AECI - ANNOUNCEMENT OF A TRANSFORMATION STRATEGY

AECI LIMITED
(REGISTRATION NUMBER 04/02590/06)
ANNOUNCEMENT OF A TRANSFORMATION STRATEGY

IN A FURTHER CAUTIONARY ANNOUNCEMENT ON 29 SEPTEMBER 1998, THE BOARD OF AECI
LIMITED ("AECI" OR "THE COMPANY") NOTED THE DECISION BY SASOL LIMITED NOT TO
PROCEED WITH ITS OFFERS FOR AECI'S ORDINARY AND PREFERENCE SHARES, AND STATED
ITS INTENT TO REVIEW A RESTRUCTURING OF THE COMPANY.

ON FRIDAY 16 OCTOBER 1998, THE BOARD AGREED A WIDE-RANGING TRANSFORMATION
STRATEGY FOR THE COMPANY TO IMPROVE OVERALL PERFORMANCE AND BUILD SHAREHOLDER
VALUE.

KEY ELEMENTS OF THE STRATEGY INCLUDE THE EXIT FROM HIGH CAPITAL, CONTINUOUS
PROCESS COMMODITY CHEMICAL BUSINESSES; A VIGOROUS DRIVE FOR SIMPLIFICATION AND
INTERNATIONAL COMPETITIVENESS WHICH WILL RESULT IN A SUBSTANTIAL REDUCTION IN
COSTS AND OVERHEADS; AND PROMOTION OF A STYLE AND CULTURE CHARACTERISED BY
OPENNESS, EMPOWERMENT AND VALUE CREATION THROUGH GREATER RESPONSIVENESS TO
CUSTOMER NEEDS.

THE FUTURE FOCUS OF THE COMPANY WILL BE ON THE EXPANSION AND DEVELOPMENT OF
DISTINCT, MARKET-ALIGNED BUSINESSES REQUIRING LOW TO MEDIUM CAPITAL INVESTMENT
WHILST SERVING GLOBAL OR REGIONAL NICHE MARKETS.  EACH BUSINESS WILL HAVE THE
POTENTIAL TO BE A LEADER IN ITS DEFINED MARKET WITH TECHNOLOGY AND

CUSTOMER/TECHNICAL SERVICE PROVIDING THE BASIS FOR DIFFERENTIATION.  WHERE
APPROPRIATE, BUSINESSES WILL BE STRENGTHENED THROUGH STRATEGIC PARTNERSHIPS.
INTERNAL RESTRUCTURING WILL COMMENCE IMMEDIATELY AND IS INTENDED TO BE COMPLETE
WITHIN SIX MONTHS.  AS REGARDS PORTFOLIO REALIGNMENT, THE KYNOCH GROUP OF
COMPANIES WILL BE UNBUNDLED INTO SEPARATE OPERATING COMPANIES AS PRIORITY.
NEGOTIATIONS WITH THE CSIR REGARDING THE ACQUISITION OF THE COMPANY'S RESEARCH
AND DEVELOPMENT FACILITY ARE IN PROGRESS.  IN TERMS OF CURRENT THINKING
REGARDING THE NEW STRATEGY, AECI MAY CONSIDER DIVESTING FROM ENTITIES SUCH AS
POLIFIN LIMITED, DULUX (PTY) LIMITED, TIOXIDE SA (PTY) LIMITED AND THE FEDMIS
PARTNERSHIP.  THE TIMING OF ANY SUCH DIVESTMENTS, HOWEVER, WILL DEPEND ON
MARKET CIRCUMSTANCES.

A DECISION HAS BEEN TAKEN TO EXIT THE MANUFACTURE OF AMMONIA AND UREA AT
MODDERFONTEIN.  HOWEVER, CURRENT OPERATIONS ARE CASH GENERATIVE AND

PREPARATIONS FOR A MAINTENANCE TURN-AROUND ON THE AMMONIA/UREA COMPLEX IN THE
YEAR 2000 WILL CONTINUE FOR THE TIME BEING.  THE LIMESTONE AMMONIUM NITRATE
FERTILIZER PLANT AT MODDERFONTEIN WILL BE CLOSED BY YEAR END.

ONCE THE TRANSFORMATION IS COMPLETE, AECI'S PORTFOLIO WILL COMPRISE FIVE
BUSINESS CLUSTERS, NAMELY EXPLOSIVES, SPECIALITY AND FINE CHEMICALS, SPECIALITY
FIBRES, BIOTECHNOLGY-BASED OPERATIONS, AND SELECTED AGRICULTURAL PRODUCTS.
RETRENCHMENTS WILL BE A REGRETTABLE CONSEQUENCE OF THE TRANSFORMATION.
ALTHOUGH THEIR EXTENT HAS YET TO BE DETERMINED, NO STEPS WILL BE TAKEN IN THIS
REGARD WITHOUT PROPER AND THOROUGH CONSULTATION WITH THE INDIVIDUALS INVOLVED
AND WITH EMPLOYEE REPRESENTATIVES.

THE BOARD HAS ESTABLISHED A SUB-COMMITTEE COMPRISING TWO EXECUTIVE AND FOUR
NON-EXECUTIVE DIRECTORS TO ASSIST IN THE IMPLEMENTATION OF THE TRANSFORMATION
STRATEGY.

THE BOARD HAS ACCEPTED THE RESIGNATION OF M P SMITH AND J P VAN LEEUWEN AS
DIRECTORS OF AECI FOLLOWING THEIR DECISION TO RETIRE FROM THE EMPLOY OF THE
COMPANY.  BOTH MIKE SMITH AND JOHNNY VAN LEEUWEN HAD LONG AND DISTINGUISHED
CAREERS WITH THE COMPANY AND THE BOARD WISHES TO RECORD ITS APPRECIATION FOR
THEIR CONTRIBUTION TO THE AFFAIRS OF AECI OVER 33 AND 38 YEARS RESPECTIVELY.
THE CHAIRMAN OF AECI, LESLIE BOYD, HAS INDICATED TO THE BOARD HIS INTENTION TO
RELINQUISH THE CHAIRMANSHIP OF THE COMPANY AT THE FINANCIAL YEAR END.  HE WOULD
REMAIN A DIRECTOR.  HE NOMINATED TONY TRAHAR AS CHAIRMAN-ELECT AND THE BOARD
UNANIMOUSLY APPROVED THIS APPOINTMENT.

THE APPOINTMENT OF L C VAN VUGHT AS MANAGING DIRECTOR OF AECI WAS ANNOUNCED ON
8 OCTOBER 1998.  DR V C LIDDIARD, PRESENTLY CHIEF EXECUTIVE OF AECI EXPLOSIVES
LIMITED, WAS APPOINTED AN EXECUTIVE DIRECTOR OF AECI ON 16 OCTOBER 1998.
THE INTERIM REPORT TO SHAREHOLDERS DATED 3 AUGUST 1998 STATED "IT IS LIKELY
THAT EARNINGS FOR THE YEAR WILL BE BELOW THE LEVEL ACHIEVED IN 1997".

CONSEQUENT UPON THE FURTHER DETERIORATION IN ECONOMIC CONDITIONS SINCE THAT
DATE, TOGETHER WITH THE CUMULATIVE EFFECT OF THE UNCERTAINTY AMONG CUSTOMERS
AND EMPLOYEES REGARDING THE NOW LAPSED SASOL OFFER, THE CURRENT PROSPECT IS
THAT HEADLINE EARNINGS FOR THE YEAR WILL BE SIGNIFICANTLY LOWER THAN IN 1997.
IN ADDITION, SHAREHOLDERS ARE ADVISED THAT IT IS THE INTENT OF THE BOARD TO
MAKE APPROPRIATE PROVISION IN THE 1998 FINANCIAL YEAR FOR THE DETERMINABLE
COSTS ASSOCIATED WITH THE TRANSFORMATION STRATEGY.

PREVIOUS CAUTIONARY ANNOUNCEMENTS TO SHAREHOLDERS ARE HEREBY WITHDRAWN.
WOODMEAD
21 OCTOBER 1998
SPONSORING BROKER
ING BARINGS
ING BARINGS SOUTHERN AFRICA LIMITED
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)
(REGISTRATION NUMBER 94/04352/07)