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A E C I LIMITED - Reviewed Condensed Consolidated Financial Results and Final Cash Dividend Declaration for the year ended 31 December

Release Date: 26/02/2013 07:05:00      Code(s): AFE     
Financial Results and Final Cash Dividend Declaration
for the year ended 31 December

AECI Limited
(AECI or the Company or the Group)
(Incorporated in the Republic of South Africa)
Registration number 1924/002590/06
Tax reference number 9000008608
ISIN NO: ZAE000000220

for the year ended 31 December 2012

The Groups underlying businesses delivered a creditable performance in an extremely challenging trading environment
characterised by depressed global economic conditions, particularly in Europe, and protracted strike action in South Africas mining,
transport and agricultural sectors. The strikes had an adverse impact in excess of R100 million on the Groups profit from

Revenue increased by 11% to R14 916 million (2011: R13 397 million), largely as a result of the weaker exchange rate and
increased selling prices to recover higher ammonia and chemical commodity prices. Overall volumes were flat.

Headline earnings declined by 21% to R611 million (2011: R772 million), due mainly to non-cash IFRS charges of R168 million
relating to the B-BBEE transactions concluded early in the year. Profit from operations of R1 341 million was up 2% on the
R1 316 million achieved in the prior year, the trading margin declined to 9,0% (2011: 9,8%), earnings per share were 564 cents
(2011: 724 cents) and headline earnings per share were 547 cents (2011: 720 cents).

The Board has declared a final cash dividend of 185 cents per ordinary share (2011: 179 cents).

The Group achieved its best ever safety performance in 2012, with the Total Recordable Incident Rate (TRIR) improving to
0,53 (2011: 0,67). The TRIR measures the number of incidents per 200 000 hours worked. Safety is a key performance indicator for
management and it is pleasing that the sustained efforts in this regard have had such a positive result.

AEL Mining Services (AEL) increased its revenue by 15% to R6 327 million (2011: R5 494 million). Volumes improved by 5%,
mainly in markets outside South Africa. Profit from operations declined to R431 million (2011: R510 million). In the first half-year,
supply chain constraints in respect of ammonia and plant shutdowns adversely impacted results by R50 million. In the second six
months, AELs results were marred by strikes at customers sites in the local coal, gold and platinum sectors. The loss of profits due
to these disruptions was estimated at R62 million. Higher priced ammonium nitrate in Indonesia also affected performance in the
second half.

The trading margin declined to 6,8% (2011: 9,3%).

Significant growth was recorded in the coal and open pit mining sectors in Southern Africa. Strikes in South Africas underground
narrow reef gold and platinum mines as well as safety-related closures compounded the loss of revenue and profit for AELs
regional business.

Good volume and revenue growth were recorded by the African business, especially in West Africa. AEL invested in three
additional bulk emulsion explosives manufacturing plants to improve its supply capacity. The plants are in Burkina Faso, the
Democratic Republic of Congo and Egypt and these will be commissioned in 2013.

The international business also grew, with four new contracts secured in Indonesia  three in the coal sector and one in
underground gold mining. Supply to these will commence in 2013.

During September 2012, AECI negotiated the acquisition of a 42% shareholding in an equity partnership with PT Black Bear
Resources Indonesia (BBRI) for US$23 million. This three-phased investment, which is subject to certain conditions, will give AEL
in-country access to a secure source of ammonium nitrate that will assist in sustaining the business growth in the region. BBRI is
currently erecting a 60 000 tonne per annum ammonium nitrate facility which is due to be commissioned by mid-2013. It is
anticipated that the final phase of the acquisition will be completed by the first quarter of 2014, once the ammonium nitrate plant
achieves name plate capacity.

The Initiating Systems Automated Plant (ISAP) produced 90 million detonators and 24 million automated shock tube assemblies.
Production ramp-up in the first six months was disappointing and a focused intervention commenced in July to rectify problems and
enhance efficiencies. The plant is now technically complete and the technology has been proved. Production volumes in the second
half were adversely affected by market constraints owing to the mining strikes. Cost savings of R57 million were achieved during
the year. The reduction in personnel at the conventional plants is underway, having been delayed by the industrial relations climate
prevailing in South Africa. Section 189 notices were issued after year-end in terms of the Labour Relations Act, No. 66 of 1995.

Capital investment, including BBRI, totalled R409 million (2011: R276 million). R205 million of this was for expansion projects.

Specialty chemicals
The specialty chemicals clusters revenue increased by 11% to R8 397 million (2011: R7 558 million) due to sustained high
chemical commodity prices as the ZAR/US$ exchange rate remained weaker in the year. Volumes were marginally negative largely
due to the strike action at customers. Profit from operations was 7% higher at R944 million (2011: R881 million). As a result of the
higher revenue value of traded commodity products at lower margins, the overall trading margin declined to 11,2% from 11,7% in

This was a highly commendable performance in a depressed environment for the mining and manufacturing sectors. Particularly
good results were achieved by Akulu Marchon, Chemical Initiatives, Industrial Oleochemical Products, Lake International
Technologies and Nulandis. Senmin again delivered a solid result, notwithstanding the platinum mining industrys difficulties in
respect of strike action and some product substitution due to high guar prices.

The negative effect of the strikes on the clusters overall profit from mining chemicals was estimated at R45 million.

The weaker exchange rate had little effect on customers output as export opportunities were curtailed by an adverse global
economic climate, particularly in the Eurozone.

The acquisition of General Electrics Chemical and Monitoring Solutions business in Africa and the Indian Ocean Islands was
completed at the end of June, for a consideration of R167 million. The acquisition has been fully integrated into ImproChem and will
enhance ImproChems technology and service offering for water treatment and process chemicals markets. The realisation of the
benefits are expected from 2013.

AECI also acquired 80% of Afoodable which has been merged into Lake Foods, expanding the companys product and service
offering to include liquid marinades and sauces.

The acquisition of Cellulose Derivatives was approved by the Competition Tribunal, with conditions, late in the year. This business
is a strategic addition to the mining chemicals portfolio.

After a detailed strategic review AECI sold its 50% interest in Resitec in Brazil to its joint venture partner, the MeadWestvaco
Corporation. Although investment in Brazil remains part of AECIs strategy, the review concluded that Resitecs business model and
positioning was unlikely to contribute meaningfully to AECIs strategic objectives in the region. Net proceeds of R108 million were
received on the disposal and a profit on the sale of the investment of R10 million was realised.

Capital expenditure for the cluster totalled R161 million (2011: R150 million), most of which was invested in expansion projects.

Revenue of R400 million (2011: R476 million) from Heartland was comprised largely of income from rentals and operation services.
Land sales totalled R47 million. Operating profit decreased to R34 million (2011: R99 million) and development expenditure of
R66 million (2011: R25 million) was incurred.

Although the South African property development market remains weak overall, demand for land for industrial end uses is improving
and sales are expected at Modderfontein in 2013.

AECI continues to assess alternative models to accelerate value realisation from land surplus to its operational requirements.

Specialty fibres
SANS Technical Fibers (STF) delivered revenue of R339 million (2011: R333 million) and profit from operations declined to
R40 million (2011: R53 million).

Although performance was tempered by depressed global economic conditions for most of the year, good results were delivered
by STFs industrial business and sales to the automotive sector exceeded expectations as the US economy showed a level of

STFs results were impacted by high raw material prices and uncompetitive two-stage technology. During 2013 new single-stage
technology will be installed and this R80 million investment will improve global competitiveness and product diversity.

STFs results will be reported as part of the specialty chemicals cluster in future. AECI continues to evaluate this business long-
term strategic fit in the Group.
Capital expenditure totalled R557 million for the year (2011: R475 million), with R265 million of this committed to expansion projects
at customer sites for explosives and mining chemicals. Cash was well maintained and gearing decreased to 32% of shareholders
interest (2011: 36%) despite an increase in working capital. Net working capital was 18,0% of revenue (2011: 17,7%) which reflects
the longer working capital trade cycles in operations outside South Africa.

The higher effective income tax rate of 35% related primarily to the non-deductibility of the B-BBEE transaction IFRS 2 charges of
R168 million and the effects of tax on higher profits in geographies outside South Africa.

Cash interest cover improved to 8,2 times (2011: 7,7 times). Net interest paid decreased to R205 million (2011: R226 million) as
lower interest rates offset the longer working capital trade cycle. No interest was capitalised in the year (2011: R17 million).

Fani Titi retired as a Non-executive Director and Chairman of the Board at the Annual General Meeting in May. He was succeeded
as Chairman by Schalk Engelbrecht.

Graham Edwards, Chief Executive, will retire from the Board on 28 February 2013. Mark Dytor, who was appointed to the Board in
an Executive capacity on 2 January 2013, will assume the role of Chief Executive on 1 March 2013.

The Board thanks both Fani and Graham for their dedicated service to the Company.

Strategic focus and outlook
Managements focus in 2013 will be on improving internal efficiencies, including working capital, and on optimising its operating
platforms. At the same time, AECI will continue to pursue its growth strategy in the rest of Africa and further afield.

A number of factors external to the Company could affect its performance in the coming year. The platinum sector is likely to
undergo restructuring. This could result in a contraction in South Africas platinum mining industry which would impact AEL and
Senmin. The industrial relations climate in South Africa could also be a determinant for AECIs local customers and operations.

Mining volumes in other countries, where Group businesses have an established presence, are expected to increase in line with
growth in emerging markets.

Manufacturing growth in South Africa is expected to continue, albeit at a slow pace, owing to the prevailing global and local
economic environments.

Schalk Engelbrecht                    Graham Edwards
Chairman                              Chief Executive

Woodmead, Sandton
26 February 2013
Final ordinary cash dividend No. 158
Notice is hereby given that on Monday, 25 February 2013 the Directors of AECI declared a gross final cash dividend of 185 cents
per share, in respect of the financial year ended 31 December 2012, payable on Monday, 15 April 2013 to ordinary shareholders
recorded in the books of the Company at the close of business on Friday, 12 April 2013.

The last day to trade cum dividend will be Friday, 5 April 2013 and shares will commence trading ex dividend as from Monday, 8
April 2013.

A South African dividend withholding tax of 15% will be applicable to all shareholders who are not either exempt or entitled to a
reduction of the withholding tax rate in terms of a relevant Double Taxation Agreement resulting in a net dividend of 157,25 cents per
share to those shareholders who are not exempt. Application forms for exemption or reduction may be obtained from the Transfer
Secretaries and must be returned to them on or before Friday, 5 April 2013.

The issued share capital at the declaration date is 128 241 140 listed ordinary shares and 10 117 951 unlisted redeemable
convertible B ordinary shares. The dividend has been declared from the income reserves of the Company. No Secondary Tax on
Companies credits are available to be used.

Any change of address or dividend instruction must be received on or before Friday, 5 April 2013.

Share certificates may not be dematerialised or rematerialised from Monday, 8 April 2013 to Friday, 12 April 2013, both days

By order of the Board
EN Rapoo
Company Secretary

Woodmead, Sandton
26 February 2013

Directors: S Engelbrecht (Chairman), GN Edwards (Chief Executive)+, RMW Dunne*, MA Dytor, Z Fuphe,
KM Kathan (Financial Director), MJ Leeming, LL Mda, AJ Morgan, LM Nyhonyha, R Ramashia.
+Executive *British

Company Secretary: EN Rapoo

Transfer Secretaries
Computershare Investor Services Proprietary Limited               Computershare Investor Services plc
70 Marshall Street                                                PO Box 82
Johannesburg                                                      The Pavilions
2001                                                              Bridgwater Road
                                                                  Bristol BS 99 7NH

Registered Office:
1st floor, AECI Place
24 The Woodlands
Woodlands Drive

Rand Merchant Bank (A division of FirstRand Bank Limited)
Income statement
R millions                                                     change       2012       2011
Revenue (2)                                                       +11     14 916     13 397
Net operating costs                                                     (13 575)   (12 081)
Profit from operations                                            +2       1 341      1 316
CST share-based payment (3)                                                (138)          
Net income from pension fund employer
surplus accounts                                                              8         29
Net (loss)/income from plan assets for
post-retirement medical aid liabilities                                      (6)         5
                                                                          1 205      1 350
Interest expense (4)                                                      (262)      (234)
Interest received                                                            40         27
Share of profit of associate companies                                         *         1
Profit before tax                                                           983      1 144
Income tax expense (5)                                                    (345)      (306)
Profit for the year                                                         638        838
Profit for the year attributable to:
 ordinary shareholders                                                     630        777
 preference shareholders                                                     2          2
 non-controlling interest                                                    6         59
                                                                            638        838
Headline earnings are derived from:
Profit attributable to ordinary shareholders                                630        777
Impairment of goodwill                                                        9          
Impairment of property, plant and equipment                                   3          
Profit on disposal of businesses, joint ventures and
subsidiaries                                                                (15)        (1)
Profit on disposal of property, plant
and equipment                                                               (18)        (7)
Tax effects of the above items                                                 2          3
Headline earnings                                                           611        772
Per ordinary share (cents):
Headline earnings                                                - 24       547        720
Diluted headline earnings                                                   521        719
Basic earnings                                                   - 22       564        724
Diluted basic earnings                                                      537        723
Dividends declared                                                +3        185        179
Dividends paid                                                              257        213
*Nominal amount

R millions                                                                 2012       2011
Profit for the year                                                         638        838
Other comprehensive income net of tax:
Foreign currency translation differences net of deferred tax                 41        182
Total comprehensive income for the year                                     679      1 020
Total comprehensive income attributable to:
 ordinary shareholders                                                     672        954
 preference shareholders                                                     2          2
 non-controlling interest                                                    5         64
                                                                            679      1 020
R millions                                                                2012      2011
Total comprehensive income for the year                                     679    1 020
Dividends paid                                                            (297)    (237)
Acquisition of subsidiary                                                     1      (37)
Issue of ordinary shares:
 at par value (3)                                                            4        
 at market value (6)                                                       393        
Net effect of acquisition of non-controlling interest to equity (6)       (393)        
Share-based payment reserve                                                  30        
Transfer to retained earnings for CST share-based payment                   138        
Equity at the beginning of the year                                       5 214    4 468
Equity at the end of the year                                             5 769    5 214
Made up as follows:
Ordinary share capital                                                      116      107
Share premium (6)                                                           496      108
Reserves                                                                    406      344
Property revaluation surplus                                                237      237
Foreign currency translation reserve                                        143      101
Share-based payment reserve                                                  30        
Other                                                                        (4)       6
Retained earnings (6)                                                     4 697    4 439
Preference share capital                                                       6       6
Non-controlling interest (6)                                                 48      210
                                                                          5 769    5 214

Millions                                                                  2012     2011
Listed ordinary shares
At the beginning of the year                                              119,1    119,1
Issued during the period for CST and KTH transactions (3)?(6)                9,1        
At the end of the year                                                    128,2    119,1
Treasury shares held by subsidiary company                                (11,9)   (11,9)
                                                                          116,3    107,2
Unlisted redeemable convertible ordinary shares
At the beginning of the year                                                          
Issued during the period for EST transaction (3)                            10,1       
At the end of the year                                                      10,1       
Treasury shares held by consolidated EST (3)                              (10,1)       
Ordinary shares in issue                                                  116,3    107,2

Millions                                                                   2012     2011
Weighted average number of ordinary shares at the beginning of the year   119,1    119,1
Weighted average number of ordinary shares issued during the year          17,4        
Weighted average number of ordinary shares held by consolidated EST        (9,0)       
Weighted average number of contingently returnable ordinary shares
held by CST                                                                (3,9)        
Weighted average number of shares held by consolidated subsidiary         (11,9)   (11,9)
Weighted average number of ordinary shares for basic earnings per share   111,7    107,2
Dilutive adjustment for potential ordinary shares                            5,6        
Dilutive adjustment for share options under the AECI share option
scheme(7)                                                                   0,1      0,2
Weighted average number of ordinary shares for diluted earnings
per share                                                                 117,4    107,4
R millions                                        2012      2011
Non-current assets                                6 314     6 024
Property, plant and equipment                     3 733     3 721
Investment property                                 445       436
Intangible assets                                   214        77
Goodwill                                          1 124     1 078
Pension fund employer surplus accounts              267       259
Investments                                          86        22
Loans receivable                                     11        24
Deferred tax                                        434       407
Current assets                                    6 752     6 433
Inventories                                       2 867     2 584
Accounts receivable                               2 737     2 772
Assets classified as held for sale                            16
Cash                                              1 148     1 061

Total assets                                     13 066    12 457
Equity and liabilities
Ordinary capital and reserves                     5 715     4 998
Non-controlling interest                             48       210
Preference share capital                              6         6
Total equity                                      5 769     5 214
Non-current liabilities                           2 488     2 702
Deferred tax                                        232       179
Non-current borrowings                            1 251     1 507
Non-current provisions                            1 005     1 016
Current liabilities                               4 809     4 541
Accounts payable                                  2 912     2 987
Current borrowings                                1 738     1 421
Tax payable                                         159       133

Total equity and liabilities                     13 066    12 457

R millions                                         2012      2011
Cash generated by operations                      1 867     1 883
Interest paid                                     (245)     (253)
Interest received                                     40        27
Income tax paid                                   (308)     (319)
Changes in working capital                        (326)     (598)
Expenditure relating to non-current provisions      (98)      (78)
Cash available from operating activities            930       662
Dividends paid                                    (297)     (237)
Cash flows from operating activities                633       425
Cash flows from investing activities              (645)     (615)
Net investment expenditure                        (144)     (173)
Net capital expenditure                           (501)     (442)

Net cash utilised                                  (12)     (190)
Cash flows from financing activities                 75       424
Non-current loans receivable                         14        (3)
Borrowings                                           61       427

Increase in cash                                     63       234
Cash at the beginning of the year                 1 061       732
Translation gain on cash                             24        95
Cash at the end of the year                       1 148     1 061
R millions                                                                             2012            2011
Capital expenditure(4)                                                                  557             475
 expansion                                                                             265             182
 replacement                                                                           292             293
Capital commitments                                                                     225             360
 contracted for                                                                         73             116
 not contracted for                                                                    152             244
Future rentals on property, plant and equipment leased                                  178             173
 payable within one year                                                                58              43
 payable thereafter                                                                    120             130
Net borrowings                                                                        1 841           1 867
Gearing (%)*                                                                             32              36
Current assets to current liabilities                                                   1,4             1,4
Net asset value per ordinary share (cents)                                            4 912           4 660
Depreciation and amortisation                                                           475             395
ZAR/US$ closing exchange rate (rand)                                                   8,49            8,15
ZAR/US$ average exchange rate (rand)                                                   8,20            7,25
Per ordinary share (cents)
(excluding B-BBEE transactions):
 headline earnings                                                                    697              720
 diluted headline earnings                                                            664              719
* Borrowings less cash as a percentage of total equity.

                                                 Revenue               Profit from operations               Net assets
R millions                                    2012        2011            2012          2011            2012           2011
Explosives                                   6 327       5 494             431            510          2 837          2 569
Specialty chemicals                          8 397       7 558             944            881          4 470          4 048
Property                                       400         476               34            99            808            762
Specialty fibres (USA)                         339         333               40            53            187            175
Group services and inter-segment             (547)       (464)             (78)         (227)            (94)           143
EST share-based payment (3)                                                (30)             
                                             14 916       13 397         1 341         1 316           8 208          7 697
Net assets consist of property, plant, equipment, investment property, intangible assets, goodwill, inventory, accounts
receivable and assets classified as held for sale less accounts payable.

(1)    Basis of preparation and accounting policies: The reviewed condensed consolidated financial results are prepared in
accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS), the
presentation and disclosure requirements of IAS 34  Interim Financial Reporting, the AC500 series issued by the Accounting
Practices Board, the Listings Requirements of the JSE Limited and the requirements of the Companies Act of South Africa,
No. 71 of 2008, as amended. Accounting policies have been applied consistently by all entities in the Group and are consistent with
those applied in the previous financial year. The preparation of these reviewed condensed consolidated financial results for the year
ended 31 December 2012 was supervised by the Financial Director, Mr KM Kathan CA(SA) AMP (Harvard). The condensed
consolidated financial results have been reviewed by the Companys auditors, KPMG, who have issued an unqualified review
opinion. A copy of the review opinion is obtainable from AECIs registered office.

(2)   Includes foreign and export revenue of R4 527 million (2011: R3 859 million).

(3)   Share-based payments
      CST share-based payment: The 3,5% AECI Community Education and Development Trust (CST) transaction became
      effective on 13 February 2012. The CST subscribed for 4 426 604 ordinary shares at par value in the Company. The shares
      vested immediately and a share-based payment expense of R138 million was recognised in full in the income statement.
      These shares are contingently returnable and, as a result, are excluded from EPS and HEPS.
      EST share-based payment: The 8% AECI Employees Share Trust (EST) transaction took effect on 9 February 2012, with
      the EST subscribing for 10 117 951 unlisted B ordinary shares of the Company. The dividend payable on these shares may
      not exceed that for ordinary shares. Employees of the Group were allocated 7 569 669 of these shares with a grant date of
      30 April 2012. The total cost is estimated at R143 million of which R30 million was recognised in the income statement in the
      year ended 31 December 2012. The remainder of the expense will be recognised in future periods over the respective
      vesting periods.

(4)   No interest was capitalised in the year (2011: R17 million).
(5)   The higher effective income tax rate of 35% related primarily to the non-deductibility of the B-BBEE transaction IFRS 2
      charges of R168 million and the effects of tax on higher profits in geographies outside South Africa.

(6)   The Kagiso Tiso Holdings Proprietary Limited (RF) (KTH) transaction took effect on 18 January 2012 and involved the
      purchase by AECI of the 25,1% interest held in AEL Holdco Limited by a KTH-led consortium in exchange for 4 678 667
      ordinary shares in AECI. The transaction is recognised as a change in ownership interest in terms of IAS 27 and the carrying
      amounts of controlling and non-controlling interests have been adjusted. The transaction has been measured at the fair value
      of the consideration paid and is based on the closing price of R83,98 of the Companys shares on 17 January 2012. The
      shares issued have been recognised in equity, with R5 million allocated to share capital and R388 million allocated to share
      premium. The non-controlling interest has been reduced by the carrying amount of R172 million, with the balance of R221
      million recognised directly in retained earnings.

(7)   Calculated in accordance with IAS 33. The Company has purchased call options over AECI shares which will obviate the
      need for the Company to issue new shares in terms of the AECI share option scheme. In practice, therefore, there will be no
      future dilution.

(8)   The reviewed condensed consolidated financial statements do not include all of the disclosures required for full annual
      financial statements and should be read in conjunction with the consolidated annual financial statements for the year ended
      31 December 2011.

(9)   The preparation of the financial statements requires management to make judgements, estimates and assumptions that
      affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and
      associated assumptions are based on historical experience and various other factors that are believed to be reasonable
      under the circumstances, the results of which form the basis of making the judgements about carrying values of assets
      and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Date: 26/02/2013 07:05:00 Supplied by www.sharenet.co.za                     
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