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AFE - AECI LIMITED - Condensed consolidated unaudited interim financial results
for the half-year ended 30 June 2010 and cash dividend declaration
AECI LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1924/002590/06)
Share code: AFE ISIN No.: ZAE000000220
("AECI" or "the Company" or "the Group")
CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL RESULTS FOR THE HALF-YEAR
ENDED 30 JUNE 2010 AND CASH DIVIDEND DECLARATION
Highlights
- Revenue from continuing operations up 3% to R5 425 million
- Profit from continuing operations up 48% to R484 million
- HEPS up 127% to 238c
- Cash dividend of 70c declared
- All strategic growth projects in ramp-up phase
Income statement
2010 2009 2009
First half First half Year
% Unaudited Unaudited Audited
change R millions R millions R millions
Continuing operations
Revenue (2) +3 5 425 5 263 10 709
Net operating costs (4 941) (4 935) (9 942)
Profit from operations +48 484 328 767
Net income from Pension
Fund employer surplus
accounts 4 * 23
Net income/(loss) from
plan assets for post-
retirement medical aid
liabilities 6 (20) 11
494 308 801
Fair value adjustments -
interest (2) * 4
Interest expense (3) (97) (155) (243)
Interest received 14 17 21
Income from associates
and investments 1 5 7
410 175 590
Impairment of goodwill - - (18)
Other impairments (4) - (16)
Reversal of impairments - - 7
Profit before tax 406 175 563
Tax (117) (64) (176)
Net profit from
continuing operations 289 111 387
Net profit from
discontinued operations - 4 53
Profit before tax - 7 65
Tax - (3) (12)
Profit for the period 289 115 440
Profit for the period
attributable to:
- ordinary shareholders 269 118 421
- preference shareholders 1 1 2
- non-controlling
interest 19 (4) 17
289 115 440
Headline earnings are
derived from:
Profit attributable to
ordinary shareholders 269 118 421
Impairment of goodwill - - 18
Other impairments and
disposals before tax 4 - 9
Surplus on disposal of
investments (18) - -
Surplus on disposal of
property, plant and
equipment (1) (9) (88)
Tax effects of the above
items 1 3 10
Headline earnings 255 112 370
Per ordinary share
(cents):
Headline earnings +127 238 105 346
Diluted headline earnings
(4) 237 104 344
Attributable earnings 251 110 393
Diluted attributable
earnings (4) 250 110 392
Continuing earnings 251 107 344
Diluted continuing
earnings (4) 250 106 343
Discontinued earnings - 4 50
Dividends declared +150 70 28 90
Dividends paid 62 141 169
Ordinary shares
(millions) (5)
- in issue 107 107 107
- weighted average number
of shares 107 107 107
- diluted weighted average
number of shares (4) 108 107 107
*nominal amount
Statement of comprehensive income
2010 2009 2009
First half First half Year
Unaudited Unaudited Audited
R millions R millions R millions
Profit for the period 289 115 440
Other comprehensive income net of
tax:
Revaluation of derivative
instruments * (12) (6)
Foreign currency translation
differences net of deferred tax 17 (145) (169)
Acquisition of subsidiaries - - (9)
Other * * *
Total comprehensive income for
the period 306 (42) 256
Total comprehensive income
attributable to:
- ordinary shareholders 288 (38) 250
- preference shareholders 1 1 2
- non-controlling interest 17 (5) 4
306 (42) 256
*nominal amount
Statement of financial position
2010 2009 2009
30 June 30 June 31 Dec
Unaudited Unaudited Audited
R millions R millions R millions
Assets
Non-current assets 5 581 5 022 5 360
Property, plant and equipment 3 451 2 912 3 260
Investment property 446 429 430
Goodwill 1 063 1 062 1 063
Pension Fund employer surplus
accounts 240 213 236
Investments 22 98 13
Non-current loan receivables 12 - 14
Deferred tax 347 308 344
Current assets 4 603 5 002 4 668
Inventories 1 828 2 033 1 827
Accounts receivable 2 080 2 514 2 159
Assets classified as held for
sale - 14 14
Cash and cash equivalents 695 441 668
Total assets 10 184 10 024 10 028
Equity and liabilities
Ordinary capital and reserves 4 159 3 663 3 937
Preference capital and non-
controlling interest 138 112 121
Total shareholders` interest 4 297 3 775 4 058
Non-current liabilities 2 570 2 406 2 564
Deferred tax 86 57 85
Non-current borrowings 1 697 1 731 1 731
Non-current provisions 787 618 748
Current liabilities 3 317 3 843 3 406
Accounts payable 1 873 2 221 2 208
Current borrowings 1 319 1 558 1 080
Tax payable 125 64 118
Total equity and liabilities 10 184 10 024 10 028
Statement of cash flows
2010 2009 2009
First half First half Year
Unaudited Unaudited Audited
R millions R millions R millions
Cash generated by operations 664 474 1 137
Dividends received - 6 12
Interest paid (143) (196) (349)
Interest received 14 17 22
Income tax paid (112) (294) (333)
Changes in working capital (265) 481 1 161
Expenditure relating to non-
current provisions (1) (8) (93)
Expenditure relating to
retrenchments and restructuring (4) (84) (105)
Cash available from operating
activities 153 396 1 452
Dividends paid (67) (152) (167)
Cash retained from operating
activities 86 244 1 285
Cash flows from investing
activities (280) (676) (981)
Proceeds from disposal of
investments and businesses 32 - 94
Investments (7) (61) (92)
Net capital expenditure (305) (615) (983)
Net cash (utilised)/generated (194) (432) 304
Cash flows from financing
activities 206 486 (6)
Non-current loan receivables 1 - (14)
Borrowings 205 486 8
Increase in cash and cash
equivalents 12 54 298
Cash and cash equivalents at the
beginning of the period 668 444 444
Translation gain/(loss) on cash
and cash equivalents 15 (57) (74)
Cash and cash equivalents at the
end of the period 695 441 668
Statement of changes in equity
2010 2009 2009
First half First half Year
Unaudited Unaudited Audited
R millions R millions R millions
Total comprehensive income for
the period 306 (42) 256
Dividends paid (67) (152) (167)
Equity at the beginning of the
period 4 058 3 969 3 969
Equity at the end of the period 4 297 3 775 4 058
Made up as follows:
Issued ordinary capital 215 215 215
Reserves 270 271 251
Surplus arising on revaluation of
property 237 240 237
Foreign currency translation
reserve net of deferred tax 22 23 3
Other 11 8 11
Retained income 3 674 3 177 3 471
Preference capital 6 6 6
Non-controlling interest 132 106 115
4 297 3 775 4 058
Other salient features
2010 2009 2009
First half First half Year
Unaudited Unaudited Audited
R millions R millions R millions
Capital expenditure - property,
plant and equipment (3) 305 675 1 150
- expansion 213 544 963
- replacement 92 131 187
Capital commitments 156 589 737
- contracted for 97 451 71
- not contracted for 59 138 666
Future rentals on property, plant
and equipment leased 124 211 185
- payable within one year 28 90 84
- payable thereafter 96 121 101
Contingent liabilities 87 105 83
Net borrowings 2 321 2 848 2 143
Gearing (%) 54 75 53
Current assets to current
liabilities 1,4 1,3 1,4
Net book value per ordinary share
(cents) 3 878 3 425 3 671
Depreciation - continuing
operations 154 122 267
Rand/US$ closing exchange rate
(rand) 7,66 7,72 7,38
Rand/US$ average exchange rate
(rand) 7,50 9,00 8,27
Industry segment analysis
Profit from
Revenue operations Net assets
2010 2009 2010 2009 2010 2009
First half First half 30 June
Unaudited Unaudited Unaudited
R millions R millions R millions
Continuing operations 5 425 5 263 484 328 6 940 6 750
Mining services 2 286 1 945 185 92 2 434 2 138
Specialty chemicals 3 039 3 233 349 241 3 828 4 008
Property 168 152 29 45 691 588
Specialty fibres (USA) 129 100 10 (7) 153 126
Group services,
intersegment and other (197) (167) (89) (43) (166) (110)
Discontinued operations - 458 - 7 55 (21)
Specialty fibres
(Bellville) - 458 - 7 55 (21)
5 425 5 721 484 335 6 995 6 729
Net assets consist of property, plant, equipment, investment property, goodwill,
inventory and accounts receivable less accounts payable.
Notes
(1) Basis of preparation
The condensed consolidated unaudited interim financial results have been
prepared in accordance with the historic cost convention except for certain
financial instruments, which have been stated at fair value.
The same accounting policies and methods of computation are followed in the
interim financial statements as compared with the most recent annual
financial statements and have been applied by all entities in the Group.
The condensed consolidated unaudited interim financial results and
accounting policies comply with the Listings Requirements of the JSE
Limited, the recognition and measurement requirements of International
Financial Reporting Standards, the disclosure requirements of IAS 34 -
Interim Financial Reporting and the South African Companies Act, No. 61 of
1973, as amended.
(2) Includes foreign sales of R1 460 million (2009 first half - R1 240
million).
(3) Interest capitalised in the period amounting to R46 million (2009 first
half - R41 million).
(4) Calculated in accordance with IAS 33. The Company has purchased call
options over AECI shares which will obviate the need for the Company to
issue new shares in terms of the AECI share option scheme. In practice,
therefore, there will be no future dilution.
(5) Net of 11 884 699 (2009 - 11 884 699) treasury shares held by a subsidiary
company.
(6) Discontinued operations
The remaining South African businesses of SANS Fibres discontinued
manufacturing activities at the end of March 2009.
(7) The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates. The accounting policies involving particularly complex or
subjective judgements or assessments are deferred tax assets, environmental
remediation, asset lives and residual values, and post-retirement benefit
obligations.
Commentary
Performance
The Group`s performance strengthened further in the first six months of 2010
with recovery in the mining and manufacturing sectors from the 2009 economic
crisis contributing significantly to the Group`s improved results. Revenue from
continuing operations increased by 3% to R5 425 million (2009: R5 263 million),
with further growth being curtailed by the strong rand. Overall volumes grew by
about 15% for continuing operations compared to the first half of 2009. Headline
earnings of R255 million (2009: R112 million) increased by 128% and profit from
continuing operations improved by 48% to R484 million (2009: R328 million).
Headline earnings per share increased to 238 cents (2009: 105 cents).
Headline earnings were also positively impacted by a lower interest charge. Net
financing costs, after capitalising borrowing costs, were R85 million (2009:
R138 million).
The Board has declared an interim cash dividend of 70 cents per ordinary share
(2009: 28 cents per ordinary share in scrip or cash alternative).
Mining services
Revenue for the period was R2 286 million, 18% up on 2009`s R1 945 million.
Volumes grew by 11%, mostly due to strong growth in Botswana, Indonesia and
Zambia. Profit from operations doubled to R185 million (2009: R92 million). The
growth in volumes, along with product mix improvements, had a positive effect on
the operating margin, which is at 8,1% (2009: 4,7%).
The Narrow Reef gold business in South Africa was impacted by shaft closures at
some of AEL Mining Services` "AEL" customers. This was offset by growth in the
Platinum, Surface and Massive business sectors. The Coal business in South
Africa was negatively affected by rains in the second quarter.
AEL`s businesses in the rest of Africa showed a strong recovery. This was
particularly evident in diamond and copper mining in Botswana and Zambia,
respectively, while the gold sector in East and West Africa remained strong.
Central African projects in the DRC are in start-up phases and are gaining
momentum as customers ramp up their operations.
The International business benefited from the full six months` trading in
respect of the business gained in Indonesia last year. AEL has now established
itself as a viable alternative supplier to the Indonesian coal mining market,
and is focusing on consolidating its position.
In line with its international footprint expansion strategy, AEL continues to
explore further opportunities in Africa, Asia Pacific and South America.
R155 million (2009: R245 million) was invested in capital expenditure, with R43
million of this spent on the Initiating Systems Automation Programme "ISAP" at
Modderfontein. The balance of the investment was for scheduled maintenance,
support for the Indonesian business and normal plant replacement activities.
Ramp-up of ISAP is progressing well, with the auto and robotic assembly machines
both in commercial production and running on a three shift cycle.
Specialty chemicals
Revenue declined by 6% to R3 039 million (2009: R3 233 million), with the strong
rand depressing prices. Volumes increased by 17%. Profit from operations showed
a 45% improvement to R349 million (2009: R241 million), delivering an operating
margin of 11,5% (2009: 7,5%).
The recovery in mining and in certain manufacturing sectors, off the low base
established in the first half of 2009, facilitated the volume growth. Continued
strong performances from Crest Chemicals, Industrial Oleochemical Products and
Lake International, and a solid contribution from Senmin secured pleasing
results for the period.
R25 million of the Zambian-based debt, previously reported and fully provided
for, was recovered.
A provision of R17 million has been made and an impairment of R4 million
recognised in the period for the restructuring of Plastamid. This company was
reliant on raw material from SANS Fibres in Bellville, which ceased operations
in March 2009. Plastamid will be consolidated into Industrial Urethanes.
R133 million was invested in capital expenditure, with R82 million of this being
spent on strategic growth projects.
No acquisitions were finalised during the period.
Property
The environment for property development remained challenging. Heartland`s
performance for the half-year was underpinned by the leasing and services
components of its portfolio. Consequently, operating profit declined by 36% to
R29 million (2009: R45 million).
The outlook for Heartland`s industrial property development is more promising
for the second half of 2010, with some interest being noted in this sector. Both
the office and residential markets, however, continue to be curtailed by the
lack of end-user finance.
Filling of the pipeline of land available for sale continues so as to ensure
that Heartland is well placed when market conditions improve. This process is
sufficiently flexible to accommodate all land uses.
Specialty fibres
SANS Technical Fibers "STF" (USA) reported an operating profit of R10 million
(2009: loss of R7 million). Revenue increased by 29% to R129 million (2009:
R100 million), whilst volumes grew by 59%. Operating margins were under pressure
on the back of increasing raw material prices and operating costs incurred in
preparing to install equipment relocated from Bellville. This capital project is
progressing well and is expected to be completed ahead of schedule. The
resulting additional capacity has already been sold for the remainder of 2010.
STF remains cash positive and self-sustaining.
Financial
As the Group`s strategic growth capital programme nears completion, expenditure
reduced to R305 million in the period (2009: R675 million). It is anticipated
that total expenditure for the year will be approximately R650 million.
Net working capital increased by R265 million to 18,7% of gross revenue (2009:
17,2%). In 2009, working capital reduced following the closure of SANS Fibres.
The increase in working capital is also attributable to a longer supply chain in
respect of sales to geographies outside of South Africa.
Borrowings increased by R178 million to R2 321 million, from R2 143 million at
December 2009, and the increase is due largely to the movement in working
capital. Cash interest cover improved to 4,8 times (2009: 2,8 times) as a result
of improved profitability. Gearing was 54% of shareholders` funds, in line with
December 2009`s position of 53%.
Corporate restructuring
In April, the Board announced a restructuring of the Group. This process
included the integration of the AECI and Chemical Services executive teams into
a single management structure, and the consolidation of the two head offices.
The objective of the consolidation was to support delivery of AECI`s strategic
growth strategy, and to enhance risk management, financial controls,
transparency and decision-making timeframes throughout the Group.
Board changes
Mr FPP (Frank) Baker retired on 31 March 2010. The Board thanks Frank for his
contribution to the Group over 34 years.
Mr AJ (Allen) Morgan and Advocate R (Rams) Ramashia were appointed to the Board
as non-executive directors with effect from 1 July 2010.
Outlook and strategic focus
The Group delivered pleasing results for the half-year, on the back of a solid
recovery in global resources markets. This recovery had a positive impact on
market volumes and on commodity prices and was of substantial benefit to the
Group. However, the strong rand remains a challenge for AECI`s mining and
manufacturing customers, and hence could impact profitability across all its
businesses in the next six months.
Recent global reports highlight the potential for a financial slow-down, and
AECI does not expect to see the same level of volume improvement in the second
half-year as it did in the first half. However, the Group expects to achieve
continued benefit from the ramp-up of its capital projects in the second half of
the year, although it will be affected by deterioration in the macroeconomic
environment should this materialise. The results for the six months to 30 June
2010 are indicative of a new base level of performance for AECI and, provided
economic conditions do not change significantly, AECI expects a gradual but
sustained improvement in performance as its growth projects come fully on-line
over the next six to 12 months.
Fani Titi Graham Edwards
Chairman Chief executive
Woodmead, Sandton
27 July 2010
Notice to shareholders
Interim ordinary cash dividend No. 153
Notice is hereby given that on Tuesday, 27 July 2010 the directors of AECI
Limited declared an interim cash dividend of 70 cents per share, in respect of
the financial year ending 31 December 2010, payable on Monday, 13 September 2010
to ordinary shareholders recorded in the books of the Company at the close of
business on Friday, 10 September 2010.
The last day to trade cum dividend will be Friday, 3 September 2010 and shares
will commence trading ex dividend as from Monday, 6 September 2010.
Any change of address or dividend instruction must be received on or before
Friday, 3 September 2010.
Share certificates may not be dematerialised or rematerialised from Monday, 6
September 2010 to Friday, 10 September 2010, both days inclusive.
This announcement will be mailed to all recorded shareholders on or about
Wednesday, 28 July 2010.
By order of the Board
EA Rea
Acting Company secretary
Directors: F Titi (Chairman), GN Edwards (Chief executive)+,
RMW Dunne*, S Engelbrecht, Z Fuphe, KM Kathan+,MJ Leeming,
AJ Morgan, LM Nyhonyha, R Ramashia.
+Executive *British
Acting Company secretary: EA Rea
Transfer secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001
and Computershare Investor Services PLC, PO Box 82, The Pavilions, Bridgwater
Road, Bristol BS99 7NH, England
Registered office
1st Floor, AECI Place, 24 The Woodlands, Woodlands Drive, Woodmead, Sandton
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
www.aeci.co.za
Date: 28/07/2010 07:05:10 Supplied by www.sharenet.co.za
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