                                                                         
shareholders`                                                                   
interest in               222            182             211                    
subsidiaries                                                                    
Total                   2 272          2 397           2 475                    
shareholders`                                                                   
interest                                                                        
Non-current             1 415            195           1 391                    
liabilities                                                                     
Deferred                (188)          (185)           (207)                    
taxation                                                                        
Long-term               1 243             59           1 248                    
borrowings                                                                      
Long-term                 360            321             350                    
provisions                                                                      
Current                 2 024          2 683           2 017                    
liabilities                                                                     
Accounts                1 559          1 148           1 530                    
payable                                                                         
Provision for              86             44             109                    
restructuring                                                                   
Short-term                330          1 450             316                    
borrowings                                                                      
Taxation                   49             41              62                    
Total equity            5 711          5 275           5 883                    
and                                                                             
liabilities                                                                     
Statement of                                                                    
changes in                                                                      
shareholders`                                                                   
equity                                                                          
                        First     First half            Year                    
half                                                   
                    Unaudited      Unaudited         Audited                    
R millions               2002           2001            2001                    
Headline earnings         135             88             226                    
Amortisation of          (23)           (21)            (44)                    
goodwill net of                                                                 
outside                                                                         
shareholders`                                                                   
interest                                                                        
Exceptional items           -           (97)           (270)                    
net of taxation                                                                 
and outside                                                                     
shareholders`                                                                   
interest                                                                        
Net profit/(loss)         112           (30)            (88)                    
attributable to                                                                 
ordinary                                                                        
shareholders                                                                    
Dividends paid           (51)           (46)            (76)                    
Foreign currency         (70)              2             140                    
translation                                                                     
differences net of                                                              
deferred taxation                                                               
Ordinary shares             1              1               2                    
issued                                                                          
Other                       -              2               -                    
Net decrease in           (8)           (71)            (22)                    
equity for the                                                                  
year before share                                                               
buy-back                                                                        
Repurchase of own       (206)          (775)           (775)                    
shares                                                                          
Equity at the           2 264          3 061           3 061                    
beginning of the                                                                
period                                                                          
Equity at the end       2 050          2 215           2 264                    
of the period                                                                   
Made up as                                                                      
follows:                                                                        
Share capital and          94             94              95                    
share premium                                                                   
Non-distributable         465            503             662                    
reserves                                                                        
Surplus arising on        346            393             391                    
revaluation of                                                                  
property, plant                                                                 
and equipment                                                                   
Foreign currency          112             47             182                    
translation                                                                     
reserve net of                                                                  
deferred taxation                                                               
Retained earnings           2             72              84                    
of associates                                                                   
Other                       5            (9)               5                    
Retained income         1 491          1 618           1 507                    
                        2 050          2 215           2 264                    
Cash flow                                                                       
statement                                                                       
                   First half     First half            Year                    
                    Unaudited      Unaudited         Audited                    
R millions               2002           2001            2001                    
Cash generated            445            300             660                    
by operations                                                                   
Dividends                   4              2               2                    
received                                                                        
Net financing            (84)           (68)           (141)                    
costs                                                                           
Taxes paid               (51)           (47)            (74)                    
Changes in               (53)          (103)            (72)                    
working                                                                         
capital                                                                         
Expenditure               (2)            (8)            (14)                    
relating to                                                                     
long-term                                                                       
provisions                                                                      
Expenditure              (23)           (24)            (74)                    
relating to                                                                     
restructuring                                                                   
Cash available            236             52             287                    
from operating                                                                  
activities                                                                      
Dividends paid           (59)           (53)            (87)                    
Cash retained             177            (1)             200                    
from/(absorbed                                                                  
by) operating                                                                   
activities                                                                      
Cash utilised            (93)          (212)           (470)                    
in investment                                                                   
activities                                                                      
Proceeds from              79              8              65                    
disinvestment                                                                   
and                                                                             
restructuring                                                                   
Expenditure on          (206)          (775)           (775)                    
repurchasing                                                                    
own shares                                                                      
Net cash                 (43)          (980)           (980)                    
utilised                                                                        
Cash effects                9            398             464                    
of financing                                                                    
activities                                                                      
Proceeds from               1              1               2                    
issue of new                                                                    
shares                                                                          
Decrease in              (33)          (581)           (514)                    
cash and cash                                                                   
equivalents                                                                     
Cash and cash             577          1 037           1 037                    
equivalents at                                                                  
the beginning                                                                   
of the period                                                                   
Translation              (18)              -              54                    
(loss)/gain on                                                                  
cash and cash                                                                   
equivalents                                                                     
Cash and cash             526            456             577                    
equivalents at                                                                  
the end of the                                                                  
period                                                                          
Other salient features                                                          
First half         First half           Year                                    
                    Unaudited      Unaudited         Audited                    
R millions               2002           2001            2001                    
Capital                    99            137             424                    
expenditure                                                                     
- expansion                68             65             276                    
- replacement              31             72             148                    
Capital                    88            106             102                    
commitments                                                                     
- contracted               64             86              92                    
for                                                                             
- not                      24             20              10                    
contracted                                                                      
for                                                                             
Future                    177            147             179                    
rentals on                                                                      
property,                                                                       
plant and                                                                       
equipment                                                                       
leased                                                                          
- payable                  41             32              40                    
within one                                                                      
year                                                                            
- payable                 136            115             139                    
thereafter                                                                      
Net                       155            180             160                    
contingent                                                                      
liabilities                                                                     
and                                                                             
guarantees                                                                      
Net                     1 047          1 053             987                    
borrowings                                                                      
Gearing (%)                46             44              40                    
Current                   1.6            1.1             1.6                    
assets to                                                                       
current                                                                         
liabilities                                                                     
Net asset               2 194          2 383           2 430                    
value per                                                                       
ordinary                                                                        
share (cents)                                                                   
Depreciation              109            107             221                    
Transfer secretaries                                                            
Computershare Investor Services Limited                                         
41 Fox Street, Johannesburg, 2001                                               
and                                                                             
Computershare Investor Services PLC                                             
PO Box 82, The Pavilions, Bridgwater Road                                       
Bristol BS99 7NH, England                                                       
Registered office                                                               
First Floor, AECI Place                                                         
24 The Woodlands                                                                
Woodlands Drive                                                                 
Woodmead, Sandton                                                               
Sponsor                                                                         
JP Morgan                                                                       
www.aeci.co.za                                                                  
AEL                                                                             
Mining solutions                                                                
Development, manufacture and supply of value-adding services, initiating systems
and explosives.                                                                 
Chemical Services Limited                                                       
Specialty chemicals                                                             
Largest specialty chemical operation in southern Africa, supplying a diverse    
range of specialties, raw materials and related services to a broad spectrum of 
industries.                                                                     
SAns Fibres                                                                     
Specialty fibres                                                                
Production, marketing and distribution of specialty nylon and polyester yarn for
local and export markets; production of PET bottle polymer.                     
Date: 30/07/2002 08:09:29 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             



                                        
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