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(REGISTRATION NO. 04/02590/06)
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 1999 FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE FINANCIAL RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 1999 AS FOLLOWS:
1999 1998 1998
FIRST HALF FIRST HALF % YEAR
UNAUDITED UNAUDITED CHANGE AUDITED
R MILLIONS R MILLIONS R MILLIONS TURNOVER (1) 4047 4075 (1) 8646
NET TRADING PROFIT 315 304 4 644
FINANCING COSTS (156) (121) (318)
INVESTMENT INCOME 7 7 18
166 190 (13) 344
EXCEPTIONAL ITEMS (2) - (17) (425)
AMORTISATION OF GOODWILL (11) - (21)
NET PROFIT BEFORE TAXATION 155 173 (102)
TAXATION (45) (54) 3
NORMAL ACTIVITIES (45) (54) (102)
EXCEPTIONAL ITEMS - - 105
NET PROFIT / (LOSS) 110 119 (99) ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS (14) (13) (28) NET PROFIT / (LOSS) ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 96 106 (127) HEADLINE EARNINGS ARE DERIVED FROM: NET PROFIT / (LOSS) ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 96 106 (127) ADD: NET EXCEPTIONAL
ITEMS - 17 313
AMORTISATION OF GOODWILL 11 - 21
107 123 207 HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) 69 80 (14) 134 ATTRIBUTABLE EARNINGS / (LOSS) PER ORDINARY SHARE
(CENTS) 62 69 (82) DIVIDEND PER ORDINARY
SHARE (CENTS) 30.0 27.5 9 55 NUMBER OF ORDINARY SHARES
(MILLIONS) 155 155 155
1. INCLUDES EXPORTS OF R 712 MILLION (1998 - R 641 MILLION)
2. A RESTRUCTURING PROVISION OF R 264 MILLION WAS ESTABLISHED AS AN EXCEPTIONAL ITEM AT 31 DECEMBER 1998 OF WHICH R 126 MILLION
WAS UTILISED DURING THE PERIOD , LEAVING A BALANCE OF R 138 MILLION AT 30 JUNE 1999. IN ADDITION, CONDITIONAL ON SHAREHOLDER APPROVAL, DISPOSAL OF AECI'S INTEREST IN POLIFIN WILL RESULT IN AN EXCEPTIONAL GAIN OF APPROXIMATELY R 1150 MILLION BEING RECOGNISED IN THE SECOND HALF YEAR. THE GAIN WILL BE PARTIALLY OFFSET BY A PROVISION, ESTIMATED AT R 150 MILLION, IN RESPECT OF THE PLANNED CLOSURE OF THE AMMONIA COMPLEX AT MODDERFONTEIN IN APRIL 2000, TOGETHER WITH ANY ADDITIONAL CHARGES WHICH MAY ARISE FROM FURTHER RESTRUCTURING ELSEWHERE IN THE GROUP. ABRIDGED BALANCE SHEET
1999 1998 1998
30 JUNE 30 JUNE 31 DEC
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS CAPITAL EMPLOYED ORDINARY SHAREHOLDERS'
INTEREST 2973 3204 2917 OUTSIDE SHAREHOLDERS'
INTEREST IN SUBSIDIARIES 130 113 128
TOTAL SHAREHOLDERS' INTEREST 3103 3317 3045
DEFERRED TAXATION (43) 80 (67)
NET BORROWINGS 1728 1548 1522
4788 4945 4500 EMPLOYMENT OF CAPITAL
FIXED ASSETS AND GOODWILL 3373 3487 3484
INVESTMENTS 140 123 115
CURRENT ASSETS 3176 3316 3110
TOTAL ASSETS 6689 6926 6709 NON INTEREST BEARING
LIABILITIES 1609 1706 1911
LONG-TERM PROVISIONS 292 275 298
4788 4945 4500 CASH FLOW STATEMENT
1999 1998 1998
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS
CASH GENERATED BY OPERATIONS 487 460 986
INVESTMENT INCOME 5 3 10
FINANCING COSTS (156) (121) (318)
TAXES PAID (74) (90) (234)
CHANGES IN WORKING CAPITAL (204) (232) (14) EXPENDITURE RELATING TO LONG-
TERM PROVISIONS (8) - (25) EXPENDITURE RELATING TO
EXCEPTIONAL ITEMS (115) - (106) CASH AVAILABLE (ABSORBED BY)
FROM OPERATING ACTIVITIES (65) 20 299
DIVIDENDS PAID (48) (101) (149) CASH RETAINED (ABSORBED BY)
FROM OPERATING ACTIVITIES (113) (81) 150 CASH UTILISED IN INVESTMENT
ACTIVITIES (93) (805) (989)
NET CASH UTILISED (206) (886) (839) CASH EFFECTS OF FINANCING
ACTIVITIES 276 827 837 INCREASE / (DECREASE) IN
LIQUID FUNDS 70 (59) (2)
INDUSTRY SEGMENT ANALYSIS FOR THE SIX MONTHS ENDED JUNE
TURNOVER TRADING PROFIT ASSETS
1999 1998 1999 1998 1999 1998
UNAUDITED UNAUDITED UNAUDITED UN- UN- UN-
AUDITED AUDITED AUDITED R MILL R MILL R MILL R MILL R MILL R MILL
MINING SOLUTIONS 586 552 97 90 853 841 SPECIALITY , FINE AND INDUSTRIAL
CHEMICALS 906 919 88 78 655 691
SPECIALITY FIBRES 594 588 66 71 472 581 MONOMERS, POLYMERS
AND RELATED PRODUCTS 746 710 136 175 1041 1003 AGRICULTURAL PRODUCTS AND
INTERMEDIATES 950 987 (23) (35) 783 821
COATINGS 343 342 0 (1) 329 326
OTHER BUSINESSES 184 183 (17) (16) 904 895 GROUP SERVICES AND
INTERGROUP (262) (206) (32) (58) 47 79
4047 4075 315 304 5084 5237
ASSETS CONSIST OF NET FIXED ASSETS AND GOODWILL, INVENTORY, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. OTHER SALIENT FEATURES
1999 1998 1998
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS CAPITAL EXPENDITURE 183 838 1108
-EXPANSION 92 749 897
-REPLACEMENT 91 89 211
CAPITAL COMMITMENTS (1) 372 240 243
-CONTRACTED FOR 289 171 175
-NOT CONTRACTED FOR 83 69 68 FUTURE RENTALS ON PROPERTY, PLANT AND
EQUIPMENT LEASED 222 149 230
-PAYABLE WITHIN ONE YEAR 43 27 45
-PAYABLE THEREAFTER 179 122 185 CONTINGENT LIABILITIES AND
GUARANTEES 28 30 22
GEARING 56% 47% 50% CURRENT ASSETS TO CURRENT
LIABILITIES 1.2 1.3 1.2 NET ASSET VALUE PER ORDINARY
SHARE (CENTS) 1922 2071 1886 NET INVESTMENT EXPENDITURE
(R MILLIONS) 93 805 385 DEPRECIATION AND AMORTISATION
(R MILLIONS) 183 158 358
(1) INCLUDES R269 MILLION IN RESPECT OF COMMITMENTS BY POLIFIN LIMITED AT 30 JUNE 1999. OPERATING RESULTS
HEADLINE EARNINGS PER ORDINARY SHARE AT 69 CENTS WERE 14% LOWER THAN IN THE SAME PERIOD LAST YEAR BUT 28% HIGHER THAN IN THE SECOND HALF OF 1998.
LOCAL SALES VOLUMES IN MANY SEGMENTS WERE MARKEDLY LOWER THAN A YEAR AGO AS THE SLUMP IN THE SOUTH AFRICAN ECONOMY INTENSIFIED. EXPORTS OF POLYMERS AND SPECIALITY FIBRES HELD UP WELL DESPITE DISRUPTIONS IN ASIA AND SOUTH AMERICA. GROSS MARGINS WERE PRESSURED BY LOW PRICES INTERNATIONALLY AND INTENSE COMPETITIVE ACTIVITY. SUBSTANTIAL REDUCTIONS IN FIXED COSTS RESULTING FROM THE GROUP'S WIDE-RANGING TRANSFORMATION AND RESTRUCTURING PROGRAMME ENABLED SOME IMPROVEMENT IN TRADING MARGINS.
THE PERFORMANCE OF THE GROUP'S THREE CORE CLUSTERS - MINING SOLUTIONS, SPECIALITY FIBRES AND SPECIALITY, FINE AND INDUSTRIAL CHEMICALS - WAS PLEASING IN DIFFICULT CIRCUMSTANCES. THE NITROGEN PRODUCTS AND RETAIL FERTILIZER BUSINESSES CONTINUED TO SUFFER THE EFFECTS OF LOW INTERNATIONAL PRICES AND AGGRESSIVE PRICE DISCOUNTING IN A WEAK LOCAL MARKET. POLIFIN'S RESULTS WERE ALSO IMPACTED BY LOWER POLYMER PRICES ON AVERAGE IN THE PERIOD ALBEIT WITH AN ENCOURAGING FIRMER TREND IN RECENT MONTHS.
TRADING CASH FLOW (OR EBITDA) INCREASED BY 8% TO R498 MILLION. WHILE NET CAPITAL AND INVESTMENT EXPENDITURE WAS CONTAINED AT R93 MILLION, THE SEASONAL INCREASE IN WORKING CAPITAL WAS EXACERBATED BY THE SEVERELY DEPRESSED LOCAL ECONOMIC CONDITIONS WHICH RESULTED IN HIGHER THAN PLANNED LEVELS OF INVENTORY AND ACCOUNTS RECEIVABLE.
NET BORROWINGS ACCORDINGLY INCREASED BY R206 MILLION FROM DECEMBER 1998 TO R1728 MILLION AT 30 JUNE. THE HIGHER AVERAGE LEVEL OF BORROWINGS TOGETHER WITH HIGHER INTEREST RATES RESULTED IN A SUBSTANTIAL INCREASE IN FINANCING COSTS RELATIVE TO THE FIRST HALF OF 1998. TRANSFORMATION AND RESTRUCTURING
CONSIDERABLE PROGRESS HAS BEEN MADE REGARDING INTERNAL RESTRUCTURING AND RATIONALISATION ASPECTS OF THE GROUP'S TRANSFORMATION PROGRAMME. CASH
EXPENDITURE ON RESTRUCTURING INITIATIVES AMOUNTED TO R115 MILLION IN THE PERIOD. MAJOR MILESTONES IN THE PERIOD UNDER REVIEW INCLUDE:-
- CONCLUSION OF AN AMMONIA SUPPLY AGREEMENT WITH SASOL LIMITED, THE CONSEQUENT CLOSURE OF THE MILNERTON AMMONIA PLANT AND THE DECISION TO CLOSE THE MODDERFONTEIN NITROGEN COMPLEX IN APRIL 2000;
- AGREEMENT SUBJECT TO CERTAIN CONDITIONS WITH NORSK HYDRO AGRI INTERNATIONAL TO ESTABLISH A 50:50 JOINT VENTURE WITH KYNOCH FERTILIZER IN SOUTHERN AFRICA. DETAILED ARRANGEMENTS RELATING TO THE JOINT VENTURE ARE NEARING COMPLETION; - THE DECISION TO CEASE MANUFACTURE OF TEXTURED POLYESTER YARNS FOR APPAREL END-USES AND THE CONSEQUENT CLOSURE OF SANS FIBRES' HAMMARSDALE FACTORY; - OUTSOURCING, RESTRUCTURING AND DOWNSIZING OF RESEARCH, ENGINEERING, FACTORY SERVICES, HEAD OFFICE AND GROUP SUPPORT FUNCTIONS. YEAR 2000 COMPLIANCE
IMPLEMENTATION OF A PROGRAMME TO ENSURE THAT ALL RELEVANT PLANT AND BUSINESS SYSTEMS ARE YEAR 2000 COMPLIANT IS NEAR COMPLETION. FOUR OUTSTANDING ITEMS WILL BE COMPLETED BY END SEPTEMBER.
THE COST OF ACHIEVING COMPLIANCE IS NOT EXPECTED TO EXCEED R10 MILLION. POST BALANCE SHEET EVENT
AS ANNOUNCED ON 2 AUGUST, AECI HAS UNDERTAKEN TO SUPPORT AN OFFER WHICH WILL BE MADE BY SASOL LIMITED TO ACQUIRE ALL OF THE ORDINARY SHARES OF POLIFIN LIMITED NOT OWNED BY SASOL AT A PRICE OF R9.70 PER POLIFIN SHARE WITH EFFECT FROM 26 JUNE 1999. AECI'S ACCEPTANCE OF SUCH AN OFFER IN RESPECT OF ITS 40%
SHAREHOLDING IN POLIFIN IS CONDITIONAL ON THE APPROVAL OF SHAREHOLDERS. A CIRCULAR SETTING OUT DETAILS OF THE PROPOSED TRANSACTION AND CONVENING A GENERAL MEETING OF SHAREHOLDERS WILL BE POSTED AS SOON AS POSSIBLE.
THE PROPOSED DISPOSAL OF THE INTEREST IN POLIFIN IS CONSISTENT WITH AECI'S STATED STRATEGY AND WILL BE A MAJOR ENABLING STEP IN THE TRANSFORMATION PROCESS COMPLETION OF THE OFFER WILL RESULT IN AECI RECEIVING CASH PROCEEDS OF R2135 MILLION, OR R13.80 PER AECI SHARE, IN CONSIDERATION FOR ITS 40% INTEREST IN POLIFIN. AN EXCEPTIONAL GAIN ON DISPOSAL OF APPROXIMATELY R1150 MILLION WILL BE RECOGNISED ON COMPLETION. INTEREST ON THE PURCHASE CONSIDERATION IS PAYABLE BY SASOL FROM 26 JUNE 1999 TO THE DATE OF PAYMENT, AS DETAILED IN THE
ANNOUNCEMENT OF 2 AUGUST. IN CONSEQUENCE, IT IS ESTIMATED THAT THE TRANSACTION WILL ENHANCE EARNINGS IN THE SECOND HALF YEAR BY APPROXIMATELY 10%. PROSPECTS
RECENT DECLINES IN LOCAL INTEREST RATES ARE AN EARLY INDICATION THAT ECONOMIC CONDITIONS SHOULD IMPROVE IN THE SECOND HALF-YEAR. THIS POSITIVE DEVELOPMENT, TOGETHER WITH THE FURTHER BENEFITS EXPECTED FROM RESTRUCTURING, SHOULD BE SUFFICIENT TO SUPPORT AN IMPROVEMENT IN HEADLINE EARNINGS FOR THE YEAR. ACCORDINGLY, THE INTERIM DIVIDEND HAS BEEN INCREASED TO 30 CENTS PER ORDINARY SHARE (1998:27.5 CENTS). TONY TRAHAR CHAIRMAN LEX VAN VUGHT MANAGING DIRECTOR 3 AUGUST 1999. DECLARATION OF ORDINARY DIVIDEND NO. 130
NOTICE IS HEREBY GIVEN THAT AN INTERIM DIVIDEND OF 30 CENTS PER SHARE, IN RESPECT OF THE YEAR ENDING 31 DECEMBER 1999, HAS BEEN DECLARED TO SHAREHOLDERS OF ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS ON 20 AUGUST 1999.
PAYMENT WILL BE MADE FROM THE OFFICES OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 23 SEPTEMBER 1999. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 20 AUGUST 1999. THE TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 21 AUGUST 1999 TO 3 SEPTEMBER 1999, BOTH DAYS INCLUSIVE. BY ORDER OF THE BOARD M J F POTGIETER SECRETARY 3 AUGUST 1999
COMPUTERSHARE SERVICES PLC TRANSFER OF SECRETARIES PO BOX 82
COMPUTERSHARE SERVICES LIMITED CAXTON HOUSE
41 FOX STREET REDCLIFFE WAY
JOHANNESBURG BRISTOL BS 99 7 KH AND ENGLAND
