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Aeci Limited - Group Audited Results For The Year Ended 31 December 2002

Release Date: 25/02/2003 08:01:42      Code(s): AFE
AECI Limited - Group audited results For the year ended 31 December 2002        
AECI LIMITED                                                                    
Incorporated in the Republic of South Africa                                    
(Registration No. 1924/002590/06)                                               
Share code:  AFE    ISIN No. ZAE 000000220                                      
Group audited results For the year ended 31 December 2002                       
Specialty product and service solutions                                         
Highlights                                                                      
- Net trading profit up 42%                                                     
- Headline earnings per share up 32%                                            
- Dividends for the year up 29% to 112 cents per share                          
- Gearing reduced to 35%                                                        
- Return on invested capital (ROIC) up to 17%                                   
Commentary                                                                      
The Group`s focus on specialty product and service solutions proved most        
rewarding in 2002 with strong growth in earnings and cash generation.           
Performance                                                                     
Headline earnings of 340 cents per ordinary share were 32 per cent higher than  
in 2001, further extending the robust growth trend established since 1998. The  
compound increase in headline earnings per share over the 1998-2002 period,     
after adjusting for the effects of the November 1999 special dividend, now      
exceeds 30 per cent per annum. An increased final dividend of 72 cents per      
ordinary share has been declared (2001 - 55 cents) to bring the total dividends 
for the year to 112 cents (87 cents in 2001) with a dividend cover of 3.0 (2.8  
in 2001). The dividend declaration is published in full elsewhere.              
Sales volumes and revenues of the core businesses increased by 7 and 22 per cent
respectively as the weaker average rand exchange rate benefited the Group`s     
major customer sectors and more than offset sluggish direct sales to generally  
sombre global markets. The continuing focus on enhanced efficiencies and lower  
operating costs, together with the benefits of restructuring, contributed to a  
higher operating margin of 8.9 per cent from 7.3 per cent in 2001. The return on
invested capital (ROIC) for the Group, excluding revaluation of land, improved  
to 17 per cent, the highest level achieved in more than a decade.               
All five Group businesses contributed to the 42 per cent increase in net trading
profit with listed subsidiary Chemical Services posting an impressive gain of 37
per cent. African Explosives, Dulux and the property realisation activities all 
recorded strong performances reflecting brisk demand for their products and     
services. SANS Fibres was affected not only by lacklustre global markets but    
also by losses incurred at its newly commissioned joint venture in Stoneville,  
North Carolina where progress in technical and market development was slower    
than expected. However, good local demand enabled a record year for SANS` South 
African operation.                                                              
The sharp appreciation of the rand exchange rate in the final quarter and its   
impact on dollar-based revenues had a negative effect on trading and earnings.  
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                                                                       
Net borrowings at year-end reduced to R814 million from R987 million in 2001,   
after making the final payment of R206 million in terms of the Anglo American   
share buy-back agreement approved by shareholders in January 2001. Gearing      
reduced from 40 to 35 percent of shareholder funds.                             
This pleasing result was achieved through prudent control of capital            
expenditures, tight working capital management (now 15 per cent of sales), and  
strong operating cash flow from the businesses. The property realisation        
activities also made a noteworthy contribution of R90 million to cash flow. Cash
interest cover improved further to 5.6 times.                                   
Portfolio                                                                       
During 2002 AECI`s metamorphosis from a diversified chemical conglomerate to a  
focused specialty product and service solutions Group was successfully          
completed. Kynoch Feeds, Aroma and Fine Chemicals and a 40 per cent interest in 
Huntsman Tioxide were disposed of for a total consideration of R150 million. An 
exceptional charge of R18 million after tax associated with these disposals and 
other restructuring effects has been recognised in the income statement.        
Chemical Services has concluded an agreement to acquire the mining and alkylate 
chemicals businesses of Sentrachem for a cash consideration of approximately    
R140 million. The purchase remains subject to regulatory approvals.             
Outlook                                                                         
Amid fears of war in the Middle East and rising oil prices, few signs of        
sustainable recovery in the world`s major economies are discernible. In         
contrast, steady performance of the domestic economy seems in prospect with     
inflation and interest rates set to abate from recent highs. The stronger rand  
and recent unexpected surge in polyester raw material prices, if sustained, will
pressure margins at SANS Fibres, particularly in the first half-year.           
Nonetheless, the Group is well positioned to respond to such challenges and     
management is targeting a further increase in headline earnings for the full    
2003 financial year.                                                            
Alan Pedder    Lex van Vught                                                    
Chairman  Chief Executive                                                       
Sandton, 25 February 2003                                                       
Income statement                                                                
                                   %       2002        2001                     
                                   change  R millions  R millions               
Revenue 1                          +16     7 818       6 745                    
Net trading profit                 +42     698         492                      
Net financing costs                        (164)       (141)                    
Income from associates and                 8           25                       
investments                                                                     
                                           542         376                      
Transitional provision for post-           (20)        (20)                     
employment medical aid benefits                                                 
Amortisation of goodwill                   (59)        (56)                     
Exceptional items                          (19)        (371)                    
Net profit/(loss) before taxation          444         (71)                     
Taxation                                   (155)       3                        
Normal activities                          (156)       (85)                     
Exceptional items                          1           88                       
Net profit/(loss)                          289         (68)                     
Attributable to preference and             (49)        (20)                     
outside shareholders                                                            
Net profit/(loss) attributable to          240         (88)                     
ordinary shareholders                                                           
Headline earnings are derived                                                   
from:                                                                           
Net profit/(loss) attributable to          240         (88)                     
ordinary shareholders                                                           
Transitional provision for post-           20          20                       
employment medical aid benefits 3                                               
Amortisation of goodwill                   59          56                       
Exceptional items                          19          371                      
Tax effects of the above                   (7)         (94)                     
Outside shareholders` share of             (13)        (25)                     
the above items                                                                 
                                           318         240                      
Per ordinary share (cents):                                                     
- Headline earnings                +32     340         258                      
- Diluted headline earnings                328         249                      
- Attributable earnings/(loss)             257         (95)                     
- Diluted earnings/(loss)                  248         (91)                     
- Dividends declared               +29     112         87                       
- Dividends paid                           95          82                       
Ordinary shares (millions)                                                      
- in issue                                 94          93                       
- weighted average number of               93          93                       
shares                                                                          
- diluted weighted average number          97          96                       
of shares                                                                       
Notes                                                                           
1 Includes foreign sales of R1 875 million (2001 - R1 783 million).             
2 Accounting policies are in accordance with South African Statements of        
Generally Accepted Accounting Practice, conform to international accounting     
standards and are consistent with those applied in the previous financial year. 
3 The transitional provision for post-employment medical aid benefits has been  
excluded from the calculation of headline earnings in terms of circular 7/2002  
issued by the South African Institute of Chartered Accountants. Previously it   
was included. Comparative figures have been restated.                           
4 The auditors, KPMG Inc, have issued their opinion on the Group financial      
statements for the year ended 31 December 2002. A copy of the auditors`         
unqualified report is available for inspection at the Company`s registered      
office.                                                                         
Industry segment analysis                                                       
                Revenue           Net trading       Assets                      
                                  profit                                        
2002     2001     2002     2001     2002    2001                
                R millions        R millions        R millions                  
Mining          1 904    1 474    176       142     869     887                 
solutions                                                                       
Specialty       3 037    2 415    318       232     923     912                 
chemicals                                                                       
Specialty       2 082    1 717    173       161     905     945                 
fibres                                                                          
Property        180      149      26        9       612     675                 
Other           787      1 044    43        21      103     222                 
businesses                                                                      
Group           (172)    (54)     (38)      (73)    (88)    (36)                
services,                                                                       
development                                                                     
and intergroup                                                                  
                7 818    6 745    698       492     3 324   3 605               
Assets consist of property, plant, equipment and goodwill,                      
inventory, accounts receivable less accounts payable. Assets in                 
the property segment include land revaluation of R493 million                   
(2001 - R509 million).                                                          
Balance sheet at 31 December                                                    
                                          2002         2001                     
                                          R millions   R millions               
Assets                                                                          
Non-current assets                        2 283        2 606                    
Property, plant and equipment             1 734        1 910                    
Goodwill                                  467          525                      
Investments                               82           171                      
Current assets                            3 211        3 277                    
Inventory                                 1 248        1 231                    
Accounts receivable                       1 321        1 469                    
Cash and cash equivalents                 642          577                      
Total assets                              5 494        5 883                    
Equity and liabilities                                                          
Ordinary capital and reserves             2 086        2 264                    
Preference capital and outside            229          211                      
shareholders` interest in subsidiaries                                          
Total shareholders` interest              2 315        2 475                    
Non-current liabilities                   1 352        1 391                    
Deferred taxation                         (195)        (207)                    
Long-term borrowings                      1 196        1 248                    
Long-term provisions                      351          350                      
Current liabilities                       1 827        2 017                    
Accounts payable                          1 446        1 530                    
Provision for restructuring               56           109                      
Short-term borrowings                     260          316                      
Taxation                                  65           62                       
Total equity and liabilities              5 494        5 883                    
Statement of changes in shareholders` equity                                    
                                          2002        2001                      
                                          R millions  R millions                
Headline earnings                         318         240                       
Amortisation of goodwill net of outside   (46)        (44)                      
shareholders` interest                                                          
Transitional provision for post-          (14)        (14)                      
employment medical benefits net of                                              
taxation                                                                        
Exceptional items net of taxation and     (18)        (270)                     
outside shareholders` interest                                                  
Net profit/(loss) attributable to         240         (88)                      
ordinary shareholders                                                           
Dividends paid                            (89)        (76)                      
Foreign currency translation differences  (127)       140                       
net of deferred taxation                                                        
Ordinary shares issued                    4           2                         
Net increase/(decrease) in equity for the 28          (22)                      
year before share buy-back                                                      
Expenditure in respect of repurchasing    (206)       (775)                     
own shares                                                                      
Equity at the beginning of the year       2 264       3 061                     
Equity at the end of the year             2 086       2 264                     
Made up as follows:                                                             
Share capital and share premium           97          95                        
Non-distributable reserves                390         662                       
Surplus arising on revaluation of         330         391                       
property, plant and equipment                                                   
Foreign currency translation reserve net  54          182                       
of deferred taxation                                                            
Retained earnings of associates           1           84                        
Other                                     5           5                         
Retained income                           1 599       1 507                     
                                          2 086       2 264                     
Cash flow statement                                                             
                                          2002        2001                      
R millions  R millions                
Cash generated by operations              899         660                       
Dividends received                        8           2                         
Net financing costs                       (164)       (141)                     
Taxes paid                                (94)        (74)                      
Changes in working capital                (99)        (72)                      
Expenditure relating to long-term         (16)        (14)                      
provisions                                                                      
Expenditure relating to restructuring     (32)        (74)                      
Cash available from operating activities  502         287                       
Dividends paid                            (103)       (87)                      
Cash retained from operating activities   399         200                       
Cash utilised in investment activities    (148)       (470)                     
Proceeds from disinvestment and           167         65                        
restructuring                                                                   
Expenditure in respect of repurchasing    (206)       (775)                     
own shares                                                                      
Net cash generated/(utilised)             212         (980)                     
Cash effects of financing activities      (108)       464                       
Proceeds from issue of new shares         4           2                         
Increase/(decrease) in cash and cash      108         (514)                     
equivalents                                                                     
Cash and cash equivalents at the          577         1 037                     
beginning of the year                                                           
Translation (loss)/gain on cash and cash  (43)        54                        
equivalents                                                                     
Cash and cash equivalents at the end of   642         577                       
the year                                                                        
Other salient features                                                          
                                         2002        2001                       
                                         R millions  R millions                 
Capital expenditure                      202         424                        
- expansion                              110         276                        
- replacement                            92          148                        
Capital commitments                      243         102                        
- contracted for                         51          92                         
- not contracted for                     192         10                         
Future rentals on property, plant and    147         179                        
equipment leased                                                                
- payable within one year                35          40                         
- payable thereafter                     112         139                        
Net contingent liabilities and           152         160                        
guarantees                                                                      
Net borrowings                           814         987                        
Gearing (%)                              35          40                         
Current assets to current liabilities    1.8         1.6                        
Net asset value per ordinary share       2 222       2 430                      
(cents)                                                                         
Depreciation                             221         221                        
Directorate:                                                                    
A E Pedder* (Chairman), L C van Vught (Chief Executive),                        
N C Axelson, C B Brayshaw,  S Engelbrecht,  M J Leeming,                        
T H Nyasulu, C M L Savage                                                       
Company Secretary: M J F Potgieter *British                                     
AECI LIMITED                                                                    
Incorporated in the Republic of South Africa                                    
(Registration No. 1924/002590/06)                                               
Share code: AFE  ISIN No: ZAE000000220                                          
AECI                                                                            
www.aeci.co.za                                                                  
AEL                                                                             
Mining solutions                                                                
Development, manufacture and supply of value-adding services, initiating systems
and explosives to the mining, quarrying, and allied industries.                 
CS 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.                     
Dulux "A home`s best friend"                                                    
Decorative coatings                                                             
A leading decorative coatings supplier in southern Africa. Dulux enjoys a strong
market position as an innovator and supplier of high performance products to a  
wide variety of customers.                                                      
Date: 25/02/2003 08:01:19 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             



                                        
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