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AECI Limited - Group audited results For the year ended 31 December 2002
AECI LIMITED
Incorporated in the Republic of South Africa
(Registration No. 1924/002590/06)
Share code: AFE ISIN No. ZAE 000000220
Group audited results For the year ended 31 December 2002
Specialty product and service solutions
Highlights
- Net trading profit up 42%
- Headline earnings per share up 32%
- Dividends for the year up 29% to 112 cents per share
- Gearing reduced to 35%
- Return on invested capital (ROIC) up to 17%
Commentary
The Group`s focus on specialty product and service solutions proved most
rewarding in 2002 with strong growth in earnings and cash generation.
Performance
Headline earnings of 340 cents per ordinary share were 32 per cent higher than
in 2001, further extending the robust growth trend established since 1998. The
compound increase in headline earnings per share over the 1998-2002 period,
after adjusting for the effects of the November 1999 special dividend, now
exceeds 30 per cent per annum. An increased final dividend of 72 cents per
ordinary share has been declared (2001 - 55 cents) to bring the total dividends
for the year to 112 cents (87 cents in 2001) with a dividend cover of 3.0 (2.8
in 2001). The dividend declaration is published in full elsewhere.
Sales volumes and revenues of the core businesses increased by 7 and 22 per cent
respectively as the weaker average rand exchange rate benefited the Group`s
major customer sectors and more than offset sluggish direct sales to generally
sombre global markets. The continuing focus on enhanced efficiencies and lower
operating costs, together with the benefits of restructuring, contributed to a
higher operating margin of 8.9 per cent from 7.3 per cent in 2001. The return on
invested capital (ROIC) for the Group, excluding revaluation of land, improved
to 17 per cent, the highest level achieved in more than a decade.
All five Group businesses contributed to the 42 per cent increase in net trading
profit with listed subsidiary Chemical Services posting an impressive gain of 37
per cent. African Explosives, Dulux and the property realisation activities all
recorded strong performances reflecting brisk demand for their products and
services. SANS Fibres was affected not only by lacklustre global markets but
also by losses incurred at its newly commissioned joint venture in Stoneville,
North Carolina where progress in technical and market development was slower
than expected. However, good local demand enabled a record year for SANS` South
African operation.
The sharp appreciation of the rand exchange rate in the final quarter and its
impact on dollar-based revenues had a negative effect on trading and earnings.
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
Net borrowings at year-end reduced to R814 million from R987 million in 2001,
after making the final payment of R206 million in terms of the Anglo American
share buy-back agreement approved by shareholders in January 2001. Gearing
reduced from 40 to 35 percent of shareholder funds.
This pleasing result was achieved through prudent control of capital
expenditures, tight working capital management (now 15 per cent of sales), and
strong operating cash flow from the businesses. The property realisation
activities also made a noteworthy contribution of R90 million to cash flow. Cash
interest cover improved further to 5.6 times.
Portfolio
During 2002 AECI`s metamorphosis from a diversified chemical conglomerate to a
focused specialty product and service solutions Group was successfully
completed. Kynoch Feeds, Aroma and Fine Chemicals and a 40 per cent interest in
Huntsman Tioxide were disposed of for a total consideration of R150 million. An
exceptional charge of R18 million after tax associated with these disposals and
other restructuring effects has been recognised in the income statement.
Chemical Services has concluded an agreement to acquire the mining and alkylate
chemicals businesses of Sentrachem for a cash consideration of approximately
R140 million. The purchase remains subject to regulatory approvals.
Outlook
Amid fears of war in the Middle East and rising oil prices, few signs of
sustainable recovery in the world`s major economies are discernible. In
contrast, steady performance of the domestic economy seems in prospect with
inflation and interest rates set to abate from recent highs. The stronger rand
and recent unexpected surge in polyester raw material prices, if sustained, will
pressure margins at SANS Fibres, particularly in the first half-year.
Nonetheless, the Group is well positioned to respond to such challenges and
management is targeting a further increase in headline earnings for the full
2003 financial year.
Alan Pedder Lex van Vught
Chairman Chief Executive
Sandton, 25 February 2003
Income statement
% 2002 2001
change R millions R millions
Revenue 1 +16 7 818 6 745
Net trading profit +42 698 492
Net financing costs (164) (141)
Income from associates and 8 25
investments
542 376
Transitional provision for post- (20) (20)
employment medical aid benefits
Amortisation of goodwill (59) (56)
Exceptional items (19) (371)
Net profit/(loss) before taxation 444 (71)
Taxation (155) 3
Normal activities (156) (85)
Exceptional items 1 88
Net profit/(loss) 289 (68)
Attributable to preference and (49) (20)
outside shareholders
Net profit/(loss) attributable to 240 (88)
ordinary shareholders
Headline earnings are derived
from:
Net profit/(loss) attributable to 240 (88)
ordinary shareholders
Transitional provision for post- 20 20
employment medical aid benefits 3
Amortisation of goodwill 59 56
Exceptional items 19 371
Tax effects of the above (7) (94)
Outside shareholders` share of (13) (25)
the above items
318 240
Per ordinary share (cents):
- Headline earnings +32 340 258
- Diluted headline earnings 328 249
- Attributable earnings/(loss) 257 (95)
- Diluted earnings/(loss) 248 (91)
- Dividends declared +29 112 87
- Dividends paid 95 82
Ordinary shares (millions)
- in issue 94 93
- weighted average number of 93 93
shares
- diluted weighted average number 97 96
of shares
Notes
1 Includes foreign sales of R1 875 million (2001 - R1 783 million).
2 Accounting policies are in accordance with South African Statements of
Generally Accepted Accounting Practice, conform to international accounting
standards and are consistent with those applied in the previous financial year.
3 The transitional provision for post-employment medical aid benefits has been
excluded from the calculation of headline earnings in terms of circular 7/2002
issued by the South African Institute of Chartered Accountants. Previously it
was included. Comparative figures have been restated.
4 The auditors, KPMG Inc, have issued their opinion on the Group financial
statements for the year ended 31 December 2002. A copy of the auditors`
unqualified report is available for inspection at the Company`s registered
office.
Industry segment analysis
Revenue Net trading Assets
profit
2002 2001 2002 2001 2002 2001
R millions R millions R millions
Mining 1 904 1 474 176 142 869 887
solutions
Specialty 3 037 2 415 318 232 923 912
chemicals
Specialty 2 082 1 717 173 161 905 945
fibres
Property 180 149 26 9 612 675
Other 787 1 044 43 21 103 222
businesses
Group (172) (54) (38) (73) (88) (36)
services,
development
and intergroup
7 818 6 745 698 492 3 324 3 605
Assets consist of property, plant, equipment and goodwill,
inventory, accounts receivable less accounts payable. Assets in
the property segment include land revaluation of R493 million
(2001 - R509 million).
Balance sheet at 31 December
2002 2001
R millions R millions
Assets
Non-current assets 2 283 2 606
Property, plant and equipment 1 734 1 910
Goodwill 467 525
Investments 82 171
Current assets 3 211 3 277
Inventory 1 248 1 231
Accounts receivable 1 321 1 469
Cash and cash equivalents 642 577
Total assets 5 494 5 883
Equity and liabilities
Ordinary capital and reserves 2 086 2 264
Preference capital and outside 229 211
shareholders` interest in subsidiaries
Total shareholders` interest 2 315 2 475
Non-current liabilities 1 352 1 391
Deferred taxation (195) (207)
Long-term borrowings 1 196 1 248
Long-term provisions 351 350
Current liabilities 1 827 2 017
Accounts payable 1 446 1 530
Provision for restructuring 56 109
Short-term borrowings 260 316
Taxation 65 62
Total equity and liabilities 5 494 5 883
Statement of changes in shareholders` equity
2002 2001
R millions R millions
Headline earnings 318 240
Amortisation of goodwill net of outside (46) (44)
shareholders` interest
Transitional provision for post- (14) (14)
employment medical benefits net of
taxation
Exceptional items net of taxation and (18) (270)
outside shareholders` interest
Net profit/(loss) attributable to 240 (88)
ordinary shareholders
Dividends paid (89) (76)
Foreign currency translation differences (127) 140
net of deferred taxation
Ordinary shares issued 4 2
Net increase/(decrease) in equity for the 28 (22)
year before share buy-back
Expenditure in respect of repurchasing (206) (775)
own shares
Equity at the beginning of the year 2 264 3 061
Equity at the end of the year 2 086 2 264
Made up as follows:
Share capital and share premium 97 95
Non-distributable reserves 390 662
Surplus arising on revaluation of 330 391
property, plant and equipment
Foreign currency translation reserve net 54 182
of deferred taxation
Retained earnings of associates 1 84
Other 5 5
Retained income 1 599 1 507
2 086 2 264
Cash flow statement
2002 2001
R millions R millions
Cash generated by operations 899 660
Dividends received 8 2
Net financing costs (164) (141)
Taxes paid (94) (74)
Changes in working capital (99) (72)
Expenditure relating to long-term (16) (14)
provisions
Expenditure relating to restructuring (32) (74)
Cash available from operating activities 502 287
Dividends paid (103) (87)
Cash retained from operating activities 399 200
Cash utilised in investment activities (148) (470)
Proceeds from disinvestment and 167 65
restructuring
Expenditure in respect of repurchasing (206) (775)
own shares
Net cash generated/(utilised) 212 (980)
Cash effects of financing activities (108) 464
Proceeds from issue of new shares 4 2
Increase/(decrease) in cash and cash 108 (514)
equivalents
Cash and cash equivalents at the 577 1 037
beginning of the year
Translation (loss)/gain on cash and cash (43) 54
equivalents
Cash and cash equivalents at the end of 642 577
the year
Other salient features
2002 2001
R millions R millions
Capital expenditure 202 424
- expansion 110 276
- replacement 92 148
Capital commitments 243 102
- contracted for 51 92
- not contracted for 192 10
Future rentals on property, plant and 147 179
equipment leased
- payable within one year 35 40
- payable thereafter 112 139
Net contingent liabilities and 152 160
guarantees
Net borrowings 814 987
Gearing (%) 35 40
Current assets to current liabilities 1.8 1.6
Net asset value per ordinary share 2 222 2 430
(cents)
Depreciation 221 221
Directorate:
A E Pedder* (Chairman), L C van Vught (Chief Executive),
N C Axelson, C B Brayshaw, S Engelbrecht, M J Leeming,
T H Nyasulu, C M L Savage
Company Secretary: M J F Potgieter *British
AECI LIMITED
Incorporated in the Republic of South Africa
(Registration No. 1924/002590/06)
Share code: AFE ISIN No: ZAE000000220
AECI
www.aeci.co.za
AEL
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Development, manufacture and supply of value-adding services, initiating systems
and explosives to the mining, quarrying, and allied industries.
CS Chemical Services Limited
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Largest specialty chemical operation in southern Africa, supplying a diverse
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industries.
SANS FIBRES
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Production, marketing and distribution of specialty nylon and polyester yarn for
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Dulux "A home`s best friend"
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A leading decorative coatings supplier in southern Africa. Dulux enjoys a strong
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wide variety of customers.
Date: 25/02/2003 08:01:19 AM Supplied by www.sharenet.co.za
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