Go Back Email this Link to a friend


Afe - Aeci - Group Interim Financial Results For The Half-year Ended 30

Release Date: 24/07/2007 07:00:02      Code(s): AFE
AFE - AECI - Group Interim Financial Results For The Half-Year Ended 30         
              June 2007                                                         
AECI Limited                                                                    
Incorporated in the Republic of South Africa                                    
(Registration No. 1924/002590/06)                                               
Share code: AFE & ISIN No: ZAE000000220                                         
SPECIALTY PRODUCT AND SERVICE SOLUTIONS                                         
Group interim financial results for the half-year ended 30 June 2007            
-    Revenue up 23% excluding property activities                               
-    Dividend per ordinary share increased to 72 cents                          
-    Major expansion projects for a total of R1.1 billion on track              
Commentary                                                                      
Performance                                                                     
Headline earnings for the first half-year were 247 cents per ordinary           
share, 131 cents lower than in the first half of 2006. Earnings in that         
period were boosted by the gain on disposal of the Company`s Milnerton site     
which contributed some 200 cents to earnings per share. No comparable           
transaction took place in the current period. An increased dividend of 72       
cents per ordinary share has been declared, compared with 64 cents per          
share in 2006. The dividend declaration is published in full elsewhere.         
Group revenue increased by 16 per cent over the same period last year.          
Excluding property activities, the increase was 23 per cent. Moderately         
higher demand from the local mining, manufacturing and consumer sectors was     
augmented by strong growth in international sales. The operating margin         
excluding property improved to 7.1 per cent of sales from 6.8 per cent last     
year, notwithstanding market resistance to the full recovery of increased       
raw material costs, which kept gross margins under pressure. The 12 month       
return on average invested capital (ROIC) for the Group, excluding              
revaluation of land, reduced to 15 per cent compared to 19 per cent at June     
2006.                                                                           
African Explosives (AEL) achieved a reasonable result despite intense           
competition in the narrow reef business in South Africa which affected          
detonator margins and volumes. Operations elsewhere in Africa again             
delivered pleasing growth. The first phase of automated production of           
initiating systems at Modderfontein is operating at increasing rates and        
the second phase is on track for completion in the last quarter of 2007. A      
third and final phase, at an estimated cost of R300 million, has been           
approved by the Board with completion expected by the end of 2009. This         
will position AEL as a leading global supplier of initiating systems.           
DetNet, the electronic detonator joint venture with Dyno Nobel Limited,         
incurred a small loss in the period.                                            
Chemical Services (Chemserve) sustained its impressive growth trend with        
profit from operations 20 per cent higher than in 2006, supported by an         
excellent performance from the mining chemicals business. Operating margins     
were largely maintained despite high and volatile prices of oil-based raw       
materials. The two major projects in the mining chemicals segment of            
Chemserve`s portfolio, approved by the Board at an aggregate cost of R610       
million, have progressed as planned with commissioning scheduled in early       
2009. Further potential acquisitions to complement the investment in            
Resitec in Brazil are being evaluated.                                          
SANS Fibres (SANS) achieved a major improvement in performance relative to      
the first half of 2006 as the power outages and other disruptions of that       
period did not recur. The quality and productivity improvement programmes       
established last year delivered significant benefits but these were not         
sufficient to offset fully the escalation in rand-based costs which             
resulted in an unsatisfactory operating margin. Progress has been made in       
identifying potential strategic partners or owners that could add value to      
all or part of SANS`s business, and discussions are underway with a number      
of interested parties.                                                          
Dulux recorded a 30 per cent increase in operating profit with higher sales     
volumes of its premium branded products in South Africa, a favourable           
product mix and stable margins. Profits from its other African operations       
were higher than in 2006.                                                       
The property activities, managed by Heartland, recorded profit from             
operations of R41 million net of R23 million of remediation costs.              
Excluding the gain on disposal of the Milnerton site, profit from               
operations was R38 million in the first half of 2006. The availability of       
land ready for release and sale is likely to remain limited in the second       
half-year.                                                                      
Financial                                                                       
Good investment returns on the employer accounts established last year in       
the AECI Pension Fund boosted profit before tax by R60 million and headline     
earnings by 39 cents per share. Higher interest rates, together with an         
increased level of average borrowings, led to a significant increase in net     
financing costs. The absence in the current period of a transaction             
comparable to the Milnerton property sale raised the effective tax rate         
from 21 per cent in the first half of 2006 to 32 per cent.                      
Expansion projects in AEL and Chemserve continued to be the main components     
of net capital expenditure which, at R275 million, was more than double the     
depreciation charge for the period. Group working capital at R1 881 million     
represented 17 per cent of revenue over the previous 12 months. At June         
2006, excluding the receivable in respect of the Milnerton sale, working        
capital was R1 624 million, equivalent to 18 per cent of revenue.               
The Group`s net borrowings of R1 192 million were R58 million lower than at     
June 2006. Cash interest cover was robust at 8 times. Gearing reduced to 31     
per cent of shareholders` funds from 38 per cent at June 2006.                  
At the Annual General Meeting of the Company held on 21 May, shareholders       
authorised a general repurchase of up to 5 per cent of the ordinary shares      
in the Company. No repurchases were undertaken in the period.                   
Portfolio                                                                       
As announced on 17 July, AECI has agreed to sell Dulux, the decorative          
coatings business, to ICI plc for a cash consideration of R745 million.         
Subject to regulatory approvals, the transaction is expected to become          
effective from 1 October 2007 when a gain on disposal of some R500 million      
will be recognised in the Group accounts. At that time, and depending on        
progress with potential acquisitions, the Board will consider returning all     
or part of the sale proceeds to shareholders.                                   
Outlook                                                                         
Favourable international conditions with firm commodity prices should           
continue to support the mining and manufacturing sectors in the second half     
with concomitant benefit to the Group`s major operating businesses. As          
stated previously, however, profit after tax from property activities is        
likely to be substantially below the record level of 2006.                      
Hence management expects that headline earnings per share in 2007 are           
likely to be lower than those achieved last year excluding the non-             
recurring effect of the agreement entered into with the Pension Fund in         
that period.                                                                    
Fani Titi                              Schalk Engelbrecht                       
Chairman                               Chief executive                          
Sandton                                                                         
23 July 2007                                                                    
Income statement                                                                
                             2007        2006         2006                      
                             First half  First half   Year                      
                             Unaudited   Unaudited    Audited                   
% change  R millions  R millions   R millions                
Revenue (2)         +16       5 410       4 666        10 212                   
Profit from                                                                     
operations          -29       409         580          1 102                    
Pension fund                                                                    
employer surplus                                                                
account                       24          -            196                      
Release of                                                                      
provision for                                                                   
post-employment                                                                 
medical aid                                                                     
benefits                      36          -            131                      
469         580          1 429                     
Net financing                                                                   
costs                         (65)        (43)         (103)                    
Income from                                                                     
associates and                                                                  
investments                   5           4            7                        
                             409         541          1 333                     
Impairment of                                                                   
goodwill                      (2)         -            (6)                      
Exceptional items             (17)        (2)          (21)                     
Profit before tax             390         539          1 306                    
Tax                           (126)       (111)        (353)                    
Profit for the                                                                  
period                         264        428          953                      
Attributable to                                                                 
preference                                                                      
shareholders and                                                                
minority interest             (3)         (13)         (37)                     
Net profit                                                                      
attributable to                                                                 
ordinary                                                                        
shareholders                  261         415          916                      
Headline earnings                                                               
are derived from:                                                               
Net profit                                                                      
attributable to                                                                 
ordinary                                                                        
shareholders                  261         415          916                      
Impairment of                                                                   
goodwill                      2           -            6                        
Exceptional items                                                               
before tax                    17          2            21                       
Minority                                                                        
shareholders`                                                                   
share of the                                                                    
above items                   (2)         -            -                        
Tax effects of                                                                  
the above items               (5)         -            (1)                      
Headline earnings             273         417          942                      
Per ordinary                                                                    
share (cents):                                                                  
Headline earnings   -35       247         378          853                      
Diluted headline                                                                
earnings (3)                  245         372          842                      
Attributable                                                                    
earnings                      236         376          829                      
Diluted                                                                         
attributable                                                                    
earnings (3)                  234         370          819                      
Dividends           +13       72          64           205                      
declared                                                                        
Dividends paid                141         121          185                      
Ordinary shares                                                                 
(millions) (4)                                                                  
- in issue                    110         110          110                      
- weighted                                                                      
average number of             110         110          110                      
shares                                                                          
- diluted                                                                       
weighted average                                                                
number of shares              112         112          112                      
(3)                                                                             
Notes                                                                           
(1)  The interim financial results have been prepared in compliance with        
International Financial Reporting Standards. Accounting policies are            
consistent with those applied in the previous financial year.                   
(2)  Includes foreign sales of R1 282 million (2006 - R990 million).            
(3)  Calculated in accordance with IAS33. In 2005, the Company purchased        
call options over AECI ordinary shares which will obviate the need for the      
Company to issue new shares in terms of the AECI share option scheme.           
Therefore, there will be no future dilution of earnings from this source.       
(4)  Net of 10 311 120 (2006 - 10 311 120) treasury shares held by a            
subsidiary company.                                                             
Balance sheet                                                                   
at 30 June                                                                      
                               2007         2006         2006                   
30 June      30 June      31 Dec                 
                               Unaudited    Unaudited    Audited                
                               R millions   R millions   R millions             
Assets                                                                          
Non-current assets              3 619        3 210        3 445                 
Property, plant and equipment   2 133        1 849        1 965                 
Goodwill                        1 015        1 001        1 019                 
Pension fund surplus            220         -             196                   
Investments                     132          101          119                   
Deferred tax                    119          259          146                   
Current assets                  4 471        4 024        4 350                 
Inventory                       1 938        1 497        1 733                 
Accounts receivable             2 139        2 182        2 242                 
Cash and cash equivalents       394          345          375                   
Total assets                    8 090        7 234        7 795                 
Equity and liabilities                                                          
Ordinary capital and reserves   3 698        3 186        3 595                 
Preference capital and                                                          
minority interest in                                                            
subsidiaries                    134          109          132                   
Total shareholders` interest    3 832        3 295        3 727                 
Non-current liabilities         905          1 064        942                   
Deferred tax                    32           26           35                    
Borrowings                      526          549          518                   
Provisions                      347          489          389                   
Current liabilities             3 353        2 875        3 126                 
Accounts payable                2 196        1 795        2 230                 
Borrowings                      1 060        1 046        797                   
Tax payable                     97           34           99                    
Total equity and liabilities    8 090        7 234        7 795                 
Industry segment analysis                                                       
for the half-year ended 30 June                                                 

                                    Profit                                      
                                    from                                        
                 Revenue            operations       Net assets                 
2007     2006      2007      2006   2007     2006              
                 Unaudited          Unaudited        Unaudited                  
                 R millions         R millions       R millions                 
Mining solutions  1 294    1 152     97        105    1 223    1 037            
Specialty                                                                       
chemicals         2 596    2 082     253       210    2 567    2 219            
Specialty fibres  1 062    786       15        (28)   727      691              
Decorative                                                                      
coatings          369      297       17        13     219      168              
Property          212      458       41        292    409      786              
Group services,                                                                 
intergroup and                                                                  
other             (123)    (109)     (14)      (12)   (116)    (167)            
                 5 410    4 666     409       580    5 029    4 734             
Net assets consist of property, plant, equipment and goodwill, inventory,       
accounts receivable less accounts payable.                                      
Cash flow statement                                                             
                               2007          2006         2006                  
                               First half    First half   Year                  
                               Unaudited     Unaudited    Audited               
R millions    R millions   R millions            
Cash generated by operations    536           689          1 385                
Dividends received              4             3            7                    
Net financing costs paid        (69)          (51)         (114)                
Taxes paid                      (107)         (142)        (202)                
Changes in working capital      (147)         (422)        (265)                
Expenditure relating to non-                                                    
current provisions              (31)          (59)         (130)                
Expenditure relating to                                                         
restructuring                   (12)          -            (13)                 
Cash available from operating                                                   
activities                      174           18           668                  
Dividends paid                  (156)        (135)         (206)                
Cash flows from operating                                                       
activities                      18            (117)        462                  
Cash flows from investment                                                      
activities                      (274)         (354)        (612)                
Proceeds from disposal of                                                       
investments and businesses      8             2            3                    
Investments                     (7)           (154)        (199)                
Net capital expenditure         (275)         (202)        (416)                
Net cash utilised               (256)         (471)        (150)                
Cash flows from financing                                                       
activities                      271           388          99                   
Increase/(decrease) in cash                                                     
and cash equivalents            15            (83)         (51)                 
Cash and cash equivalents at                                                    
the beginning of the period     375           409          409                  
Translation gain on cash and                                                    
cash equivalents                4             19           17                   
Cash and cash equivalents at                                                    
the end of the period           394           345         375                   
Statement of changes in equity                                                  
                                2007         2006         2006                  
                                First half   First half   Year                  
                                Unaudited    Unaudited    Audited               
R millions   R millions   R millions            
Profit for the period            264          428          953                  
Dividends paid                   (156)        (135)        (206)                
Revaluation of derivative                                                       
instruments                      (3)         -             6                    
Foreign currency translation                                                    
differences                                                                     
net of deferred tax              4            46           17                   
Changes in the Group             -            13           14                   
Other                            (4)          3            3                    
Net increase in equity for the                                                  
period                           105          355          787                  
Equity at the beginning of the                                                  
period                           3 727        2 940        2 940                
Equity at the end of the period  3 832        3 295        3 727                
Made up as follows:                                                             
Issued ordinary capital          453          453          453                  
Non-distributable reserves       289          319          294                  
Surplus arising on revaluation                                                  
of property,                                                                    
plant and equipment              257          263          261                  
Foreign currency translation                                                    
reserve net of deferred tax      24           49           20                   
Other                            8            7            13                   
Retained income                  2 956        2 414        2 848                
Preference capital               6            6            6                    
Minority interest                128          103          126                  
                                3 832        3 295        3 727                 
Other salient features                                                          
                                                                                
                                2007         2006                               
                                First        First        2006                  
half         half         Year                  
                                Unaudited    Unaudited    Audited               
                                R millions   R millions   R millions            
Capital expenditure - property,                                                 
plant and equipment              282         210           433                  
- expansion                      170          142          239                  
- replacement                    112          68           194                  
Capital commitments              1 264        226          650                  
- contracted for                 17           50           91                   
- not contracted for             1 247        176          559                  
Future rentals on property,                                                     
plant and                                                                       
equipment leased                 298          236          290                  
- payable within one year        64           46           65                   
- payable thereafter             234          190          225                  
Net contingent liabilities and                                                  
guarantees                       117          238          121                  
Net borrowings                   1 192        1 250        940                  
Gearing (%)                      31           38           25                   
Current assets to current                                                       
liabilities                      1.3          1.4          1.4                  
Net asset value per ordinary                                                    
share (cents)                    3 349       2 885         3 255                
Depreciation                     114         106           223                  
Directorate                                                                     
F Titi (Chairman), S Engelbrecht (Chief executive), NC Axelson #,               
FPP Baker#, RMW Dunne*, GN Edwards#, MJ Leeming, LM Nyhonyha,                   
AC Parker, LC van Vught.                                                        
Company secretary: A Kennedy                                                    
#Executive   *British                                                           
www.aeci.co.za                                                                  
Mining solutions                                                                
Development, manufacture and supply of value-adding services, initiating        
systems and explosives to the mining, quarrying, and allied industries.         
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.                                                         
Specialty fibres                                                                
Production, marketing and distribution of specialty nylon and polyester         
yarn for local and export markets; production of PET bottle polymer.            
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.                                        
Property                                                                        
Heartland manages the realisation of land and related assets that have          
become surplus to the Group`s requirements.                                     
23 July 2007                                                                    
Sponsor: J.P.Morgan Equities Limited                                            
Date: 24/07/2007 07:00:02 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  



                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.