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AECI - GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2002 AECI LIMITED Incorporated in the Republic of South Africa (Registration No. 1924/002590/06) Share code: AFE ISIN No: ZAE000000220 * Net trading profit up 64% * Headline earnings per share up 53% * Interim dividend up 25% * Return on invested capital (ROIC) up to 15% * Outlook positive specialty product and service solutions Commentary The Group has achieved a most pleasing result, benefiting from the completion of the transformation strategy and stronger than expected demand in most domestic markets. Performance Headline earnings of 145 cents per ordinary share were 53 per cent higher than in the first half of 2001, extending the strong growth trend established since 1999. An increased interim dividend of 40 cents per ordinary share has been declared (2001 - 32 cents). Revenue increased by 19 per cent year on year as moderate volume growth in local markets and the weaker rand exchange rate more than offset lower international demand and the impact of disposals. Higher raw material costs in rand terms could not be fully recovered in selling prices. However, the benefits of restructuring, together with a continuing focus on enhanced efficiencies and lower operating costs, delivered a 64 per cent gain in net trading profit. The operating margin improved to 8.5 per cent from 6.2 per cent in the same period last year. The annualised return on invested capital (ROIC) for the Group, excluding revaluation of land, at 15 per cent approached an acceptable level for the first time in many years. All businesses improved their performance. Highlights included the turnaround of the technical coatings business in Chemical Services; growth in holes drilled by the South African mining industry, after many years of decline, to the benefit of AEL; and markedly better performances by Dulux and Heartland Properties. Commissioning of the joint venture (Unifi-SANS) nylon industrial yarn plant in Stoneville, North Carolina, USA was completed in the period. However, customer product approvals are taking longer than planned and could delay profitability of the joint venture into next year. The weaker level of the rand exchange rate year on year had a net positive impact on earnings in the period although the modest recovery in the exchange rate did diminish this impact during the second quarter. The translation differences arising on the Group`s net investment in activities outside South Africa were recognised, as in 2001, through reserves and not through the income statement. Financial The final payment of R206 million was made in terms of the share buy-back agreement approved by shareholders in January 2001. Net investment and capital expenditure at R93 million in the period was significantly lower than in recent years with the completion of the new nylon spinning platform by SANS Fibres the only notable component of the total. Working capital was tightly managed to 17 per cent of sales. The Group`s net borrowings were well contained to R1 047 million at mid-year and benefited from strong cash flow from the businesses. Cash interest cover improved to 5.3 times whilst gearing increased marginally from year-end to 46 per cent of shareholder funds. Portfolio Disposal of the Group`s 40 per cent equity-accounted interest in Huntsman Tioxide SA, effective January 2002, was concluded during the period and the proceeds of R79 million were received in June. Disposal of the animal feeds business Kynoch Feeds, effective April 2002, was also finalised in the period although the proceeds of R70 million had not been received by mid-year. Chemical Services has concluded an agreement in principle to acquire the mining and alkylate chemicals businesses of Dow Sentrachem for a cash consideration of approximately R140 million. The purchase is subject to Board and regulatory approvals. Outlook The hesitant recovery in a volatile global economy is not expected to gain much momentum in the second half. However, the new AECI with its more specialised business portfolio is well positioned to sustain its recent track record and expects continued real growth in headline earnings for the full 2002 financial year, albeit at a lower rate than that achieved in the first half year. Dividend A formal announcement of the dividend declared by the Board is published separately from this announcement. Alan Pedder Lex van Vught Chairman Chief Executive Sandton 29 July 2002 Income statement First half First half Year % Unaudited Unaudited Audited
R millions Change 2002 2001 2001 Revenue (Note +19 3 849 3 246 6 745 1) Net trading +64 328 200 492 profit Net financing (84) (68) (141) costs Income from 4 14 25 associates and investments 248 146 376 Provision for (12) - (20) post-employment medical benefits Amortisation of (29) (21) (56) goodwill Exceptional - (114) (371) items Net 207 11 (71) profit/(loss) before taxation Taxation (75) (30) 3 Normal (75) (41) (85) activities Exceptional - 11 88 items Net 132 (19) (68) profit/(loss) Attributable to (20) (11) (20) preference and outside shareholders Normal (26) (17) (45) activities Amortisation of 6 - 12 goodwill Exceptional - 6 13 items Net 112 (30) (88) profit/(loss) attributable to ordinary shareholders Headline earnings are derived from: Net 112 (30) (88) profit/(loss) attributable to ordinary shareholders Amortisation of 23 21 44 goodwill Net exceptional - 97 270 items 135 88 226 Headline +53 145 95 243 earnings per ordinary share (cents) Diluted 139 91 235 headline earnings per ordinary share (cents) Attributable 120 (32) (95) earnings/(loss) per ordinary share (cents) Dividends +25 40 32 87 declared per ordinary share (cents) Dividends paid 55 50 82 per ordinary share (cents) Ordinary shares (millions) - in issue 93 93 93 - weighted 93 93 93 average number of shares - diluted 97 96 96 weighted average number of shares Notes (1) Includes exports of R987 million (2001 - R833 million). (2) Accounting policies are in accordance with South African Statements of Generally Accepted Accounting Practice and are consistent with those applied in the previous financial year. Industry segment analysis for the six months ended 30 June Net trading Revenue profit Assets
Unaudited Unaudited Unaudited R millions 2002 2001 2002 2001 2002 2001 Mining 912 683 83 60 823 851 solutions Specialty 1 470 1 121 149 101 962 787 chemicals Specialty 1 038 874 91 78 944 733 fibres Property 83 74 10 3 650 681 Other 402 507 12 (11) 157 414 businesses Group services, development and (56) (13) (17) (31) 5 41 intergroup 3 849 3 246 328 200 3 541 3 507 Assets consist of property, plant, equipment and goodwill, inventory, accounts receivable and accounts payable. Assets in the property segment include land revaluation of R509 million (2001 - R509 million). Balance sheet 30 Jun 30 Jun 31 Dec Unaudited Unaudited Audited R millions 2002 2001 2001 Assets Non-current 2 410 2 487 2 606 assets Property, 1 829 1 832 1 910 plant and equipment Goodwill 496 491 525 Investments 85 164 171 Current 3 301 2 788 3 277 assets Inventory 1 252 1 042 1 231 Accounts 1 523 1 290 1 469 receivable Cash and cash 526 456 577 equivalents Total assets 5 711 5 275 5 883 Equity and liabilities Ordinary 2 050 2 215 2 264 capital and reserves Preference capital and outside shareholders` interest in 222 182 211 subsidiaries Total 2 272 2 397 2 475 shareholders` interest Non-current 1 415 195 1 391 liabilities Deferred (188) (185) (207) taxation Long-term 1 243 59 1 248 borrowings Long-term 360 321 350 provisions Current 2 024 2 683 2 017 liabilities Accounts 1 559 1 148 1 530 payable Provision for 86 44 109 restructuring Short-term 330 1 450 316 borrowings Taxation 49 41 62 Total equity 5 711 5 275 5 883 and liabilities Statement of changes in shareholders` equity First First half Year half
Unaudited Unaudited Audited R millions 2002 2001 2001 Headline earnings 135 88 226 Amortisation of (23) (21) (44) goodwill net of outside shareholders` interest Exceptional items - (97) (270) net of taxation and outside shareholders` interest Net profit/(loss) 112 (30) (88) attributable to ordinary shareholders Dividends paid (51) (46) (76) Foreign currency (70) 2 140 translation differences net of deferred taxation Ordinary shares 1 1 2 issued Other - 2 - Net decrease in (8) (71) (22) equity for the year before share buy-back Repurchase of own (206) (775) (775) shares Equity at the 2 264 3 061 3 061 beginning of the period Equity at the end 2 050 2 215 2 264 of the period Made up as follows: Share capital and 94 94 95 share premium Non-distributable 465 503 662 reserves Surplus arising on 346 393 391 revaluation of property, plant and equipment Foreign currency 112 47 182 translation reserve net of deferred taxation Retained earnings 2 72 84 of associates Other 5 (9) 5 Retained income 1 491 1 618 1 507 2 050 2 215 2 264 Cash flow statement First half First half Year Unaudited Unaudited Audited R millions 2002 2001 2001 Cash generated 445 300 660 by operations Dividends 4 2 2 received Net financing (84) (68) (141) costs Taxes paid (51) (47) (74) Changes in (53) (103) (72) working capital Expenditure (2) (8) (14) relating to long-term provisions Expenditure (23) (24) (74) relating to restructuring Cash available 236 52 287 from operating activities Dividends paid (59) (53) (87) Cash retained 177 (1) 200 from/(absorbed by) operating activities Cash utilised (93) (212) (470) in investment activities Proceeds from 79 8 65 disinvestment and restructuring Expenditure on (206) (775) (775) repurchasing own shares Net cash (43) (980) (980) utilised Cash effects 9 398 464 of financing activities Proceeds from 1 1 2 issue of new shares Decrease in (33) (581) (514) cash and cash equivalents Cash and cash 577 1 037 1 037 equivalents at the beginning of the period Translation (18) - 54 (loss)/gain on cash and cash equivalents Cash and cash 526 456 577 equivalents at the end of the period Other salient features First half First half Year Unaudited Unaudited Audited R millions 2002 2001 2001 Capital 99 137 424 expenditure - expansion 68 65 276 - replacement 31 72 148 Capital 88 106 102 commitments - contracted 64 86 92 for - not 24 20 10 contracted for Future 177 147 179 rentals on property, plant and equipment leased - payable 41 32 40 within one year - payable 136 115 139 thereafter Net 155 180 160 contingent liabilities and guarantees Net 1 047 1 053 987 borrowings Gearing (%) 46 44 40 Current 1.6 1.1 1.6 assets to current liabilities Net asset 2 194 2 383 2 430 value per ordinary share (cents) Depreciation 109 107 221 Transfer secretaries Computershare Investor Services Limited 41 Fox Street, Johannesburg, 2001 and Computershare Investor Services PLC PO Box 82, The Pavilions, Bridgwater Road Bristol BS99 7NH, England Registered office First Floor, AECI Place 24 The Woodlands Woodlands Drive Woodmead, Sandton Sponsor JP Morgan www.aeci.co.za AEL Mining solutions Development, manufacture and supply of value-adding services, initiating systems and explosives. Chemical Services Limited Specialty chemicals Largest specialty chemical operation in southern Africa, supplying a diverse range of specialties, raw materials and related services to a broad spectrum of industries. SAns Fibres Specialty fibres Production, marketing and distribution of specialty nylon and polyester yarn for local and export markets; production of PET bottle polymer. Date: 30/07/2002 08:09:29 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
