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A E C I LIMITED - Summarised audited consolidated financial results and final cash dividend declaration for the year ended 31 Dec 2016

Release Date: 28/02/2017 07:05:00      Code(s): AFE     
AECI Limited
(Incorporated in the Republic of South Africa) 
Registration number 1924/002590/06
Tax reference number 9000008608
(?AECI? or ?the Company? or ?the Group?) 
Share code: AFE
ISIN: ZAE000000220

Summarised audited consolidated financial results and final 
cash dividend declaration for the year ended 31 December 2016

Profits from operations of core businesses: Specialty Chemicals
+8,3% to R1 214m Explosives +7,4% to R449m
Excellent cash generation: +52% to R1 918m, net debt reduced by
R881m to R297m
Safety performance: TRIR of 0,45
HEPS -9% to 818c underlying HEPS +29% to 920c
Final ordinary cash dividend: +15% to 300cps

Income statement

                                                     %     2016      2015
R millions                                Note  change  Audited   Audited
Revenue                                      2       1   18 596    18 446
Net operating costs                                     (17 261)  (16 743) 
Profit from operations                             (22)   1 335     1 703
Impairment of equity-accounted investee                       ?       (51) 
Share of profit of equity-accounted
investees, net of tax                                        28        28
Profit from operations and equity-
accounted investees                                       1 363     1 680
Net finance costs                                          (215)     (187) 
Interest expense                                           (270)     (253) 
Interest received                                            55        66
Profit before tax                                         1 148     1 493
Tax expense                                                (336)     (464) 
Profit for the year                                         812     1 029
Profit for the year attributable to:
? Ordinary shareholders                                     777     1 007
? Preference shareholders                                     3         3
? Non-controlling interest                                   32        19
                                                            812     1 029
Headline earnings are derived from: 
Profit attributable to ordinary
shareholders                                                777     1 007
Impairment of goodwill                                       28         4
Impairment of property, plant and
equipment                                                    54        19
Impairment of equity-accounted investees                      ?        51
Gain on bargain purchase                                      ?       (23) 
Loss/(surplus) on disposal of property,
plant and equipment                                           9       (26)
Surplus on disposal of assets classified
as held for sale                                              ?       (48)
Foreign currency translation differences 
reclassified on net investments in
foreign operations                                            17        ?
Tax effects of the above items                               (21)       4
Headline earnings                                            864      988
Per ordinary share (cents):
Headline earnings                                    (9)     818      894
Diluted headline earnings                                    800      870
Basic earnings                                      (19)     735      911
Diluted basic earnings                                       720      886
Ordinary dividends declared                          15      300      260
Ordinary dividends paid                                      395      350
Special dividend paid                                          ?      375

Statement of comprehensive income

                                                             2016     2015
R millions                                                Audited  Audited
Profit for the year                                           812    1 029
Other comprehensive income net of tax:
Items that may be reclassified subsequently 
to profit or loss:
? Foreign currency translation differences                   (376)     808
? Effective portion of cash flow hedges                        (3)       ? 
Items that may not be reclassified subsequently to
profit or loss:
? Remeasurement of defined-benefit and post-retirement
medical aid obligations                                         ?      820
Total comprehensive income for the year                       433    2 657
Total comprehensive income attributable to:
? Ordinary shareholders                                       405    2 619
? Preference shareholders                                       3        3
? Non-controlling interest                                     25       35
                                                              433    2 657

Statement of changes in equity

                                                             2016     2015
R millions                                                Audited  Audited
Total comprehensive income for the year                       433    2 657
Dividends paid                                               (435)    (838) 
Share-based payment reserve                                    45      (17) 
Shares repurchased                                            (39)    (563) 
Equity at the beginning of the year                         9 042    7 803
Equity at the end of the year                               9 046    9 042
Made up as follows:
Ordinary share capital                                        110      110
Reserves                                                    1 280    1 605
Foreign currency translation reserve                        1 086    1 455
Other reserves                                                 (1)       ? 
Share-based payment reserve                                   195      150
Retained earnings                                           7 523    7 217
Non-controlling interest                                      127      104
Preference share capital                                        6        6
                                                            9 046    9 042

Reconciliation of weighted average number of shares

                                                             2016     2015
Millions                                                  Audited  Audited
Weighted average number of ordinary shares at the
beginning of the year                                       132,4    138,3
Weighted average number of unlisted ordinary shares held
by consolidated EST                                         (10,1)   (10,1) 
Weighted average number of contingently returnable
ordinary shares held by CEDT                                 (4,4)    (4,4)
Weighted average number of shares held by consolidated
subsidiary                                                  (11,9)   (11,9) 
Weighted average number of shares repurchased during 
the year                                                     (0,3)    (1,4)
Weighted average number of ordinary shares for basic
earnings per share                                          105,7    110,5
Dilutive adjustment for potential ordinary shares             2,3      3,1
Weighted average number of ordinary shares for diluted
earnings per share                                          108,0    113,6

Statement of financial position at 31 December

                                                           2016       2015
R millions                                       Note   Audited    Audited
Non-current assets                                        7 538      8 374
Property, plant and equipment                       3     3 990      4 296
Investment property                                         140        137
Intangible assets                                           211        257
Goodwill                                            4     1 541      1 590
Pension fund employer surplus accounts              5       583        982
Investments in joint ventures                               327        313
Investments in associates                                   194        250
Other investments                                            25         27
Deferred tax                                                527        522
Current assets                                            8 282      9 420
Inventories                                               3 174      3 358
Accounts receivable                                       3 342      3 825
Other investments                                           190         67
Assets classified as held for sale                  6        60          ? 
Tax receivable                                               51         56
Cash                                                      1 465      2 114
Total assets                                             15 820     17 794
Equity and liabilities                       
Equity                                                    9 046      9 042
Ordinary share capital and reserves                       8 913      8 932
Non-controlling interest                                    127        104
Preference share capital                                      6          6
Non-current liabilities                                   2 324      1 871
Deferred tax                                                254        427
Non-current borrowings                                    1 600        672
Contingent consideration                                     58         70
Non-current provisions and employee benefits        5       412        702
Current liabilities                                       4 450      6 881
Accounts payable                                          4 148      4 003
Current borrowings                                          162      2 620
Contingent consideration                                      ?         15
Loans from joint ventures                                    75         36
Tax payable                                                  65        207
Total equity and liabilities                             15 820     17 794

Statement of cash flows

                                                             2016     2015
R millions                                                Audited  Audited
Cash generated by operations                                2 328    2 607
Dividends received                                             46       30
Interest paid                                                (238)    (253) 
Interest received                                              55       66
Tax paid                                                     (636)    (532) 
Changes in working capital                                    488     (215) 
Cash outflows relating to defined-benefit and post-
retirement medical aid obligations                            (27)    (284)
Cash outflows relating to non-current provisions and
employee benefits                                             (76)     (64)
Settlement of performance shares                              (22)     (94) 
Cash available from operating activities                    1 918    1 261
Dividends paid                                               (435)    (838) 
Cash flows from operating activities                        1 483      423
Cash flows from investing activities                         (452)    (844) 
Net investment expenditure                                     36     (334) 
Net capital expenditure                                      (488)    (510) 
Net cash generated/(utilised) before financing
activities                                                  1 031     (421)
Cash flows from financing activities                       (1 549)     691
Non-current loans receivable                                    ?        4
Shares repurchased                                            (39)    (563) 
Borrowings raised                                           1 110    7 424
Borrowings repaid                                          (2 620)  (6 174) 
Net (decrease)/increase in cash                              (518)     270
Cash at the beginning of the year                           2 114    1 376
Translation (loss)/gain on cash                              (131)     468
Cash at the end of the year                                 1 465    2 114

Industry segment analysis

                                                           2016       2015
R millions                                              Audited    Audited
                                                          External revenue
Explosives                                                7 918      8 169
Specialty Chemicals                                      10 363      9 434
Property                                                    315        843
Inter-segment                                                 ?          ?
                                                         18 596     18 446
                                                           Profit from 
Explosives                                                  449        418
Specialty Chemicals                                       1 214      1 121
Property                                                     87        527
Group services                                             (415)      (363)
                                                          1 335      1 703
Explosives                                                4 255      5 333
Specialty Chemicals                                       7 672      7 521
Property                                                    315        387
Group services                                              216        222
                                                         12 458     13 463

                                                           2016       2015
R millions                                              Audited    Audited
Explosives                                                   56         67
Specialty Chemicals                                         422        452
Property                                                     83         79
Inter-segment                                              (561)      (598)
                                                              ?          ? 
                                                          and amortisation
Explosives                                                  339        329
Specialty Chemicals                                         264        242
Property                                                      9          8
Group services                                               14         11
                                                            626        590
Explosives                                                1 260      1 512
Specialty Chemicals                                       2 571      2 365
Property                                                     72        114
Group services                                              245         12
                                                          4 148      4 003

                                                           2016       2015
R millions                                              Audited    Audited
                                                           Total segment 
Explosives                                                7 974      8 236
Specialty Chemicals                                      10 785      9 886
Property                                                    398        922
Inter-segment                                              (561)      (598)
                                                         18 596     18 446
Explosives                                                   54         18
Specialty Chemicals                                          28          5
Property                                                      ?          ? 
Group services                                                ?          ?
                                                             82         23
Capital expenditure
Explosives                                                  257        313
Specialty Chemicals                                         179        235
Property                                                     26         14
Group services                                               40         21
                                                            502        583

Operating assets consists of property, plant and equipment, investment 
property, intangible assets, goodwill, inventories, accounts receivable 
and assets classified as held for sale. Operating liabilities consists 
of accounts payable.

In 2014, AECI revised its strategy and developed five key growth pillars, 
which have since been the focus of its integrated reporting. Progress has 
been made in managing the Group?s businesses in terms of these pillars and 
the process of altering internal reporting to reflect this has commenced. 
In future, management reporting will be structured by pillar and the same 
restructuring will apply to reporting in the annual financial statements.

Other salient features

                                                             2016     2015
R millions                                                Audited  Audited
Capital expenditure                                           502      583
? expansion                                                   183      275
? replacement                                                 319      308
Capital commitments                                           233      436
? contracted for                                               62       71
? not contracted for                                          171      365
Future rentals on leased property, plant and equipment        443      331
? payable within one year                                     123      112
? payable thereafter                                          320      219
Net borrowings                                                297    1 178
Depreciation and amortisation                                 626      590
Gearing (%)?*                                                   3       13
Current assets to current liabilities                         1,9      1,4
Net asset value per ordinary share (cents)                  8 107    8 096
ZAR/US$ closing exchange rate (rand)                        13,73    15,48
ZAR/US$ average exchange rate (rand)                        14,72    12,76
* Borrowings less cash, as a percentage of equity. 

(1) (a) Basis of preparation and accounting policies
The summarised consolidated financial results are prepared in accordance with 
the requirements of the JSE Limited?s Listings Requirements (?Listings 
Requirements?) for provisional reports and the requirements of the Companies 
Act of South Africa applicable to summarised financial statements. The Listings 
Requirements require provisional reports to be prepared in accordance with the 
framework concepts and the measurement and recognition requirements of 
International Financial Reporting Standards (?IFRS?); the South African 
Institute of Chartered Accountants Financial Reporting Guides as issued by 
the Accounting Practices Committee; Financial Pronouncements as issued by 
the Financial Reporting Standards Council; and to also, as a minimum, to 
contain the information required by IAS 34 Interim Financial Reporting. 
The accounting policies applied in the preparation of the audited consolidated 
financial statements, from which the summarised consolidated financial results 
were derived, are in terms of IFRS and are consistent with those applied in the 
previous consolidated financial statements. New standards adopted did not have 
a material effect on the financial results.

The preparation of these summarised consolidated financial results for the year 
ended 31 December 2016 was supervised by the Financial Director, Mr KM Kathan 
CA(SA)AMP (Harvard).

(b) Financial statement preparation and independent audit
The summary report is extracted from audited information but is itself not 
audited. The financial statements were audited by KPMG Inc. who expressed an 
unmodified opinion thereon.

The audited financial statements and the auditor?s report thereon are available 
for inspection at the Company?s registered office. The Company?s Directors take 
full responsibility for the preparation of the provisional report and for the 
financial information having been extracted correctly from the underlying 
financial statements.

The summarised consolidated financial results do not include all of the 
disclosures required for full financial statements and should be read in 
conjunction with the consolidated annual financial statements for the year 
ended 31 December 2016.

(2) Revenue includes foreign and export revenue of R6 479 million 
(2015: R6 361 million).

(3) Impairment of plant and equipment
During the year, the directors performed a detailed impairment assessment in 
respect of the property, plant and equipment (?PPE?) within the Explosives 
segment in South Africa. The recoverable amounts in respect of each cash 
generating unit (?CGU?) was estimated based on the greater of its value in 
use and fair value less costs of disposal. Key inputs and assumptions used 
in determining value in use was revenue growth, remaining useful lives of 
the PPE and an appropriate discount rate applied to the future expected 
cash flows.

An impairment of R52 million was recognised in respect of plant and equipment 
used to service customers in the South African coal mining sector. The 
impairment arose due to continued adverse trading conditions in the local 
coal market.

Management estimated the recoverable amount of the cash-generating unit related 
to the assets used to service the coal mining sector. The recoverable amount was 
estimated based on the assets? fair value less costs of disposal. The impairment 
loss was included in net operating costs. Fair value less costs of disposal was 
determined by assessing the market value of the assets in their current condition 
and location.

In 2016, following changes to the use of certain robotic equipment that is part of 
AEL?s ISAP plant, the Group reassessed its estimates and R8 million of the 2015 
impairment was reversed.

In 2016 a decision was taken to exit the explosives manufacturing market
in Egypt, resulting in the moveable assets of the business being transferred 
elsewhere in the Explosives segment. An impairment loss of R10 million was 
recognised on the remaining immovable assets, which represented the net book 
value of these assets.

(4) Impairment of goodwill
Exposure to South Africa?s poultry industry, which has been disrupted by amended 
legislation regulating brining levels and imports, resulted in the recognition of 
an impairment loss of R28 million in respect of the goodwill in the Cobito business. 
The impairment loss was included in net operating costs. The business is part 
of Lake Foods, which in turn is part of the Specialty Chemicals segment.

(5) Settlement of post-retirement medical aid obligations
As stated in AECI?s 2015 integrated report, voluntary alternative benefit offers had 
been made to active employees eligible for a post-retirement medical aid subsidy 
so as to settle their defined-benefit entitlements. The offers were made to 
eligible employees who are contributing members of the AECI Employees Provident 
Fund (?AEPrF?), the AECI Defined Contribution Pension Fund (?ADCPF?) and the 
AECI Employees Pension Fund (?AEPF?).

Offers made to active employees were funded from employer surplus accounts (?ESA?) 
with a section 15E transfer from the ESA of the AECI Pension Fund (?APF?) to the 
AEPF and the ADCPF required to enable the settlement. The section 15E transfer 
was approved by the Financial Services Board. The ESA transfers took place in 
March 2016, with the settlement offers finalised in June 2016 for those employees 
who had accepted the offer.

In 2016, AECI reissued offers to eligible pensioner members who had previously 
rejected or not responded to the alternative benefit offer made to them in 2014 
and implemented in 2015. The pensioner members were given the opportunity to accept 
the offer previously made, which would be implemented as though they had accepted 
the original offer. At the end of the year, an additional 367 pensioners had accepted 
the offer. Implementation will occur in 2017 and AECI has recognised the settlement
of these post-retirement medical aid subsidy obligations. The pensioner offers will 
be funded from the ESA in the APF for former members of that fund and in cash for 
other pensioners via a section 14 transfer to Momentum Group Limited (?MMI?) and 
the purchase of annuities for cash from MMI.

The amount transferred from the ESA was R250 million whilst the accrual for 
settlement in 2017 amounts to R172 million (with R95 million of this to be 
transferred from ESA). The related liability that was derecognised had a 
carrying amount of R273 million, resulting in a loss on settlement of 
R149 million, which is included in net operating costs for the year.

(6) Assets classified as held for sale
Management is committed to a plan to sell the Olive Pride business and 
anticipates the disposal to be completed within the next financial year. 
The assets are available for immediate sale in their present condition. 
Accordingly, the business is presented as a disposal group held for sale 
as at 31 December 2016. No impairment loss was required to be recognised
as its carrying amount is lower than its fair value less costs to sell. No
cumulative income or expenses related to the disposal group are included 
in other comprehensive income. The Olive Pride business is part of the 
Specialty Chemicals segment.

The carrying amount of total assets classified as held for sale is:

R millions
Goodwill                                                               27
Property, plant and equipment                                           1
Intangible assets                                                      21
Inventory                                                              11
Assets classified as held for sale                                     60

(7) Shares repurchased
During the year AECI completed the general repurchase of shares in terms of 
the general authority to do so that was approved by the Company?s shareholders 
at the Annual General Meeting on 1 June 2015. 442 212 shares were repurchased 
at a cost of R39 million.

(8) Contingent liabilities
The investigation process undertaken by the Competition Commission of South 
Africa (?the Commission?) in 2014, on allegations of collusion by Akulu Marchon 
?Akulu? with a competitor, progressed. The Commission rejected Akulu?s application 
for leniency. The matter is in the process of being finalised with the Commission. 
A provision, based on Group management?s estimate, has been recognised in respect 
of the matter.

The Group is involved in various legal proceedings and is in consultation with 
its legal counsel, assessing the outcome of these proceedings on an ongoing basis. 
As proceedings progress, the Group?s management makes provision in respect of 
legal proceedings where appropriate. Litigations, current or pending, are not 
likely to have a material adverse effect on the Group.

(9) The Group entered into various sale and purchase transactions with related 
parties in the Group in the ordinary course of business on terms that are no more 
and no less favourable than transactions with unrelated external parties. The 
nature of which is consistent with those previously reported. All transactions 
and balances with these related parties have been eliminated appropriately 
in the consolidated results.

(10) The Group measures forward exchange contracts at fair value
(amounting to a net liability of R40 million) using inputs as described in
level 2 of the fair value hierarchy. The fair values for forward exchange 
contracts are based on quotes from brokers. Similar contracts are traded in 
an active market and the quotes reflect the actual transactions on similar 
instruments. Other financial assets and financial liabilities, carried at fair 
value through profit or loss amounted to R190 million and R58 million respectively, 
using inputs described in level 1 and 3, respectively, of the fair value hierarchy. 
There were no transfers between levels 1, 2 or 3 of the fair value hierarchy 
during the year ended 31 December 2016.

(11) The summarised consolidated financial results do not include all of the 
disclosures required for full financial statements and should be read in 
conjunction with the consolidated annual financial statements for the year 
ended 31 December 2016.

Financial performance
The Group?s core operating segments, Explosives and Specialty Chemicals,
delivered a commendable performance in a trading environment that remained 
very difficult both locally and internationally. Although the global resources 
sector showed some recovery and overall commodity prices increased in the latter 
part of 2016, volatility persisted and the longer- term sustainability of 
improved conditions in the sector remain uncertain. Growth in South Africa?s 
manufacturing sector was negligible and the agricultural sector in a number 
of Southern African countries remained constrained by the effects of the 
drought for most of the year.

The Group?s revenue increased by 1% to R18 596 million (2015: R18 446 million), 
of which 35% was generated outside South Africa. Profit from operations declined 
by 22% to R1 335 million (2015: R1 703 million). Headline earnings declined by 
13% to R864 million (2015: R988 million), while HEPS declined by 9% to 818 cents 
(2015: 894 cents) and EPS was 735 cents (2015: 911 cents).

In addition to the effects of the prevailing environment, the Group?s 
performance was also impacted by the following:
*  the sale of sizeable parcels of land in Somerset West in 2015, which 
   positively impacted HEPS in that year by 295 cents;
*  in 2015 and 2016, the Group undertook to complete the de-risking of 
   its defined-benefit (?DB?) obligations for past and current employees. The 
   settlement of these obligations, in terms of IAS 19 Employee Benefits, 
   was charged to the income statement. The negative impact on HEPS for 2015 and
   2016 was 116 cents and 102 cents per share, respectively.

Taking the above adjustments into account, the Group?s underlying performance 
can be analysed as follows:

                                               2016    2015       (%)
Reported HEPS                                   818     894       (9) 
Somerset West land sales                               (295)
DB obligations de-risking                       102     116
Underlying HEPS                                 920     715       29

The Board has declared a final gross cash dividend of 300 cents per ordinary 
share, an increase of 15% from 2015?s 260 cents per share, bringing the total 
ordinary dividend for the 2016 financial year to 435 cents, 13% higher than 
the prior year?s 385 cents. A South African dividend withholding tax of 20% 
will be applicable to the final dividend, resulting in a final net dividend 
of 240 cents per share payable to those shareholders who are not eligible for 
exemption or reduction of the withholding tax.

The aspiration remains zero harm to employees and contractors. The Total
Recordable Injury Rate (?TRIR?) was 0,45 in 2016. It was disappointing 
that this was behind the 0,35 achieved last year and management remains 
focused on improvements. The TRIR measures the number of incidents per 
200 000 hours worked.

Segmental performance
AEL Mining Services? (?AEL?) revenue declined by 3,2% to R7 974 million
(2015: R8 236 million). This was due mainly to the sharp decline in
ammonia prices in the second half of the year and the strengthening of the 
rand against the US dollar in the same period. Approximately 60% of AEL?s 
revenue is US dollar based.

Profit from operations increased by 7,4% to R449 million (2015: R418 million). 
AEL?s assets deployed in the local coal mining sector were impaired as a 
consequence of disappointing results in that business. The net cost of the 
impairment was R54 million (2015: R18 million). Excluding impairments, 
profit from operations would have increased by 15,4% to R503 million and 
the operating profit margin would have been 6,3%.

Overall explosive volumes were flat. In South Africa, explosive volumes 
improved by 1,1%. This improvement, in an environment where overall 
mining production contracted significantly, was largely due to two new 
contracts gained in the iron ore and uranium surface mining sectors, the 
supply of which commenced mid-year. Generally, customers continued to 
restructure their mining plans and reduce waste mining, resulting in 
the mining of high grade ores.

Volumes of initiating systems, which are supplied to the underground mining 
market, declined by 5,1%. This was due to the loss of sales to one mine 
and several protracted safety-related Section 54 stoppages at customer 
sites. Furthermore, customers ceased operations at loss-making mines, 
with the platinum sector being the most affected. Gold mining activity 
remained robust.

In the rest of Africa, overall volumes were 2,9% lower year-on-year. Volumes 
in the Democratic Republic of Congo were negatively impacted by unusually 
high rainfall which curtailed output early in the year. In the second 
half-year, most copper miners in Central Africa reduced their production 
rates as a consequence of the lower copper price and some mines were put 
under care and maintenance. Business in the region remains highly 

There was an increase in demand from the gold mining sector in West and East 
Africa. AEL was awarded four new tenders, three in West Africa and one in 
East Africa. These will make a positive contribution by the end of
2017. The four contracts all meet the AECI Group?s return hurdle rates and
represent additional annual revenue of US$25 million for AEL. One contract 
was lost in Egypt in the fourth quarter.

The profitability of AEL?s International businesses, mainly in Australia and 
Indonesia, improved although margins were still under sustained pressure.

There was good volume growth in Australia and the contractual arrangement 
with the major customer has been extended for a further three years.
In Indonesia, volumes sold to the largest customer stabilised and AEL?s 
supply contract has been extended. With increases in thermal coal prices, 
volumes are expected to increase in 2017. The BBRI ammonium nitrate 
solution manufacturing ran well, albeit at a 55% utilisation rate. 
AEL has a 42,6% minority ownership stake in BBRI.

AEL?s cash management in the year was exceptional. Net working capital 
reduced by more than R400 million and capital expenditure was controlled
to below the depreciation charge. Capital expenditure was R257 million, 
of which R50 million was for investments at customer sites to support 
growth and to service new business.

Input VAT refunds in Indonesia
In November, AEL?s explosives licensee in Indonesia applied for tax amnesty 
in terms of a programme offered by the Indonesian Tax Office. The licensee?s 
amnesty application was with reference to all tax assets and liabilities for 
the financial years up to and including 2015. As a result, the VAT refund due 
to the licensee will not be recovered from the Indonesian Tax Office. AECI 
is pursuing alternatives for recovery with the licensee. Full provision for 
the outstanding VAT was made in 2015. Good progress has been made in 
submitting VAT returns on the licensee?s behalf for the 2016 financial 
year to recover the credit due to AECI.

Specialty Chemicals
Revenue increased by 9,1% to R10 785 million (2015: R9 886 million). Profit 
from operations improved by 8,3% to R1 214 million (2015: R1 121 million). 
The increase in revenue was driven by higher prices as a result of the weaker 
average rand exchange rate against the US dollar and the benefits of the 
acquisitions finalised in 2015. Overall volumes declined by 1,6%, a 
consequence of the severe drought conditions and the decline of South 
Africa?s poultry industry. The goodwill relating to the poultry business
was impaired at a cost of R28 million. Operating margin remained at a 
pleasing 11,3%.

Senmin, the mining chemicals business achieved excellent results. Volumes 
grew by 7,5% and profit from operations increased by 10,5% on the back 
of exports.

Robust performances, with improvements in excess of 20%, were delivered 
by Chemical Initiatives, ChemSystems, ImproChem, Nulandis and SANS 
Technical Fibers.

The results of ImproChem, AECI?s water treatment business, were adversely 
impacted by the protracted drought in Southern Africa. This was offset 
by savings from the integration of manufacturing sites and growth in 
the public water market in the rest of Africa.

Nulandis? agrochemicals business was also impacted by drought conditions, 
which still persist in the Western Cape, but benefited from the 
acquisition of Farmers Organisation and Biocult in 2015.

Lake Foods? performance was curtailed by the adverse conditions in the 
poultry industry and that of Southern Canned Products was negatively 
impacted by low demand from its large beverage customers. The sale of 
an initial 51% of the Olive Pride business to Clover SA Ltd was 
approved unconditionally by the Competition Commission of South Africa 
by year-end and the transaction will take effect in 2017.

The Specialty Chemicals cluster remained highly cash generative and 
controlled working capital very well during the year. Capital 
expenditure for the segment was R179 million. Of this amount, 
R127 million was for expansion purposes. During 2017, R90 million 
will be invested to expand Senmin?s xanthates production capacity 
by 4 000 tonnes a year. These products are used in the extraction 
of gold, platinum and copper. The project is expected to come 
on line early in 2018.

All bulk land surplus to AECI?s operational requirements and 
available for redevelopment in the short term was disposed of 
in the prior two financial years. The Group?s remaining property 
activities comprise mainly the leasing of buildings at Modderfontein 
(Gauteng) and Umbogintwini (KwaZulu- Natal), as well as the provision 
of services at the Umbogintwini Industrial Complex.

Results in the prior year included the bulk sale of the Somerset West 
site. As such, revenue from the Property segment declined to R398 million 
(2015: R922 million) while profit from operations was a pleasing R87 million.

Cash utilisation
Cash available from operating activities increased by 52% to R1 918
million (2015: R1 261 million). This was particularly pleasing, given that
2015?s results included the sale of the Somerset West properties. The
improvement in cash generation was primarily due to good working capital 
management by all Group businesses and by AEL in particular. In spite of 
some large customers extending their payment terms at year end, the 
ratio of net working capital to revenue reduced to 12,7% from 17,2% 
in the prior year.

Capital expenditure, which was curtailed to below the depreciation and 
amortisation charge, was R502 million (2015: R583 million). Of this amount, 
R183 million was expansion capital.

Cash interest cover was at 11,0 times (2015: 12,4 times). It was affected 
by higher interest rates and the share repurchase programme completed 
during the year. Consequently, the net interest cost increased to 
R215 million (2015: R187 million).

More than R1 billion in dividend proceeds from the Group?s African 
subsidiaries was repatriated to South Africa. These funds were used 
to settle short-term borrowings.

Confirmation of changes to the board of directors
As announced in July 2016, Schalk Engelbrecht and Richard Dunne will 
retire from their positions as Non-executive Directors of the Company. 
Schalk will retire as Chairman of the Company and the Board today and 
Richard will retire at the Annual General Meeting of the Company?s 
shareholders scheduled for 29 May 2017. The Board thanks them for 
their valuable contributions to the affairs of the Company and the 
Board over many years.  On 1 September 2016, the Board welcomed Moses 
Kgosana as a new Non-executive Director.

As previously reported, Khotso Mokhele will succeed Schalk Engelbrecht 
as Chairman on 1 March 2017 and the Board looks forward to working with 
Khotso in his new role.

The global outlook is more positive than it was a year ago. Better 
overall GDP growth is forecast, the US dollar is expected to remain 
strong and it is not anticipated that oil prices will return to the 
low levels seen in the early part of 2016. This should have a positive 
effect on input chemical prices. Commodity prices in general appear 
to be on an upward trend, a positive signal for activity in the 
mining sector.

In South Africa, the GDP growth forecast for 2017 and 2018, though 
still modest, indicates an improvement in economic activity from 
2016?s low base.

A more positive overall environment will benefit AECI as it implements its
strategy. Group businesses are focused on the mining sector; the water 
treatment industry in Africa, where water remains a scarce resource 
required by every sector of the economy; agrochemicals in Southern Africa, 
where rainfall patterns appear to have normalised on the whole; the food 
industry in Southern Africa, where growth continues to outpace that of
GDP; and the diverse industries that comprise South Africa?s manufacturing 
sector. The Group?s customer-centric and value-adding specialty chemicals 
businesses are well placed to benefit from improvements in this sector.

Cash management will remain a focus area, as will the pursuit of accelerated 
growth through acquisitions and the realisation of benefits from strategic 
value growth initiatives embarked on in the last two years.

Schalk Engelbrecht                   Mark Dytor
Chairman                             Chief Executive

Woodmead, Sandton
28 February 2017

Directors: S Engelbrecht (Chairman), GW Dempster, MA Dytor (Chief Executive), 
RMW Dunne*, Z Fuphe, G Gomwe**, M Kgosana, KM Kathan (Executive), LL Mda, 
KDK Mokhele, AJ Morgan, R Ramashia
*British           **Zimbabwean
Group Company Secretary: EN Rapoo

Notice to shareholders
Declaration of final ordinary cash dividend no. 166
Notice is hereby given that, on Monday, 27 February 2017, the directors of 
AECI declared a gross final cash dividend of 300 cents per share, in respect 
of the financial year ended 31 December 2016. The dividend is payable on Monday, 
10 April 2017 to holders of ordinary shares recorded in the register of the 
Company at the close of business on the record date, being Friday, 7 April 2017.

The last day to trade ?cum? dividend will be Tuesday, 4 April 2017 and shares 
will commence trading ?ex? dividend as from the commencement of business on 
Wednesday, 5 April 2017.

A South African dividend withholding tax of 20% 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 240 cents per share payable to those 
shareholders who are not eligible for exemption or reduction. Application 
forms for exemption or reduction may be obtained from the Transfer Secretaries 
and must be returned to them on or before Tuesday, 4 April 2017.

The issued share capital at the declaration date is 121 829 083 listed ordinary 
shares, 10 117 951 unlisted redeemable convertible B ordinary shares and 
3 000 000 listed cumulative preference shares. The dividend has been declared 
from the income reserves of the Company.

Any change of address or dividend instruction must be received on or before
Tuesday, 4 April 2017.

Share certificates may not be dematerialised or rematerialised from
Wednesday, 5 April 2017 to Friday, 7 April 2017, both days inclusive.

By order of the Board

EN Rapoo
Group Company Secretary

Woodmead, Sandton
28 February 2017

Transfer Secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001

Computershare Investor Services PLC
PO Box 82, The Pavilions, Bridgwater Road, Bristol BS 99 7NH, England

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

Rand Merchant Bank (A division of FirstRand Bank Limited)
1 Merchant Place, cnr Fredman Drive and Rivonia Road
Sandton, 2196
Date: 28/02/2017 07:05:00 Supplied by www.sharenet.co.za                     
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