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AECI LIMITED TRANSFORMATION...........PAYING OFF *HEADLINE EARNINGS UP 44% *FINAL DIVIDEND INCREASED TO 50 CENTS *GEARING DOWN TO 4% *RESTRUCTURING WELL ADVANCED *IMPROVED EARNINGS IN PROSPECT COMMENT OPERATING RESULTS
IT IS PLEASING TO REPORT THAT AECI MADE SUBSTANTIAL PROGRESS WITH ITS
TRANSFORMATION PROGRAMME AND, DESPITE DIFFICULT TRADING CONDITIONS, HEADLINE EARNINGS PER ORDINARY SHARE AT 193 CENTS WERE 44% HIGHER THAN IN 1998. SIGNIFICANT CHANGES IN THE GROUP'S PORTFOLIO OF BUSINESSES, IN LINE WITH ITS TRANSFORMATION PROGRAMME, IMPACTED MATERIALLY ON CONSTITUENT PARTS OF THE FINANCIAL STATEMENTS. THE DISPOSAL FOR R2.1 BILLION OF THE 40% INTEREST IN POLIFIN LIMITED TO SASOL LIMITED AT MID-YEAR, AND THE SALE OF A CONTROLLING 50% INTEREST IN KYNOCH FERTILIZER TO NORSK HYDRO WITH THE RETAINED INTEREST EQUITY-ACCOUNTED FROM JULY, TOGETHER HAD THE EFFECT OF REDUCING GROUP TURNOVER AND NET TRADING PROFIT IN THE SECOND HALF. EXCLUDING THESE BUSINESSES, THE GROUP RECORDED A HEALTHY 25% INCREASE IN TRADING PROFIT IN 1999.
MOST OF THIS GAIN REFLECTED THE TANGIBLE BENEFITS OF MAJOR COST REDUCTIONS DELIVERED BY THE TRANSFORMATION PROGRAMME. CASH EXPENDITURE ON RESTRUCTURING INITIATIVES AMOUNTED TO R206 MILLION IN THE YEAR IN ADDITION TO THE R106 MILLION EXPENDED IN 1998. RESULTANT SAVINGS, ON AN ANNUALISED BASIS, WERE ESTIMATED AT R250 MILLION BY YEAR-END.
PERFORMANCE OF THE GROUP'S THREE CORE CLUSTERS - MINING SOLUTIONS, SPECIALTY FIBRES AND SPECIALTY, FINE AND INDUSTRIAL CHEMICALS - WAS VERY SATISFACTORY, DESPITE A WEAK DOMESTIC ECONOMY AND SUBDUED GLOBAL DEMAND FOR PERFORMANCE CHEMICALS IN GENERAL. SOME IMPROVEMENT IN DOMESTIC DEMAND BECAME APPARENT IN THE LAST QUARTER.
PROCEEDS FROM DISPOSALS AMOUNTING TO R2.4 BILLION IN THE YEAR WERE APPLIED IN THE FIRST INSTANCE TO REDUCING GROUP BORROWINGS, WHICH STOOD AT R1.7 BILLION AT MID-YEAR. INTEREST EARNED ON SURPLUS FUNDS IN THE SECOND HALF REDUCED NET FINANCING COSTS FOR THE YEAR TO R120 MILLION - SOME R200 MILLION LOWER THAN IN 1998. INTEREST COVER IMPROVED TO 4.8 TIMES.
NET CAPITAL EXPENDITURE WAS WELL CONTAINED AT R155 MILLION. THE LESS CAPITAL INTENSIVE NATURE OF THE RESTRUCTURED GROUP PORTFOLIO ENABLED A RETURN OF SURPLUS FUNDS TO SHAREHOLDERS AND IN NOVEMBER A SPECIAL DIVIDEND OF R928 MILLION OR R6 PER ORDINARY SHARE WAS PAID.
THE NET EFFECT OF DISPOSALS, CASH RESTRUCTURING COSTS, OPERATING CASH FLOW AND THE SPECIAL DIVIDEND WAS TO REDUCE NET BORROWINGS AT YEAR-END TO R124 MILLION, REPRESENTING A DEBT TO EQUITY RATIO OF 4%. TRANSFORMATION AND RESTRUCTURING
THE MAJOR STEPS IN THE GROUP'S TRANSFORMATION PROGRAMME HAVE BEEN ACHIEVED. VARIOUS FURTHER DISPOSALS OF NON-CORE INTERESTS WILL BE PURSUED WITH A VIEW TO REALISING OPTIMAL VALUE FOR SHAREHOLDERS. PARTICULAR EMPHASIS WILL BE PLACED IN 2000 ON ACCELERATING THE REALISATION OF PROPERTY SURPLUS TO OPERATING
REQUIREMENTS AND ON FURTHER DEVELOPING THE GROWTH STRATEGIES OF THE GROUP'S CORE CLUSTERS. EVOLUTION OF A GROUP CULTURE APPROPRIATE TO A LEAN,
CUSTOMER-FOCUSED, NIMBLE AND MOTIVATED ORGANISATION WILL REMAIN A PRIORITY. YEAR 2000 COMPLIANCE
NO DISRUPTIVE EVENTS RELATED TO THE ADVENT OF THE YEAR 2000 HAVE BEEN
EXPERIENCED BY THE GROUP. THE COST OF ACHIEVING COMPLIANCE WAS ESTIMATED AT LESS THAN R10 MILLION. PROSPECTS
EXTERNAL CONDITIONS APPEAR FAVOURABLE, WITH MANY INDICATORS POINTING TO A PERIOD OF REASONABLE GLOBAL AND DOMESTIC ECONOMIC GROWTH. THE BENEFITS OF TRANSFORMATION AND AN IMPROVING ECONOMIC ENVIRONMENT SHOULD ENABLE THE GROUP TO INCREASE HEADLINE EARNINGS IN 2000, NOTWITHSTANDING A LOWER ASSET BASE. ACCORDINGLY, THE BOARD HAS DECIDED TO INCREASE THE FINAL DIVIDEND TO 50 CENTS PER ORDINARY SHARE. TONY TRAHAR LEX VAN VUGHT
CHAIRMAN MANAGING DIRECTOR 24 FEBRUARY 2000 1999 FINANCIAL RESULTS
THE DIRECTORS ANNOUNCE THE AUDITED FINANCIAL RESULTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 1999 AS FOLLOWS: INCOME STATEMENT
1999 1998 % R MILLIONS CHANGE TURNOVER (1) 7 311 8 646 (15) NET TRADING PROFIT 568 644 (12) FINANCING COSTS (120) (318)
INVESTMENT INCOME 20 18
468 344 36 EXCEPTIONAL ITEMS (2) 683 (425)
AMORTISATION OF GOODWILL (25) (21)
NET PROFIT / (LOSS) BEFORE TAXATION 1 126 (102)
TAXATION (117) 3
NORMAL ACTIVITIES (134) (102)
EXCEPTIONAL ITEMS 17 105
NET PROFIT / (LOSS) 1 009 (99) ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS (35) (28) NET PROFIT / (LOSS) ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 974 (127) HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) (3) 193 134 44 ATTRIBUTABLE EARNINGS / (LOSS)
PER ORDINARY SHARE (CENTS) 63 (82)
DIVIDENDS PER ORDINARY SHARE (CENTS) - NORMAL 80 55
- SPECIAL 600 -
NUMBER OF ORDINARY SHARES IN ISSUE (MILLIONS) 155 155 (1) INCLUDES EXPORTS OF R1 334 MILLION (1998 - R1 449 MILLION)
(2) CLOSURE OF OPERATIONS (299) (220)
RESTRUCTURING OF OPERATIONS (104) (181) PROVISION FOR POST-EMPLOYMENT
HEALTH CARE BENEFITS (29) (24)
PROVISION FOR ENVIRONMENTAL REMEDIATION (54) - NET GAIN ON DISPOSAL OF BUSINESSES
AND INVESTMENTS 1 169 -
683 (425) (3) HEADLINE EARNINGS ARE DERIVED FROM: NET PROFIT / (LOSS) ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 974 (127)
EXCEPTIONAL ITEMS NET OF TAX (700) 320 EXCEPTIONAL ITEM ATTRIBUTABLE TO
OUTSIDE SHAREHOLDERS - (7)
AMORTISATION OF GOODWILL 25 21
299 207 ABRIDGED BALANCE SHEET
1999 1998 R MILLIONS CAPITAL EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 2 843 2 917 PREFERENCE CAPITAL AND OUTSIDE SHAREHOLDERS' INTEREST 145 128 TOTAL SHAREHOLDERS' INTEREST 2 988 3 045 DEFERRED TAXATION (215) (67) NET BORROWINGS 124 1 522 2 897 4 500 EMPLOYMENT OF CAPITAL
PROPERTY, PLANT, EQUIPMENT AND GOODWILL 2 319 3 484 INVESTMENTS 338 115 CURRENT ASSETS 2 190 3 110 TOTAL ASSETS 4 847 6 709 NON INTEREST-BEARING LIABILITIES 1 597 1 911 LONG-TERM PROVISIONS 353 298 2 897 4 500 ABRIDGED CASH FLOW STATEMENT
1999 1998 R MILLIONS CASH GENERATED BY OPERATIONS 897 986 INVESTMENT INCOME 11 10 FINANCING COSTS (120) (318) TAXES PAID (178) (234) CHANGE IN WORKING CAPITAL (207) (14) EXPENDITURE RELATING TO LONG-TERM PROVISIONS (36) (25) EXPENDITURE RELATING TO EXCEPTIONAL ITEMS (206) (106) CASH AVAILABLE FROM OPERATING ACTIVITIES 161 299 NORMAL DIVIDENDS PAID (99) (149) CASH RETAINED FROM OPERATING ACTIVITIES 62 150 CASH UTILISED IN INVESTMENT ACTIVITIES (199) (1 003) PROCEEDS FROM DISPOSAL OF INVESTMENTS AND BUSINESSES 2 432 14 2 295 (839) SPECIAL DIVIDEND PAID (928) - NET CASH GENERATED / (UTILISED) 1 367 (839) CASH EFFECTS OF FINANCING ACTIVITIES (679) 837 INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 688 (2) OTHER SALIENT FEATURES
1999 1998 R MILLIONS CAPITAL EXPENDITURE 231 479 - EXPANSION 104 268 - REPLACEMENT 127 211 CAPITAL COMMITMENTS 181 175 - CONTRACTED 57 107 - NOT CONTRACTED FOR 124 68 1999 1998 R MILLIONS
FUTURE RENTALS ON PROPERTY, PLANT AND EQUIPMENT LEASED 173 230 - PAYABLE WITHIN ONE YEAR 45 45 - PAYABLE THEREAFTER 128 185 CONTINGENT LIABILITIES AND GUARANTEES 169 22 GEARING (%) 4 50 CURRENT ASSETS TO CURRENT LIABILITIES (RATIO) 1.2 1.2 NET ASSET VALUE PER ORDINARY SHARE (CENTS) 1 838 1 886 NET CAPITAL EXPENDITURE 155 385 DEPRECIATION 286 337 INDUSTRY SEGMENT ANALYSIS
TURNOVER NET TRADING PROFIT ASSETS 1999 1998 1999 1998 1999 1998 R MILLIONS R MILLIONS R MILLIONS MINING SOLUTIONS 1 225 1 142 195 188 861 822 SPECIALTY, FINE AND INDUSTRIAL
CHEMICALS 1 885 1 957 196 194 637 645 SPECIALTY FIBRES 1 210 1 177 125 115 458 553 PROPERTY 21 - 4 (6) 644 615 OTHER BUSINESSES 2 252 2 119 42 21 720 724 GROUP SERVICES, DEVELOPMENT
AND INTERGROUP (529) (301) (64) (114) (4) 102 6 064 6 094 498 398 3 316 3 461 BUSINESSES SOLD / EQUITY
-ACCOUNTED 1 247 2 552 70 246 - 1 552 7 311 8 646 568 644 3 316 5 013 ASSETS CONSIST OF NET PROPERTY, PLANT, EQUIPMENT, GOODWILL, INVENTORY, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
REGISTERED OFFICE: 1ST FLOOR, AECI PLACE, 24 THE WOODLANDS, WOODLANDS DRIVE, WOODMEAD, SANDTON. WWW.AECI.CO.ZA. REGISTRATION NUMBER 04/02590/06
