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AECI LIMITED
(REGISTRATION NUMBER 04/02590/06)
INTERIM REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2000
TRANSFORMATION...CLEARER FOCUS
* HEADLINE EPS UP SIX PER CENT AFTER PAYMENT OF SPECIAL DIVIDEND *
INCOME STATEMENT
2000 1999 1999
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
NOTES R MILLIONS R MILLIONS R MILLIONS
REVENUE (1) 2 913 4 047 7 311
NET TRADING PROFIT 210 315 568
FINANCING COSTS (20) (156) (120)
INCOME/(LOSS) FROM
ASSOCIATES AND INVESTMENTS (7) 7 20
183 166 468
EXCEPTIONAL ITEMS - - 683
AMORTISATION OF GOODWILL (14) (11) (25)
NET PROFIT BEFORE TAXATION 169 155 1 126
TAXATION (54) (45) (117)
NORMAL ACTIVITIES (54) (45) (134)
EXCEPTIONAL ITEMS - - 17
NET PROFIT 115 110 1 009
ATTRIBUTABLE TO PREFERENCE
AND OUTSIDE SHAREHOLDERS (16) (14) (35)
NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 99 96 974
HEADLINE EARNINGS ARE
DERIVED FROM:
NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 99 96 974
LESS: NET EXCEPTIONAL ITEM - - (700)
AMORTISATION OF GOODWILL 14 11 25
113 107 299
HEADLINE EARNINGS PER
ORDINARY SHARE (CENTS) (2) 73 69 193
ATTRIBUTABLE EARNINGS
PER ORDINARY SHARE (CENTS) 64 62 630
DIVIDEND PER ORDINARY
SHARE (CENTS)
NORMAL 30 30 80
SPECIAL - - 600
NUMBER OF ORDINARY SHARES
IN ISSUE (MILLIONS) 155 155 155
NOTES:
(1) INCLUDES EXPORTS OF R601 MILLION (1999 - R712 MILLION).
(2) PAYMENT OF THE SPECIAL DIVIDEND OF R6 PER ORDINARY SHARE IN NOVEMBER 1999
REDUCED THE AVAILABLE CASH RESOURCES OF THE COMPANY BY R1 044 MILLION. IF THESE
FUNDS HAD BEEN RETAINED IN THE COMPANY AND PLACED ON CALL DEPOSIT, HEADLINE
EARNINGS PER ORDINARY SHARE FOR THE PERIOD WOULD HAVE BEEN 97 CENTS PER SHARE.
PLEASING PROGRESS HAS BEEN MADE IN REFOCUSING AECI AS A SPECIALTY CHEMICALS
GROUP.
BALANCE SHEET
2000 1999 1999
30 JUNE 30 JUNE 31 DEC
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS
ASSETS
NON-CURRENT ASSETS 2 576 3 513 2 657
PROPERTY, PLANT, EQUIPMENT
AND GOODWILL 2 302 3 373 2 319
INVESTMENTS 274 140 338
CURRENT ASSETS 3 222 3 447 3 079
INVENTORY 996 1 573 939
ACCOUNTS RECEIVABLE 1 252 1 603 1 251
CASH AND CASH EQUIVALENTS 974 271 889
TOTAL ASSETS 5 798 6 960 5 736
EQUITY AND LIABILITIES
ORDINARY CAPITAL AND RESERVES 2 900 2 967 2 843
PREFERENCE CAPITAL AND OUTSIDE
SHAREHOLDERS' INTEREST 165 136 145
TOTAL SHAREHOLDERS' INTEREST 3 065 3 103 2 988
NON-CURRENT LIABILITIES 208 1 113 233
DEFERRED TAXATION (194) (43) (215)
LONG-TERM BORROWINGS 50 864 95
LONG-TERM PROVISIONS 352 292 353
CURRENT LIABILITIES 2 525 2 744 2 515
ACCOUNTS PAYABLE 1 104 1 465 1 193
PROVISION FOR RESTRUCTURING 106 124 282
SHORT-TERM BORROWINGS 1 249 1 135 918
TAXATION 20 (26) 45
DIVIDEND DECLARED 46 46 77
TOTAL EQUITY AND LIABILITIES 5 798 6 960 5 736
ABRIDGED CASH FLOW STATEMENT
2000 1999 1999
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS
CASH GENERATED BY
OPERATIONS 300 487 897
INVESTMENT INCOME - 5 11
FINANCING COSTS (20) (156) (120)
TAXES PAID (53) (74) (62)
CHANGES IN WORKING CAPITAL (126) (204) (207)
EXPENDITURE RELATING TO
LONG-TERM PROVISIONS (1) (8) (36)
EXPENDITURE RELATING TO
RESTRUCTURING (141) (115) (206)
CASH (ABSORBED BY)/AVAILABLE
FROM OPERATING ACTIVITIES (41) (65) 277
NORMAL DIVIDENDS PAID (83) (48) (99)
CASH (ABSORBED BY)/RETAINED
FROM OPERATING ACTIVITIES (124) (113) 178
CASH UTILISED IN INVESTMENT
ACTIVITIES (159) (93) (199)
PROCEEDS FROM DISINVESTMENT AND
RESTRUCTURING 86 - 2 432
SPECIAL DIVIDEND AND STC PAID - - (1 044)
NET CASH (UTILISED)/GENERATED (197) (206) 1 367
CASH EFFECTS OF FINANCING
ACTIVITIES 282 276 (679)
INCREASE IN LIQUID FUNDS 85 70 688
OTHER SALIENT FEATURES
2000 1999 1999
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS
CAPITAL EXPENDITURE 113 183 231
- EXPANSION 64 92 104
- REPLACEMENT 49 91 127
CAPITAL COMMITMENTS 151 372 181
- CONTRACTED FOR 68 289 57
- NOT CONTRACTED FOR 83 83 124
FUTURE RENTALS ON
PROPERTY, PLANT AND
EQUIPMENT LEASED 166 222 173
- PAYABLE WITHIN ONE YEAR 38 43 45
- PAYABLE THEREAFTER 128 179 128
CONTINGENT LIABILITIES
AND GUARANTEES 169 28 169
NET BORROWINGS (R MILLIONS) 325 1 728 124
GEARING (%) 11 56 4
CURRENT ASSETS TO CURRENT
LIABILITIES 1.3 1.2 1.2
NET ASSET VALUE PER ORDINARY
SHARE (CENTS) 1 875 1 918 1 838
NET CAPITAL EXPENDITURE
(R MILLIONS) 79 93 155
DEPRECIATION AND AMORTISATION
(R MILLIONS) 117 183 311
INDUSTRY SEGMENT ANALYSIS
FOR THE HALF-YEAR ENDED JUNE
REVENUE TRADING PROFIT ASSETS
2000 1999 2000 1999 2000 1999
UNAUDITED UNAUDITED UNAUDITED
R MILLIONS R MILLIONS R MILLIONS
MINING SOLUTIONS 580 586 50 97 851 853
SPECIALTY, FINE AND
INDUSTRIAL CHEMICALS 957 906 96 88 679 655
SPECIALTY FIBRES 628 594 58 66 608 472
PROPERTY - - 9 6 627 625
OTHER BUSINESSES 827 833 25 19 640 666
GROUP SERVICES,
DEVELOPMENT
AND INTERGROUP (131) (262) (29) (32) 37 47
2 861 2 657 209 244 3 442 3 318
BUSINESSES
SOLD/EQUITY-ACCOUNTED 52 1 390 1 71 - 1 766
2 913 4 047 210 315 3 442 5 084
ASSETS CONSIST OF PROPERTY, PLANT, EQUIPMENT AND GOODWILL, INVENTORY, ACCOUNTS
RECEIVABLE AND ACCOUNTS PAYABLE.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
2000 1999 1999
FIRST HALF FIRST HALF YEAR
UNAUDITED UNAUDITED AUDITED
R MILLIONS R MILLIONS R MILLIONS
HEADLINE EARNINGS FOR THE PERIOD 113 107 299
EXCEPTIONAL ITEMS NET OF TAXATION - - 700
AMORTISATION OF GOODWILL (14) (11) (25)
DIVIDENDS (46) (46) (1 051)
OTHER 4 - 3
NET INCREASE/(DECREASE) IN EQUITY
FOR THE PERIOD 57 50 (74)
EQUITY AT THE BEGINNING OF THE PERIOD 2 843 2 917 2 917
EQUITY AT THE END OF THE PERIOD 2 900 2 967 2 843
MADE UP AS FOLLOWS:
SHARE CAPITAL AND SHARE PREMIUM 228 228 228
NON-DISTRIBUTABLE RESERVES 581 593 596
RETAINED INCOME 2 091 2 146 2 019
2 900 2 967 2 843
"PLEASING PROGRESS HAS BEEN MADE IN REFOCUSING AECI AS A
SPECIALTY CHEMICALS GROUP."
TONY TRAHAR
OPERATING RESULTS
HEADLINE EARNINGS PER ORDINARY SHARE AT 73 CENTS WERE
SIX PER CENT HIGHER THAN IN THE FIRST HALF OF 1999. THIS RESULT SHOULD BE SEEN
IN THE LIGHT OF THE SPECIAL DIVIDEND OF SIX RAND PER SHARE PAID TO SHAREHOLDERS
ON 29 NOVEMBER 1999, WHICH REDUCED THE CAPITAL BASE AND AVAILABLE CASH
RESOURCES OF THE COMPANY BY R1 044 MILLION. HAD THESE FUNDS BEEN RETAINED IN
THE COMPANY AND PLACED ON CALL DEPOSIT, HEADLINE EARNINGS FOR THE FIRST HALF
WOULD HAVE BEEN 97 CENTS PER ORDINARY SHARE, A 41 PER CENT INCREASE ON THE
CORRESPONDING PERIOD OF 1999. AN UNCHANGED INTERIM DIVIDEND OF 30 CENTS PER
SHARE HAS BEEN DECLARED.
TRADING CONDITIONS OVER THE PERIOD WERE LACKLUSTRE, REFLECTING LITTLE EVIDENCE
OF UNDERLYING GROWTH IN THOSE SECTORS OF THE DOMESTIC ECONOMY SERVICED BY THE
GROUP.
THE IMPROVEMENT IN EARNINGS REFLECTS SIGNIFICANTLY LOWER FINANCING COSTS AND
THE BENEFITS OF INTENSIVE COST CUTTING AND RATIONALISATION, AND WAS ACHIEVED IN
SPITE OF A MAJOR REDUCTION IN THE CONTRIBUTION FROM AFRICAN EXPLOSIVES, WHICH
SUFFERED FROM A NUMBER OF FACTORS, INCLUDING A SEVERE MARGIN SQUEEZE IN
AMMONIUM NITRATE-BASED EXPLOSIVES. THIS RESULTED FROM AN UNEXPECTED SURGE IN
THE GLOBAL PRICE OF AMMONIA, THE PRIMARY RAW MATERIAL. IN ADDITION A WEAK
MINING SECTOR, EXCESSIVE RAIN AND THE ABSORPTION OF SERVICE COSTS FOLLOWING THE
CLOSURE OF OTHER GROUP OPERATIONS AT MODDERFONTEIN, COMPOUNDED THE REVERSAL. AN
AGGRESSIVE ACTION PLAN IS BEING IMPLEMENTED TO ADDRESS THE CURRENT COST
STRUCTURE OF THE EXPLOSIVES BUSINESS.
THE GROUP'S OTHER CORE CLUSTERS, SPECIALTY, FINE AND INDUSTRIAL CHEMICALS AND
SPECIALTY FIBRES, DELIVERED MOST SATISFACTORY RESULTS, WITH THE LATTER
PROGRESSIVELY RECOVERING OIL-BASED RAW MATERIAL PRICE INCREASES FROM ITS
MARKETS. THE GROUP'S PROPERTY ACTIVITIES ARE ALSO GATHERING MOMENTUM AND SHOULD
MAKE A MATERIAL CONTRIBUTION TO PROFITS IN THE SECOND HALF OF THE YEAR.
THE GROUP'S BALANCE SHEET IS SOUND, WITH GEARING UP FROM FOUR PER CENT TO 11
PER CENT AT MID-YEAR. CASH SPENT AGAINST THE PROVISION FOR RESTRUCTURING COSTS,
ESTABLISHED LAST YEAR, AMOUNTED TO R141 MILLION AND A CHANGE IN PROCUREMENT
TERMS OF RAW MATERIALS AT SANS FIBRES ACCOUNTED FOR AN INCREASE IN BORROWINGS
OF R103 MILLION. HOWEVER, WORKING CAPITAL AND CAPEX WERE GENERALLY WELL
CONTROLLED.
TRANSFORMATION
THE TRANSFORMATION OF THE GROUP IS WELL ADVANCED AND AN EVENTFUL HALF-YEAR SAW
THE CLOSURE, AS SCHEDULED, OF THE AMMONIA/UREA COMPLEX AT MODDERFONTEIN, THE
NITRATES PRODUCTION UNIT AT MILNERTON AND A FEED PHOSPHATES PLANT AT
POTCHEFSTROOM. AS FURTHER STEPS TOWARDS ACHIEVING CLEAR FOCUS ON THREE CORE
BUSINESS CLUSTERS, THE DISPOSALS OF ALLIANCE PEROXIDE AND ACRYLIC PRODUCTS WERE
CONCLUDED. THE GROUP INCREASED ITS HOLDING IN LISTED SUBSIDIARY, CHEMICAL
SERVICES, BY FIVE PER CENT TO 68 PER CENT THROUGH THE ACQUISITION OF SHARES
FROM AN INSTITUTIONAL SHAREHOLDER.
EXPANSION
PARTICULARLY PLEASING IS THE STRATEGIC PROGRESS MADE BY SANS FIBRES, WHICH HAS
ANNOUNCED A R40 MILLION PROJECT TO EXPAND INDUSTRIAL YARN PRODUCTION AT ITS
BELLVILLE PLANT. THIS INVESTMENT FOLLOWS CLOSELY ON THE R60 MILLION PET BOTTLE
POLYMER EXTENSION SCHEDULED FOR COMMISSIONING IN DECEMBER THIS YEAR.
PROSPECTS
TRADING PROSPECTS FOR THE BALANCE OF THE YEAR APPEAR MIXED BUT WITH A GRADUAL
RECOVERY OF MARGINS IN THE MINING SOLUTIONS CLUSTER ANTICIPATED. AS A
CONSEQUENCE, HEADLINE EARNINGS FOR THE YEAR ARE EXPECTED TO BE SIMILAR TO THE
LEVEL ACHIEVED IN 1999.
TONY TRAHAR LEX VAN VUGHT
CHAIRMAN MANAGING DIRECTOR
DECLARATION OF ORDINARY DIVIDEND NO. 133
NOTICE IS HEREBY GIVEN THAT AN INTERIM DIVIDEND OF 30 CENTS PER SHARE, IN
RESPECT OF THE YEAR ENDING 31 DECEMBER 2000, HAS BEEN DECLARED TO HOLDERS OF
ORDINARY SHARES REGISTERED IN THE BOOKS OF THE COMPANY AT THE CLOSE OF BUSINESS
ON 18 AUGUST 2000.
PAYMENT WILL BE MADE FROM THE OFFICE OF THE TRANSFER SECRETARIES IN
JOHANNESBURG ON 27 SEPTEMBER 2000. CHANGES OF ADDRESS OR DIVIDEND INSTRUCTIONS
TO APPLY TO THIS DIVIDEND MUST BE RECEIVED NOT LATER THAN 18 AUGUST 2000. THE
TRANSFER BOOKS AND REGISTER OF MEMBERS WILL BE CLOSED FROM 19 AUGUST 2000 TO 1
SEPTEMBER 2000, BOTH DAYS INCLUSIVE.
BY ORDER OF THE BOARD
M J F POTGIETER
SECRETARY
3 AUGUST 2000
TRANSFER SECRETARIES: REGISTERED OFFICE:
COMPUTERSHARE SERVICES LIMITED 1ST FLOOR, AECI PLACE
41 FOX STREET, 24 THE WOODLANDS
JOHANNESBURG, 2001; AND WOODLANDS DRIVE
WOODMEAD, SANDTON
COMPUTERSHARE SERVICES PLC
PO BOX 82
CAXTON HOUSE
REDCLIFFE WAY
BRISTOL BS 99 7 KH
ENGLAND
WWW.AECI.CO.ZA
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