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AECI LIMITED
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 1998 COMMENT
FURTHER WEAKENING IN DOMESTIC DEMAND FOR MOST GROUP PRODUCTS, REFLECTING THE GENERAL DOWNTURN IN THE SOUTH AFRICAN ECONOMY, CONSTRAINED GROWTH IN LOCAL SALES. EXPORT SALES WERE SUSTAINED DESPITE DECLINING DEMAND IN EAST ASIAN MARKETS.
PLEASING IMPROVEMENTS IN PROFIT PERFORMANCE WERE RECORDED IN SANS FIBRES AND AECI EXPLOSIVES. FOLLOWING THE PURCHASE OF ICI'S 51% INTEREST IN AECI
EXPLOSIVES ON 1 JANUARY, GROUP RESULTS FOR THE PERIOD INCLUDE 100% OF THE EXPLOSIVES BUSINESS AS AGAINST 49% IN THE SAME PERIOD LAST YEAR. CONTINUING ACTIONS TO ENHANCE PRODUCTIVITY AND REDUCE COSTS ARE BEING VIGOROUSLY PURSUED IN ALL BUSINESSES.
WHILE THE AMMONIA AND UREA PLANTS AT MODDERFONTEIN ACHIEVED RECORD LEVELS OF PRODUCTION FOLLOWING LAST YEAR'S SHUTDOWN, LOW INTERNATIONAL NITROGEN PRICES AND REDUCED REGIONAL DEMAND FOR FERTILIZERS IMPACTED SEVERELY ON THE PERFORMANCE OF KYNOCH LIMITED.
NET EXPENDITURE ON INVESTMENTS AND FIXED ASSETS OF R805 MILLION INCLUDED R570 MILLION IN RESPECT OF THE PURCHASE OF 51% OF THE EXPLOSIVES BUSINESS.
ADDITIONAL BORROWING TO FINANCE THIS INVESTMENT WAS THE MAIN CONTRIBUTOR TO THE INCREASE IN FINANCE COSTS. DISCUSSIONS WITH POTENTIAL INTERNATIONAL JOINT VENTURE PARTNERS REGARDING EQUITY PARTICIPATION IN THE EXPLOSIVES BUSINESS WERE DISCONTINUED FOLLOWING THE ANNOUNCEMENT OF SASOL'S INTENDED OFFER FOR THE COMPANY. ACCORDINGLY, NO PROCEEDS FROM SUCH PARTICIPATION WERE REALISED IN THE PERIOD AND GEARING INCREASED TO 54% COMPARED TO 29% AT JUNE 1997.
HEADLINE EARNINGS PER ORDINARY SHARE IN THE HALF YEAR ENDED 30 JUNE 1998 AT 80 CENTS WERE 23% LOWER THAN IN THE FIRST HALF OF 1997. THE BOARD DECIDED TO MAINTAIN THE DIVIDEND AT 27.5 CENTS PER SHARE.
DOCUMENTS RELATING TO SCHEMES OF ARRANGEMENT, PROPOSED BY SASOL LIMITED, BETWEEN THE COMPANY AND ITS ORDINARY AND PREFERENCE SHAREHOLDERS WERE ISSUED TO SHAREHOLDERS ON 16 JULY 1998. SEPARATE SCHEME MEETINGS OF ORDINARY SHAREHOLDERS AND PREFERENCE SHAREHOLDERS HAVE BEEN CONVENED FOR FRIDAY 7 AUGUST 1998. THE BOARD HAS RECOMMENDED THAT SHAREHOLDERS VOTE IN FAVOUR OF THE SCHEMES. THE SCHEMES ARE SUBJECT TO THE APPROVAL OF THE COMPETITION BOARD WHICH INITIATED A FORMAL INVESTIGATION OF THE PROPOSED TRANSACTION ON 26 JUNE 1998. THIS INVESTIGATION IS EXPECTED TO TAKE APPROXIMATELY THREE MONTHS TO COMPLETE AND THE BOARD LOOKS FORWARD TO A SUCCESSFUL OUTCOME.
OTHER KEY UNCERTAINTIES AFFECTING THE BALANCE OF THE YEAR INCLUDE THE FURTHER CONSEQUENCES OF CONTINUING TURBULENCE IN ASIAN MARKETS, THE LEVEL OF THE EXCHANGE RATE AND LOCAL INTEREST RATES, AND THE EFFECTS THEREOF ON DOMESTIC ECONOMIC ACTIVITY. IN ADDITION, THE EXTENT TO WHICH CURRENT INDUSTRIAL ACTION IN THE CHEMICAL INDUSTRY, AND THE UNCERTAINTY AMONG CUSTOMERS AND EMPLOYEES PENDING THE COMPETITION BOARD RULING, WILL IMPACT PERFORMANCE IN THE SECOND HALF YEAR REMAINS UNCLEAR. IN THE CIRCUMSTANCES, HOWEVER, IT IS LIKELY THAT EARNINGS FOR THE YEAR WILL BE BELOW THE LEVEL ACHIEVED IN 1997. L BOYD CHAIRMAN
M P SMITH MANAGING DIRECTOR 3 AUGUST 1998 DECLARATION OF ORDINARY DIVIDEND NO. 128
NOTICE IS HEREBY GIVEN THAT AN INTERIM DIVIDEND OF 27.5 CENTS PER SHARE, IN RESPECT OF THE YEAR ENDING 31 DECEMBER 1998, HAS BEEN DECLARED TO HOLDERS OF ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON 21 AUGUST 1998.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 18 SEPTEMBER 1998. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN
21 AUGUST 1998. THE TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 22 AUGUST TO 4 SEPTEMBER 1998, BOTH DAYS INCLUSIVE. BY ORDER OF THE BOARD M J F POTGIETER SECRETARY 3 AUGUST 1998 TRANSFER SECRETARIES: CONSOLIDATED SHARE REGISTRARS LIMITED 41 FOX STREET JOHANNESBURG AND COMPUTERSHARE SERVICES PLC P O BOX 82 CAXTON HOUSE REDCLIFFE WAY BRISTOL BS 99 7 KH ENGLAND FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE UNAUDITED FINANCIAL RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 1998 AS FOLLOWS:
1998 1997 1997 FIRST HALF FIRST HALF % YEAR R MILLIONS CHANGE R MILLIONS TURNOVER (1) 4 075 3 875 5 8 275
TRADING PROFIT 304 326 (7) 671
FINANCING COSTS 121 68 145
183 258 (29) 526
ABNORMAL ITEMS (17) - 2
166 258 528
TAXATION 54 87 120
NORMAL ACTIVITIES 54 87 137
ABNORMAL ITEMS - - (17)
112 171 408
INVESTMENT INCOME 7 4 9
DIVIDENDS RECEIVED 3 2 5 SHARE OF ASSOCIATED
COMPANIES' INCOME 4 2 4
NET PROFIT 119 175 417 ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS 13 14 36
TOTAL NET PROFIT 106 161 (34) 381 EARNINGS PER ORDINARY
SHARE (CENTS) 69 104 246 HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) 80 104 237 DIVIDEND PER ORDINARY
SHARE (CENTS) 27.5 27.5 90 NUMBER OF ORDINARY
SHARES (MILLIONS) 155 155 155
(1) INCLUDES EXPORTS OF R641 MILLION (1997 - R651 MILLION) ABRIDGED BALANCE SHEET
1998 1997 1997 30 JUNE 30 JUNE 31 DEC R MILLIONS R MILLIONS CAPITAL EMPLOYED ORDINARY SHAREHOLDERS'
INTEREST 2 771 2 990 3 107 PREFERENCE CAPITAL 6 6 6 OUTSIDE SHAREHOLDERS'
INTEREST IN SUBSIDIARIES 113 104 133 TOTAL SHAREHOLDERS'
INTEREST 2 890 3 100 3 246 DEFERRED TAXATION 80 100 66
LONG-TERM BORROWINGS 774 204 174 3 744 3 404 3 486 EMPLOYMENT OF CAPITAL
FIXED ASSETS 3 060 2 739 2 886 INVESTMENTS 123 154 116 NET CURRENT ASSETS 836 766 723 INVENTORY 1 663 1 420 1 396 ACCOUNTS RECEIVABLE 1 653 1 598 1 535 ACCOUNTS PAYABLE 1 566 1 432 1 492 NET SHORT-TERM BORROWINGS 774 693 488 INTEREST FREE LIABILITIES 140 127 228 LONG-TERM PROVISIONS 275 255 239 3 744 3 404 3 486 CASH FLOW STATEMENT
1998 1997 1997 FIRST HALF FIRST HALF YEAR R MILLIONS R MILLIONS CASH GENERATED BY
OPERATIONS 460 455 937 INVESTMENT INCOME 3 4 20 FINANCING COSTS (121) (68) (145) TAXES PAID (90) (115) (132) CHANGES IN WORKING
CAPITAL (232) (395) (366) EXPENDITURE RELATING TO
LONG-TERM PROVISIONS - - (23) EXPENDITURE RELATING
TO ABNORMAL ITEMS - - (5) CASH AVAILABLE FROM (ABSORBED BY)
OPERATING ACTIVITIES 20 (119) 286 DIVIDENDS PAID (101) (106) (153) CASH RETAINED FROM (ABSORBED BY)
OPERATING ACTIVITIES (81) (225) 133 CASH UTILISED IN
INVESTMENT ACTIVITIES (805) (263) (356) CASH EFFECTS OF FINANCING
ACTIVITIES 827 188 (16) DECREASE IN CASH AND
CASH EQUIVALENTS (59) (300) (239) OTHER SALIENT FEATURES
1998 1997 1997 HALF YEAR HALF YEAR YEAR 30 JUNE 30 JUNE 31 DEC GEARING (%) 54 29 20 CURRENT ASSETS TO
CURRENT LIABILITIES 1.3 1.3 1.3 NET ASSET VALUE PER
ORDINARY SHARE (CENTS) 1 792 1 933 2 009 R MILLIONS R MILLIONS DEPRECIATION 158 128 265 CAPITAL EXPENDITURE 838 304 607 - EXPANSION 749 180 333 - REPLACEMENT 89 124 274 CAPITAL COMMITMENTS 240 279 426 - CONTRACTED FOR 171 83 242 - NOT CONTRACTED FOR 69 196 184 FUTURE RENTALS ON PROPERTY, PLANT
AND EQUIPMENT LEASED 149 174 160 - PAYABLE WITHIN
ONE YEAR 27 26 31 - PAYABLE THEREAFTER 122 148 129 CONTINGENT LIABILITIES
AND GUARANTEES 30 32 97 INDUSTRY SEGMENT ANALYSIS FOR THE HALF YEAR ENDED JUNE
TURNOVER TRADING PROFIT ASSETS
1998 1997 1998 1997 1998 1997 R MILLIONS R MILLIONS R MILLIONS AGRICULTURAL PRODUCTS
AND INDUSTRIAL CHEMICALS 948 1 005 23) 33 926 868 COATINGS 342 340 (1) 7 327 319 FIBRES 588 615 71 62 582 533 MINING SOLUTIONS 552 252 90 28 413 168 MONOMERS, POLYMERS AND
RELATED PRODUCTS 710 745 175 189 1 017 893 OTHER BUSINESSES 251 250 (7) 8 338 320 SPECIALITY CHEMICALS 695 624 62 60 506 399 PROPERTY AND SITE SERVICES 209 208 3 (3) 711 740 CORPORATE RESEARCH (32) (25) 49 44 INTERGROUP/CORPORATE (220) (164) (34) (33) (59) 41 4 075 3 875 304 326 4 810 4 325 ASSETS CONSIST OF NET FIXED ASSETS, INVENTORY, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. REGISTRATION NO: 04/02590/06 REGISTERED OFFICE: FIRST FLOOR, AECI PLACE 24 THE WOODLANDS WOODLANDS DRIVE WOODMEAD, SANDTON
