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AECI LIMITED (REGISTRATION NUMBER 04/02590/06) 1997 AUDITED RESULTS FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE AUDITED FINANCIAL RESULTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 1997 AS FOLLOWS:
1997 1996 % R MILLIONS CHANGE TURNOVER (1) 8 275 7 536 10 NET TRADING PROFIT 671 741 (9) FINANCING COSTS 145 242
NET PROFIT BEFORE ABNORMAL ITEMS 526 499 5 ABNORMAL ITEMS 2 (118)
528 381
TAXATION 120 33
NORMAL ACTIVITIES 137 151
ABNORMAL ITEMS (17) (118)
408 348
INVESTMENT INCOME 9 104
NET PROFIT 417 452 (8) ATTRIBUTABLE TO PREFERENCE AND
OUTSIDE SHAREHOLDERS 36 25 NET PROFIT ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 381 427 (11) ORDINARY DIVIDENDS 139 139
RETAINED PROFIT FOR THE YEAR 242 288 (16) EARNINGS PER ORDINARY SHARE (CENTS) 246 276 HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) 237 276 (14) DIVIDENDS PER ORDINARY SHARE (CENTS) 90 90 NUMBER OF ORDINARY SHARES
IN ISSUE (MILLIONS) 155 155
(1) INCLUDES EXPORTS OF R1 533 MILLION (1996: R1 453 MILLION). HEADLINE EARNINGS NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 381 427 NET GAIN FROM DISPOSAL
OF INVESTMENTS (20) (210)
GAIN ARISING FROM RESTRUCTURING (57) (21)
COSTS RELATED TO RESTRUCTURING 55 103 PROVISION FOR POST-EMPLOYMENT
MEDICAL AID BENEFITS 20 206 PROVISION FOR ENVIRONMENTAL
REMEDIATION - 40 TAX EFFECT AND MINORITIES' SHARE OF
ABNORMAL ITEMS (13) (118)
HEADLINE EARNINGS 366 427 ABRIDGED BALANCE SHEET
1997 1996
R MILLIONS CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 3 107 2 870
MINORITIES' INTEREST 139 102
SHAREHOLDERS' INTEREST 3 246 2 972
DEFERRED TAXATION 66 98
NET BORROWINGS 662 409
3 974 3 479 EMPLOYMENT OF CAPITAL
FIXED ASSETS 2 886 2 633
INVESTMENTS 116 135
CURRENT ASSETS 2 931 2 782
TOTAL ASSETS 5 933 5 550
NON INTEREST BEARING LIABILITIES 1 720 1 816
LONG-TERM PROVISIONS 239 255
3 974 3 479
GEARING % 20 14 CURRENT ASSETS TO CURRENT
LIABILITIES 1,3 1,3 NET ASSET VALUE PER ORDINARY
SHARE (CENTS) 2 009 1 856 NET CAPITAL EXPENDITURE
(R MILLIONS) 463 369
DEPRECIATION (R MILLIONS) 265 235 ABRIDGED CASH FLOW STATEMENT
1997 1996
R MILLIONS
CASH GENERATED BY OPERATIONS 937 962
INVESTMENT INCOME 20 52
FINANCING COSTS (145) (242)
TAXES PAID (132) (145)
CHANGE IN WORKING CAPITAL (223) 1
EXPENDITURE RELATING TO PROVISIONS (166) 63 EXPENDITURE RELATING TO
ABNORMAL ITEMS (5) (46) CASH AVAILABLE FROM
OPERATING ACTIVITIES 286 645
DIVIDENDS PAID (153) (135) CASH RETAINED FROM
OPERATING ACTIVITIES 133 510 CASH UTILISED IN INVESTING
ACTIVITIES (560) (386) PROCEEDS FROM DISINVESTMENT
AND RESTRUCTURING 204 894
NET CASH GENERATED (UTILISED) (223) 1 018
CASH EFFECTS OF FINANCING ACTIVITIES (16) (712)
INCREASE (DECREASE) IN LIQUID FUNDS (239) 306 INDUSTRY SEGMENT ANALYSIS
TURNOVER TRADING PROFIT ASSETS 1997 1996 1997 1996 1997 1996 R MILLIONS R MILLIONS R MILLIONS AGRICULTURAL PRODUCTS AND
INDUSTRIAL CHEMICALS 2 257 2 178 67 234 815 514 COATINGS 720 678 30 16 280 263 FIBRES 1 230 1 144 111 65 511 543 MINING SOLUTIONS 528 457 66 63 198 159 MONOMERS, POLYMERS AND
RELATED PRODUCTS 1 543 1 357 370 328 992 909 OTHER BUSINESSES 571 546 11 9 317 352 SPECIALITY CHEMICALS 1 371 1 072 126 105 440 327 PROPERTY AND SITE SERVICES 435 376 (1) 18 741 727 CORPORATE RESEARCH (58) (46) 42 45 INTERGROUP/CORPORATE (380) (272) (51)* (51) (11) (25) 8 275 7 536 671 741 4 325 3 814 *CONSISTS OF COMMUNITY RESPONSIBILITY R21 MILLION (1996: R20 MILLION) AND GROUP SUPPORT R30 MILLION (1996: R31 MILLION).
ASSETS CONSIST OF NET FIXED ASSETS, STOCKS, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. COMMENT
THE INTERIM REPORT DATED 1 AUGUST 1997 ADVISED THAT PROSPECTS FOR THE BALANCE OF THE YEAR HAD BEEN IMPAIRED BY A SLOWDOWN IN THE DOMESTIC ECONOMY AND PREVAILING WEAKNESS IN GLOBAL MARKETS FOR NITROGEN FERTILIZERS. NONETHELESS, IT WAS THE BOARD'S VIEW AT THE TIME THAT, PROVIDED INTEREST RATES WERE SOON ALLOWED TO REFLECT THE LOWER LEVELS OF ECONOMIC ACTIVITY AND GIVEN REASONABLE AGRICULTURAL CONDITIONS, THE GROUP REMAINED WELL POSITIONED TO ACHIEVE REAL GROWTH IN EARNINGS FOR THE YEAR.
IN AN ANNOUNCEMENT TO SHAREHOLDERS ON 1 OCTOBER 1997, IT WAS REPORTED THAT DOMESTIC ECONOMIC ACTIVITY HAD CONTINUED TO WEAKEN AND THAT THE PERFORMANCE OF KYNOCH LIMITED WAS LIKELY TO BE SUBSTANTIALLY BELOW THAT ACHIEVED IN 1996. THE BOARD EXPRESSED THE VIEW THAT EARNINGS FOR THE YEAR WERE UNLIKELY TO MATCH THE LEVEL ACHIEVED IN 1996.
IN THE EVENT, THE RESULTS OF KYNOCH LIMITED WERE WORSE THAN EXPECTED WITH TRADING PROFIT IN THE NITROGEN BUSINESS R187 MILLION LOWER THAN IN 1996. OF THIS DECLINE, R110 MILLION WAS ATTRIBUTABLE TO LOSS OF MARGIN CONSEQUENT UPON THE UNEXPECTED COLLAPSE IN INTERNATIONAL NITROGEN, AND PARTICULARLY UREA, PRICES. THE PROTRACTED BIENNIAL MAINTENANCE SHUTDOWN OF THE AMMONIA AND UREA PLANTS AT MODDERFONTEIN, TOGETHER WITH THE LOSS OF THREE WEEKS' PRODUCTION ON THE MAIN NITRIC ACID PLANT FOLLOWING A PIPE RUPTURE, ACCOUNTED FOR THE BALANCE OF R77 MILLION. SINCE THE SHUTDOWN, PRODUCTION OF AMMONIA AND UREA HAS BEEN AT A CONSISTENTLY HIGH RATE.
EXCLUDING NITROGEN, GROUP BUSINESSES ACHIEVED AN INCREASE OF R117 MILLION OR 23% IN AGGREGATE TRADING PROFIT WITH DULUX AND SANS FIBRES RECORDING
PARTICULARLY NOTEWORTHY GAINS AND POLIFIN CONTRIBUTING A COMMENDABLE
IMPROVEMENT OF 13%. THIS WAS A PLEASING RESULT IN THE CONTEXT OF A WEAKENING DOMESTIC ECONOMY. REALISATIONS OF LAND SURPLUS TO OPERATING REQUIREMENTS WERE DISAPPOINTING, HOWEVER, WITH GAINS OVER REVALUED BOOK VALUE OF R5 MILLION COMPARED TO R26 MILLION IN 1996.
AGAINST THE BACKGROUND OF A RAPIDLY CHANGING GLOBAL CHEMICAL INDUSTRY, FURTHER INITIATIVES TO RATIONALISE AND FOCUS THE GROUP'S PORTFOLIO OF BUSINESSES WILL CONTINUE TO BE PURSUED AGGRESSIVELY. IN 1997 AECI'S 50% INTEREST IN ANIKEM (PTY) LIMITED, A LONG-STANDING JOINT VENTURE WITH NALCO CHEMICAL COMPANY OF THE USA IN THE FIELD OF SPECIALITY WATER TREATMENT, WAS ACQUIRED BY CHEMICAL SERVICES LIMITED WHICH IS SEEN AS THE PREFERRED PARENT FOR MORE
SERVICE-INTENSIVE, SPECIALITY BUSINESSES. CONSOLIDATION OF THE GROUP'S INTERESTS IN THIS FIELD IN THE COMPANY NALCO-CHEMSERVE WILL ENABLE THE GROWTH POTENTIAL OF THE BUSINESS TO BE REALISED MORE FULLY.
IN SIMILAR VEIN, THE DECISION BY CHEMICAL SERVICES TO ENTER THE FIELD OF AGROCHEMICAL FORMULATION THROUGH THE ACQUISITION OF APPLIED CHEMICAL PRODUCTS PROVIDED AN OPPORTUNITY TO CONSOLIDATE GROUP INTERESTS IN THIS AREA BY DISPOSAL OF KYNOCH AGROCHEMICALS (PTY) LIMITED TO CHEMICAL SERVICES. A CONSEQUENCE OF CHEMSERVE'S ACQUISITION OF APPLIED CHEMICAL PRODUCTS HAS BEEN A REDUCTION IN AECI'S EQUITY INTEREST IN CHEMICAL SERVICES TO 61%.
THE DECISION BY ICI OF THE UK TO WITHDRAW FROM THE EXPLOSIVES BUSINESS GLOBALLY ENABLED THE GROUP TO SECURE ITS POSITION IN THE AFRICAN EXPLOSIVES MARKET BY PURCHASING ICI'S 51% INTEREST IN THE AECI EXPLOSIVES PARTNERSHIP. THE EFFECTIVE DATE OF THE TRANSACTION WAS 1 JANUARY 1998. WITH MANUFACTURING SITES IN GHANA AND ZAMBIA, THE EXPLOSIVES BUSINESS IS WELL POSITIONED TO BENEFIT FROM THE EXPECTED EXPANSION IN MINING OF LARGELY UNDERDEVELOPED MINERAL RESOURCES IN AFRICA. DISCUSSIONS WITH POTENTIAL TECHNOLOGY AND JOINT VENTURE PARTNERS HAVE BEEN INITIATED.
RESTRUCTURING COSTS ASSOCIATED WITH THE ABOVE TRANSACTIONS HAVE BEEN SET OFF AGAINST THE GAINS REALISED THEREFROM AND INCLUDED AS ABNORMAL ITEMS TOGETHER WITH AN INCREASE IN THE PROVISION FOR POST-EMPLOYMENT MEDICAL LIABILITIES AND THE GAIN ARISING FROM DISPOSAL OF THE GROUP'S INTEREST IN EDS AFRICA.
THE REDUCTION IN FINANCING COSTS AND INVESTMENT INCOME REFLECTS THE REALISATION OF THE GROUP'S INVESTMENT IN AFEX HOLDINGS (PTY) LIMITED DURING OCTOBER 1996. RESULTS FOR 1996 HAVE BEEN RESTATED TO REFLECT THE CONSOLIDATION OF FOREIGN SUBSIDIARIES OTHER THAN IN ZIMBABWE.
HEADLINE EARNINGS PER ORDINARY SHARE DECLINED BY 14% TO 237 CENTS. THE BOARD DECIDED TO DECLARE A FINAL DIVIDEND OF 62,5 CENTS PER SHARE, THEREBY
MAINTAINING THE TOTAL DISTRIBUTION FOR THE YEAR AT 90 CENTS PER SHARE. DIVIDEND COVER REDUCED TO 2,6 TIMES.
WHILE THE CONSEQUENCES OF RECENT TURMOIL IN ASIAN MARKETS AND THE OUTLOOK FOR INTERNATIONAL NITROGEN PRICES REMAIN KEY UNCERTAINTIES IN THE YEAR AHEAD, FURTHER GAINS IN MOST BUSINESSES SHOULD ENABLE THE GROUP TO ACHIEVE MODERATE REAL GROWTH IN EARNINGS IN 1998. L BOYD CHAIRMAN
M P SMITH MANAGING DIRECTOR 6 MARCH 1998 DECLARATION OF ORDINARY DIVIDEND NO. 127
NOTICE IS HEREBY GIVEN THAT A FINAL DIVIDEND OF 62,5 CENTS PER SHARE, IN RESPECT OF THE YEAR ENDED 31 DECEMBER 1997, HAS BEEN DECLARED TO HOLDERS OF ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON 27 MARCH 1998.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 28 APRIL 1998. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 27 MARCH 1998. THE TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 28 MARCH TO 9 APRIL 1998, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD 6 MARCH 1998 MJF POTGIETER SECRETARY TRANSFER SECRETARIES:
CONSOLIDATED SHARE REGISTRARS LIMITED AND THE ROYAL BANK OF SCOTLAND PLC 41 FOX STREET SECURITIES SERVICES
JOHANNESBURG REGISTRARS
P O BOX 82
CAXTON HOUSE
REGISTERED OFFICE: REDCLIFFE WAY
1ST FLOOR, AECI PLACE, BRISTOL BS 99 7 KH
24 THE WOODLANDS, WOODLANDS DRIVE, ENGLAND WOODMEAD, SANDTON
