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Aeci - Interim Results

Release Date: 29/07/2003 07:23:09      Code(s): AFE
AECI - Interim Results                                                          
AECI LIMITED                                                                    
Incorporated in the Republic of South Africa                                    
(Registration No 1924/002590/06)                                                
Share code: AFE                                                                 
ISIN No: ZAE000000220                                                           
Group interim results for the six months ended 30 June 2003                     
Specialty product and service solutions                                         
Highlights                                                                      
* Headline earnings per share match 2002 levels                                 
* Interim ordinary dividend increased to 42c                                    
* Return on invested capital (ROIC) steady at 15%                               
* Increase in full year headline earnings per share still targeted              
Commentary                                                                      
Performance                                                                     
Headline earnings of 151 cents per ordinary share were unchanged from the high  
level established in the first half of 2002 but 59 per cent higher than in the  
first half of 2001. An increased dividend of 42 cents per ordinary share has    
been declared (2002 - 40 cents) with a dividend cover of 3.6 (2002 - 3.8). The  
dividend declaration is published in full elsewhere.                            
Sales volumes and revenues of Group businesses, excluding those sold in 2002,   
increased by 3 and 1 per cent respectively as demand slowed in local markets and
the continued appreciation of the rand against the US dollar eroded the rand    
value of dollar-based revenues. The ongoing focus on enhanced efficiencies and  
lower operating costs enabled the operating margin to be largely maintained at  
8.2 per cent from 8.5 per cent in the same period last year. The annualised     
return on invested capital (ROIC) for the Group, excluding revaluation of land, 
was steady at 15 per cent.                                                      
African Explosives benefited from growth in the platinum sector and a favourable
product mix, which contributed to a pleasing improvement in trading profit.     
Chemical Services continued its impressive growth record as tight cost control  
and a small increase in volumes enabled an increase in trading margin. The      
property activities of Heartland delivered improved results in challenging      
market conditions while Dulux was affected by lower demand for decorative       
coatings.                                                                       
As forewarned earlier this year in the commentary on 2002, margins at SANS      
Fibres were eroded by the strength of the rand throughout the first half of the 
year. However, following the spike in polyester raw material prices during the  
first quarter of the year, SANS achieved much improved results in the second    
quarter. Additional business at good dollar margins was procured in Asia and the
joint venture operations in Stoneville, North Carolina, approached break-even   
before depreciation by mid-year. These gains notwithstanding, it is now evident 
that SANS" full year trading profit will fall short of that recorded in 2002.   
Financial                                                                       
Capital expenditure of R109 million was controlled to a level in line with the  
depreciation charge for the period. Investment expenditure included the         
acquisition by Chemical Services of the mining and alkylate chemicals businesses
of Sentrachem for a cash consideration of approximately R160 million. Group     
working capital was well managed at 17 per cent of sales.                       
The Group"s net borrowings were contained to R1 057 million at mid-year. Cash   
interest cover at 5.3 times was in line with that achieved in the first half of 
2002 while gearing increased from year-end to 46 per cent of shareholder funds, 
the same level as June 2002.                                                    
Portfolio                                                                       
Chemical Services has concluded an agreement to acquire from Ondeo Nalco Company
of the USA the 50 per cent interest in Ondeo Nalco SA, which it does not already
own for a cash consideration of approximately R120 million. The purchase is     
subject to regulatory approvals.                                                
The Group"s segmental reporting has been amended to include "Decorative and     
packaging coatings" as a distinct and ongoing component of the business         
portfolio. Revenue and trading profit from non-core businesses sold during 2002 
have been included in the segment "Group services, intergroup and other" for    
that year.                                                                      
Outlook                                                                         
While international interest rates are at historic lows and there has been some 
easing of security fears, tangible signs of sustainable recovery in the world"s 
major economies remain elusive. Sluggish global markets, together with the      
further significant strengthening of the rand against the US dollar since year- 
end, have undermined the steady performance of the domestic economy,            
particularly in the mining and export-oriented manufacturing sectors. However,  
further reductions in local interest rates as inflation declines are expected to
bolster domestic consumption in due course, and some improvement in trading     
conditions for the Group now seems in prospect over the next 18 months.         
With focused actions to enhance competitiveness underpinning performance in     
current market conditions, management continues to target an increase in        
headline earnings for the full 2003 financial year.                             
Alan Pedder                   Schalk Engelbrecht                                
Chairman                      Chief Executive                                   
Sandton, 28 July 2003                                                           
Income statement                                                                
                                                2003        2002        2002    
                                          First half  First half        Year    
                                       %   Unaudited   Unaudited     Audited    
change  R millions  R millions  R millions    
Revenue (1)                           -2       3 753       3 849       7 818    
Net trading profit                    -5         309         325         698    
Net financing costs                             (79)        (84)       (164)    
Income from associates and                         3           4           8    
investments                                                                     
                                                 233         245         542    
Transitional provision for post-                                                
employment                                                                      
medical aid benefits (2)                        (10)         (9)        (20)    
Amortisation of goodwill                        (34)        (29)        (59)    
Exceptional items                                  -           -        (19)    
Net profit before taxation                       189         207         444    
Taxation                                        (61)        (75)       (155)    
Normal activities                               (61)        (75)       (156)    
Exceptional items                                  -           -           1    
Net profit                                       128         132         289    
Attributable to preference and                  (20)        (20)        (49)    
outside shareholders                                                            
Normal activities                               (27)        (26)        (62)    
Amortisation of goodwill                           7           6          13    
Net profit attributable to                       108         112         240    
ordinary shareholders                                                           
Headline earnings are derived                                                   
from:                                                                           
Net profit attributable to                       108         112         240    
ordinary shareholders                                                           
Transitional provision for post-                                                
employment medical                                                              
aid benefits (2)                                  10           9          20    
Amortisation of goodwill                          34          29          59    
Exceptional items                                  -           -          19    
Outside shareholders" share of                   (7)         (6)        (13)    
the above items                                                                 
Tax effects of the above items                   (3)         (3)         (7)    
                                                 142         141         318    
Per ordinary share (cents):                                                     
- Headline earnings                    -         151         151         340    
- Diluted headline earnings                      146         145         328    
- Attributable earnings                          115         120         257    
- Diluted earnings                               111         115         248    
- Dividends declared                  +5          42          40         112    
- Dividends paid                                  72          55          95    
Ordinary shares (millions)                                                      
- In issue                                        94          93          94    
- Weighted average number of                      94          93          93    
shares                                                                          
- Diluted weighted average                        98          97          97    
number of shares                                                                
Notes                                                                           
(1) Includes foreign sales of R772 million (2002 - R987 million).               
(2) The portion of the provision for post-employment medical aid benefits       
representing the transitional liability calculated in accordance with AC 116 has
been excluded from the calculation of headline earnings in terms of circular    
7/2002 issued by the South African Institute of Chartered Accountants. At 30    
June 2002 it was included. Comparative figures have been restated.              
(3) 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. 
Industry segment analysis                                                       
Revenue        Net trading       Assets      
                                                    profit                      
                                  2003     2002     2003   2002   2003    2002  
For the six months ended          Unaudited        Unaudited      Unaudited     
30 June                          R millions       R millions      R millions    
Mining solutions                    987     912       94     83    881     823  
Specialty chemicals               1 537   1 470      164    146  1 163     962  
Specialty fibres                    935   1 038       45     91    849     944  
Decorative and packaging            291     291       11     13     91     145  
coatings                                                                        
Property                             84      83       14     10    620     650  
Group services, intergroup         (81)      55     (19)   (18)   (80)      17  
and other                                                                       
                                  3 753   3 849      309    325  3 524   3 541  
Assets consist of property, plant, equipment and goodwill, inventory, accounts  
receivable and accounts payable. Assets in the property segment include land    
revaluation of R493 million (2002 - R509 million).                              
Balance sheet                                                                   
                                            2003         2002        2002       
                                          30 Jun       30 Jun      31 Dec       
Unaudited    Unaudited     Audited       
                                      R millions   R millions  R millions       
Assets                                                                          
Non-current assets                         2 316        2 410       2 283       
Property, plant and equipment              1 696        1 829       1 734       
Goodwill                                     537          496         467       
Investments                                   83           85          82       
Current assets                             3 052        3 301       3 211       
Inventory                                  1 232        1 252       1 248       
Accounts receivable                        1 381        1 523       1 321       
Cash and cash equivalents                    439          526         642       
Total assets                               5 368        5 711       5 494       
Equity and liabilities                                                          
Ordinary capital and reserves              2 093        2 050       2 086       
Preference capital and outside                                                  
shareholders"                                                                   
interest in subsidiaries                     218          222         229       
Total shareholders" interest               2 311        2 272       2 315       
Non-current liabilities                    1 362        1 415       1 352       
Deferred taxation                          (200)        (188)       (195)       
Long-term borrowings                       1 198        1 243       1 196       
Long-term provisions                         364          360         351       
Current liabilities                        1 695        2 024       1 827       
Accounts payable                           1 322        1 559       1 446       
Provision for restructuring                   26           86          56       
Short-term borrowings                        298          330         260       
Taxation                                      49           49          65       
Total equity and liabilities               5 368        5 711       5 494       
Statement of changes in shareholders" equity                                    
                                             2003        2002        2002       
                                       First half  First half        Year       
                                        Unaudited   Unaudited     Audited       
R millions  R millions  R millions       
Headline earnings                             142         141         318       
Amortisation of goodwill net of              (27)        (23)        (46)       
outside shareholders" interest                                                  
Transitional provision for post-                                                
employment medical aid                                                          
benefits net of taxation                      (7)         (6)        (14)       
Exceptional items net of taxation               -           -        (18)       
and outside shareholders" interest                                              
Net profit attributable to ordinary           108         112         240       
shareholders                                                                    
Dividends paid                               (68)        (51)        (89)       
Foreign currency translation                 (30)        (70)       (127)       
differences net of deferred taxation                                            
Revaluation of derivative                     (5)           -           -       
instruments                                                                     
Ordinary shares issued                          2           1           4       
Net increase/(decrease) in equity               7         (8)          28       
for the period before share buy-back                                            
Expenditure in respect of                       -       (206)       (206)       
repurchasing own shares                                                         
Equity at the beginning of the              2 086       2 264       2 264       
period                                                                          
Equity at the end of the period             2 093       2 050       2 086       
Made up as follows:                                                             
Share capital and share premium                98          94          97       
Non-distributable reserves                    355         465         390       
Surplus arising on revaluation of             330         346         330       
property, plant and equipment                                                   
Foreign currency translation reserve           24         112          54       
net of deferred taxation                                                        
Revaluation of derivative                     (5)           -           -       
instruments                                                                     
Retained earnings of associates                 1           2           1       
Other                                           5           5           5       
Retained income                             1 640       1 491       1 599       
2 093       2 050       2 086       
Cash flow statement                                                             
                                            2003         2002        2002       
                                      First half   First half        Year       
Unaudited    Unaudited     Audited       
                                      R millions   R millions  R millions       
Cash generated by operations                 418          445         899       
Dividends received                             3            4           8       
Net financing costs                         (79)         (84)       (164)       
Taxes paid                                  (69)         (51)        (94)       
Changes in working capital                  (93)         (53)        (99)       
Expenditure relating to long-term            (5)          (2)        (16)       
provisions                                                                      
Expenditure relating to                     (29)         (23)        (32)       
restructuring                                                                   
Cash available from operating                146          236         502       
activities                                                                      
Dividends paid                              (77)         (59)       (103)       
Cash retained from operating                  69          177         399       
activities                                                                      
Cash utilised in investment                (300)         (93)       (148)       
activities                                                                      
Proceeds from disinvestment and                1           79         167       
restructuring                                                                   
Expenditure in respect of                      -        (206)       (206)       
repurchasing own shares                                                         
Net cash (utilised)/generated              (230)         (43)         212       
Cash effects of financing activities          40            9       (108)       
Proceeds from issue of new shares              2            1           4       
(Decrease)/increase in cash and cash       (188)         (33)         108       
equivalents                                                                     
Cash and cash equivalents at the             642          577         577       
beginning of the period                                                         
Translation loss on cash and cash           (15)         (18)        (43)       
equivalents                                                                     
Cash and cash equivalents at the end         439          526         642       
of the period                                                                   
Other salient features                                                          
                                             2003        2002        2002       
                                       First half  First half        Year       
Unaudited   Unaudited     Audited       
                                       R millions  R millions  R millions       
Capital expenditure                           109          99         202       
- expansion                                    73          68         110       
- replacement                                  36          31          92       
Capital commitments                           134          88         243       
- contracted for                               73          64          51       
- not contracted for                           61          24         192       
Future rentals on property, plant             154         177         147       
and equipment leased                                                            
- payable within one year                      40          41          35       
- payable thereafter                          114         136         112       
Net contingent liabilities and                187         155         152       
guarantees                                                                      
Net borrowings                              1 057       1 047         814       
Gearing (%)                                    46          46          35       
Current assets to current                     1.8         1.6         1.8       
liabilities                                                                     
Net asset value per ordinary share          2 223       2 194       2 222       
(cents)                                                                         
Depreciation                                  108         109         221       
Directors:                                                                      
AE Pedder* (Chairman), S Engelbrecht (Chief Executive),                         
NC Axelson, CB Brayshaw, MJ Leeming, TH Nyasulu,                                
CML Savage, LC van Vught                                                        
*British                                                                        
AECI and                                                                        
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.                 
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                                                                           
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: 29/07/2003 07:23:22 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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