Wrap Text
AECI - Group audited financial results for the year ended 31 December 2004
AECI Limited
Incorporated in the Republic of South Africa
(Registration No. 1924/002590/06)
Share code AFE ISIN No. ZAE000000220
Group audited financial results
for the year ended 31 December 2004
Specialty product and service solutions
- Headline earnings per share up 10%
- Dividends for the year up 15% to 138 cents per share
- Sales volumes and revenues up 4% and 3%
- Return on invested capital (ROIC) higher at 16%
- Gearing reduced from 40% to 24%
Commentary
Performance
Headline earnings of 392 cents per ordinary share were 10 per cent higher than
in 2003. This result was achieved after recognising charges for restructuring
equivalent to 27 cents per share. An increased final dividend of 94 cents per
ordinary share has been declared (78 cents in 2003) to bring the total dividends
for the year to 138 cents (120 cents in 2003) with a dividend cover of 2.8 (3.0
in 2003). The dividend declaration is published in full elsewhere.
Sales volumes and revenues of Group businesses increased by 4 and 3 per cent
respectively from 2003. Growth slowed in many local markets in the second half
of the year as the continued appreciation of the rand against the US dollar
further pressured the mining and manufacturing industries. Gross margins were
largely maintained despite a surge in many raw material prices caused by global
demand growth and high energy costs. The ongoing improvement in operating costs
and margins, together with pleasing results from the property portfolio,
delivered an increase in the overall trading margin to 9.4 per cent of sales
from 9.0 per cent in 2003. The return on invested capital (ROIC) for the Group,
excluding revaluation of land, was higher at 16 per cent (15 per cent in 2003).
African Explosives recorded a small gain in underlying trading profit from
improvements in operating performance. Overall mining activity was down with
reduced gold mining in South Africa partly offset by modest growth in platinum
and other mining activities elsewhere in Africa. Restructuring costs of R33
million were expensed in the year. Imports of state-subsidised initiators from
China had a limited impact on some sectors of the initiating systems market in
the second half of the year.
The 50:50 joint venture with Dyno Nobel ASA in electronic detonators was
implemented in September 2004. International trials of the new generation
detonator technology are now in progress.
Chemical Services continued to experience mixed trading conditions with lower
selling prices in some markets, pressured by the stronger rand, offsetting the
benefit of higher volumes. Rationalisation of manufacturing facilities and tight
control of costs enabled margins to be maintained. Initiatives taken during the
year to raise the performance of certain businesses in the portfolio,
particularly automotive coatings, are expected to deliver positive results in
2005.
Dulux achieved excellent results in South Africa with higher volumes and an
improved mix of its branded products. Profits from its export and African
operations were lower due to currency effects and unfavourable market
conditions.
The restructuring programme at SANS Fibres was progressed in line with plan and
a restructuring charge of R6 million was expensed in the second half of the
year. Subject to the average exchange rate not appreciating significantly from
2004, the progress made on new product development, conversion efficiencies and
cost reduction should enable SANS to deliver an improving performance during the
course of 2005.
The property activities of Heartland produced outstanding profits and cash flow
in favourable market conditions. Substantial sales of land for residential,
commercial and light industrial use were recorded at Modderfontein, Somerset
West and Umbogintwini.
Financial
An impairment charge of R13 million was raised primarily in respect of the
Group"s residual investment in Botswana Ash. The exceptional charge of R23
million also includes the closure of a resin plant in the automotive coatings
business offset by gains arising from the sale of intellectual property to
DetNet, the electronic detonator joint venture.
Capital expenditure of R277 million was controlled to a level somewhat higher
than the depreciation charge for the period. Group working capital of R960
million was contained to 12 per cent of sales.
Net borrowings of R633 million were R386 million lower than at December 2003
with property activities contributing a net cash flow of R270 million in the
year. Net financing costs of R139 million (R152 million in 2003) included R13
million of non-cash mark-to-market adjustments related to interest rate hedging
instruments in compliance with AC 133. Cash interest cover improved further to
7.0 times while gearing reduced to 24 per cent of shareholder funds from 40 per
cent at December 2003.
In view of the lower level of gearing, the Board has resolved to seek approval
from shareholders for a general repurchase of up to 10 per cent of the ordinary
shares in the Company, subject to market conditions from time to time. The
appropriate resolution will be included in the Notice of the Annual General
Meeting of the Company which is to be held on 23 May 2005.
Portfolio
As previously announced, the 50:50 joint venture in electronic detonation
systems with Dyno Nobel ASA of Norway became effective in September 2004, and
the acquisition of a 25.1 per cent interest in the Group"s explosives business
by an empowerment consortium led by the Tiso Group took effect on 1 July 2004.
Both transactions have met Group expectations to date.
In December 2004, Chemical Services announced the acquisition of UAP, a
distributor of agro-chemicals, with effect from January 2005 and of Chemiphos, a
producer of food-grade phosphates, for a total consideration of R150 million.
The latter transaction remains subject to regulatory approvals.
Outlook
The Group"s portfolio of businesses has demonstrated its robustness and has
responded effectively to the changing environment of relatively strong commodity
prices and rand exchange rate accompanied by low inflation and interest rates.
This environment is not expected to change significantly in the year ahead and
the progressive benefits of actions taken to align each business with these
conditions should accordingly emerge more fully in 2005.
Assuming no material strengthening of the rand exchange rate from the 2004
average, and with a further contribution in prospect from property activities,
management is targeting an increase in headline earnings for the full 2005
financial year.
Alan Pedder CBE Schalk Engelbrecht
Chairman Chief executive
Sandton
21 February 2005
Income statement
% 2004 2003
change R millions R millions
Revenue (2) +3 7 911 7 659
Net trading profit +8 743 691
Net financing costs (139) (150)
Income from associates and investments 3 4
607 545
Transitional provision for post-employment
medical aid benefits (20) (20)
Amortisation of goodwill (104) (75)
Exceptional items (23) (31)
Net profit before taxation 460 419
Taxation (173) (135)
Normal activities (167) (143)
Exceptional items (6) 8
Net profit 287 284
Attributable to preference and outside (4) (45)
shareholders
Normal activities (7) (59)
Amortisation of goodwill 2 14
Exceptional item 1 -
Net profit attributable to ordinary 283 239
shareholders
Headline earnings are derived from:
Net profit attributable to ordinary 283 239
shareholders
Transitional provision for post-employment
medical
aid benefits (3) 20 20
Amortisation of goodwill 104 75
Exceptional items 23 31
Outside shareholders" share of the above (3) (14)
items
Tax effects of the above - (14)
427 337
Per ordinary share (cents):
Headline earnings +10 392 356
Diluted headline earnings 383 345
Attributable earnings 260 252
Diluted attributable earnings 254 244
Dividends declared +15 138 120
Dividends paid 122 114
Ordinary shares (millions)
- in issue 109 108
- weighted average number of shares 109 95
- diluted weighted average number of shares 111 98
Notes
(1) Accounting policies are in accordance with South African Statements of
Generally Accepted Accounting Practice, conform to International Financial
Reporting Standards and are consistent with those applied in the previous
financial year.
(2) Includes foreign sales of R1 506 million (2003 - R1 483 million).
(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.
(4) The auditors, KPMG Inc, have issued their opinion on the Group financial
statements for the year ended 31 December 2004. A copy of the auditors"
unqualified report is available for inspection at the Company"s registered
office.
Industry segment analysis
Revenue Net trading profit Assets
2004 2003 2004 2003 2004 2003
R millions R millions R millions
Mining 2 140 2 076 212 241 842 817
solutions
Specialty 3 302 3 197 380 372 1 459 1 490
chemicals
Specialty 1 595 1 714 3 22 667 761
fibres
Decorative and
packaging
coatings 671 661 59 52 122 116
Property 352 207 130 39 520 671
Group
services,
intergroup
and other (149) (196) (41) (35) (168) (142)
7 911 7 659 743 691 3 442 3 713
Assets consist of property, plant, equipment and goodwill, inventory, accounts
receivable less accounts payable. Assets in the property segment include land
revaluation of R432 million (2003 - R493 million).
Balance sheet at 31 December
2004 2003
R millions R millions
Assets
Non-current assets 2 935 3 110
Property, plant and equipment 1 659 1 708
Goodwill 822 916
Investments 94 87
Deferred taxation assets 360 399
Current assets 2 942 2 911
Inventory 1 160 1 170
Accounts receivable 1 420 1 280
Cash and cash equivalents 362 461
Total assets 5 877 6 021
Equity and liabilities
Ordinary capital and reserves 2 605 2 494
Preference capital and outside shareholders"
interest in subsidiaries 41 27
Total shareholders" interest 2 646 2 521
Non-current liabilities 1 426 756
Deferred taxation liabilities 33 46
Long-term borrowings 899 209
Long-term provisions 494 501
Current liabilities 1 805 2 744
Accounts payable 1 619 1 361
Provision for restructuring 9 48
Short-term borrowings 96 1 271
Taxation 81 64
Total equity and liabilities 5 877 6 021
Statement of changes in shareholders" equity
2004 2003
R millions R millions
Net profit attributable to ordinary shareholders 283 239
Ordinary dividends paid (133) (107)
Fair value adjustments 5 (7)
Foreign currency translation differences net of (52) (50)
deferred taxation
Ordinary shares issued 8 340
Other - (7)
Net increase in equity for the year 111 408
Equity at the beginning of the year 2 494 2 086
Equity at the end of the year 2 605 2 494
Made up as follows:
Share capital and share premium 445 437
Non-distributable reserves 289 347
Surplus arising on revaluation of property, plant 288 329
and equipment
Foreign currency translation reserve net of (3) 18
deferred taxation
Retained earnings of associates 1 1
Other 3 (1)
Retained income 1 871 1 710
2 605 2 494
Cash flow statement
2004 2003
R millions R millions
Cash generated by operations 957 898
Dividends received 2 3
Net financing costs (126) (148)
Taxes paid (128) (119)
Changes in working capital 120 109
Expenditure relating to long-term provisions (21) (21)
Expenditure relating to restructuring (36) (43)
Cash available from operating activities 768 679
Dividends paid (135) (123)
Cash retained from operating activities 633 556
Cash utilised in investment activities (238) (1 063)
Acquisition of remaining shares in Chemical - (602)
Services Limited
Proceeds from disposal of investments and 58 1
businesses
Investments (27) (281)
Net capital expenditure (269) (181)
Net cash generated/(utilised) 395 (507)
Cash effects of financing activities (485) 9
Proceeds from issue of new shares 8 340
Decrease in cash and cash equivalents (82) (158)
Cash and cash equivalents at the beginning of the 461 642
year
Translation loss on cash and cash equivalents (17) (23)
Cash and cash equivalents at the end of the year 362 461
Other salient features
2004 2003
R millions R millions
Capital expenditure 277 241
- expansion 157 159
- replacement 120 82
Capital commitments 294 189
- contracted for 25 23
- not contracted for 269 166
Future rentals on property, plant
and equipment leased 231 158
- payable within one year 49 41
- payable thereafter 182 117
Net contingent liabilities and guarantees 282 223
Net borrowings 633 1 019
Gearing (%) 24 40
Current assets to current liabilities 1.6 1.1
Net asset value per ordinary share (cents) 2 381 2 305
Depreciation 224 223
Directorate
AE Pedder CBE* (Chairman), S Engelbrecht (Chief executive), NC Axelson+, CB
Brayshaw,
MJ Leeming, TH Nyasulu, CML Savage, LC van Vught
*British +Executive
www.aeci.co.za
AEL Logo
Mining solutions
Development, manufacture and supply of value-adding services, initiating systems
and explosives to the mining, quarrying, and allied industries.
Chemical Services Logo
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 Logo
Specialty fibres
Production, marketing and distribution of specialty nylon and polyester yarn for
local and export markets; production of PET bottle polymer.
Dulux Logo
Decorative coatings
A leading decorative coatings supplier in southern Africa. Dulux enjoys a strong
market position as an innovator and supplier of high performance products to a
wide variety of customers.
Heartland Logo
Property
Heartland Properties manages the realisation of land and related assets that
have become surplus to the Group"s requirements.
Date: 22/02/2005 07:00:07 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
Sharenet Sites 
