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AFE - AECI Limited - Reviewed condensed consolidated financial results for the
year ended 31 December 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")
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER
2010 AND CASH DIVIDEND DECLARATION
Best ever safety performance, Total Recordable Incident Rate of 0,58
HEPS up 67%
Profit from continuing operations up 38%
Gearing improved to 40%
Final cash dividend of 135 cents declared
All strategic growth projects substantially complete and in ramp-up phase
Income statement
% 2010 2009
change R millions R millions
Continuing operations
Revenue(2) +8 11 569 10 709
Net operating costs +6 10 507 9 942
Profit from operations +38 1 062 767
Net (loss)/income from Pension
Fund employer surplus accounts (6) 23
Net (loss)/income from plan assets
for post-retirement medical aid
liabilities (5) 11
1 051 801
Fair value adjustments - interest
2 4
Interest expense (net of costs
capitalised) (175) (243)
Interest received 21 21
Income from associates and
investments 2 7
901 590
Impairment of goodwill (28) (18)
Impairments of plant and equipment
(4) (16)
Reversal of impairment of plant
and equipment - 7
Gain on acquisition of subsidiary
4 -
Profit before tax 873 563
Tax (233) (176)
Net profit from continuing
operations 640 387
Net profit from discontinued
operations - 53
Profit before tax - 65
Tax - (12)
Profit for the year 640 440
Profit for the year attributable
to:
- ordinary shareholders 600 421
- preference shareholders 2 2
- non-controlling interest 38 17
640 440
Headline earnings are derived
from:
Profit attributable to ordinary
shareholders 600 421
Impairment of goodwill 28 18
Impairments of plant and equipment
4 16
Reversal of impairment of plant
and equipment - (7)
Gain on acquisition of subsidiary
(4) -
Profit on disposal of property,
plant and equipment (5) (88)
Loss on disposal of subsidiaires 20 -
Profit on disposal of associates
and investments (22) -
Tax effects of the above items 2 10
Non-controlling interest effect of
the above items (4) -
Headline earnings 619 370
Per ordinary share (cents):
Headline earnings +67 577 346
Diluted headline earnings(3) 575 344
Basic earnings +42 559 393
Diluted basic earnings(3) 558 392
Continuing basic earnings 559 344
Diluted continuing basic
earnings(3) 558 343
Discontinued basic earnings(3) - 49
Dividends declared +128 205 90
Dividends paid 132 169
Ordinary shares (millions)(4)
- in issue 107 107
- weighted average number of
shares 107 107
- diluted weighted average number
of shares(3) 108 107
Statement of comprehensive income
2010 2009
R millions R millions
Profit for the year 640 440
Other comprehensive income net of tax:
Revaluation of derivative instruments * (6)
Foreign currency translation differences net
of deferred tax (84) (169)
Total comprehensive income for the year 556 265
Total comprehensive income attributable to:
- ordinary shareholders 519 250
- preference shareholders 2 2
- non-controlling interest 35 13
556 265
*Nominal amount
Statement of financial position
2010 2009
R millions R millions
Assets
Non-current assets 5 634 5 360
Property, plant and equipment 3 564 3 260
Investment property 440 430
Goodwill 1 035 1 063
Pension Fund employer surplus accounts 230 236
Investments 20 13
Non-current loans receivable 22 14
Deferred tax 323 344
Current assets 4 647 4 668
Inventories 1 892 1 827
Accounts receivable 2 023 2 159
Assets classified as held for sale - 14
Cash and cash equivalents 732 668
Total assets 10 281 10 028
Equity and liabilities
Ordinary capital and reserves 4 314 3 937
Preference capital and non-controlling
interest 154 121
Total shareholders` interest 4 468 4 058
Non-current liabilities 2 175 2 564
Deferred tax 88 85
Non-current borrowings 1 133 1 731
Non-current provisions 954 748
Current liabilities 3 638 3 406
Accounts payable 2 168 2 208
Current borrowings 1 368 1 080
Tax payable 102 118
Total equity and liabilities 10 281 10 028
Statement of cash flows
2010 2009
R millions R millions
Cash generated by operations 1 619 1 137
Dividends received 2 12
Interest paid (268) (349)
Interest received 21 22
Income tax paid (209) (333)
Changes in working capital 26 1 161
Expenditure relating to non-current provisions
(37) (93)
Expenditure relating to retrenchments and
restructuring (33) (105)
Cash available from operating activities 1 121 1 452
Dividends paid (144) (167)
Dividends paid to non-controlling interest
(2) -
Cash retained from operating activities 975 1 285
Cash utilised in investment activities (577) (981)
Proceeds from disposal of investments and
businesses 39 94
Investments (7) (92)
Net capital expenditure (609) (983)
Net cash generated 398 304
Cash effects of financing activities (294) (6)
Non-current loans receivable 14 (14)
Borrowings (308) 8
Increase in cash and cash equivalents 104 298
Cash and cash equivalents at the beginning of the
year 668 444
Translation loss on cash and cash equivalents
(40) (74)
Cash and cash equivalents at the end of the year
732 668
Statement of changes in equity
2010 2009
R millions R millions
Total comprehensive income for the year 556 265
Dividends paid (144) (167)
Dividends paid to non-controlling interest
(2) -
Acquisition of subsidiary - (9)
Equity at the beginning of the year 4 058 3 969
Equity at the end of the year 4 468 4 058
Made up as follows:
Issued ordinary capital 215 215
Non-distributable reserves 164 251
Property revaluation reserve 237 237
Foreign currency translation reserve net of
deferred tax (81) 3
Other 8 11
Retained income 3 935 3 471
Ordinary capital and reserves 4 314 3 937
Preference capital and non-controlling interest
154 121
Preference capital 6 6
Non-controlling interest 148 115
4 468 4 058
Other salient features
2010 2009
R millions R millions
Capital expenditure - property, plant and
equipment 634 1 150
- expansion 385 963
- replacement 249 187
Capital commitments 88 737
- contracted for 49 71
- not contracted for 39 666
Future rentals on property, plant and equipment
leased 196 185
- payable within one year 96 84
- payable thereafter 100 101
Contingent liabilities 97 83
Net borrowings 1 769 2 143
Gearing (%) 40 53
Current assets to current liabilities 1,3 1,4
Net asset value per ordinary share (cents)
4 022 3 681
Depreciation - continuing operations 332 267
Rand/US$ closing exchange rate (rand) 6,65 7,38
Rand/US$ average exchange rate (rand) 7,32 8,27
Industry segment analysis
Profit from
Revenue operations
2010 2009 2010 2009
R millions R millions
Continuing operations
Mining services 4 832 4 070 378 298
Specialty chemicals 6 453 6 524 811 483
Property 370 211 66 33
Specialty fibres 294 222 33 9
Group services and intersegment (380) (318) (226) (56)
11 569 10 709 1 062 767
Discontinued operations
SANS Fibres - Bellville - 469 - 66
11 569 11 178 1 062 833
Net assets
2010 2009
R millions
Continuing operations
Mining services 2 294 2 187
Specialty chemicals 3 716 3 643
Property 726 669
Specialty fibres 143 116
Group services and intersegment (93) (51)
6 786 6 564
Discontinued operations
SANS Fibres - Bellville - (33)
6 786 6 531
Net assets consist of property, plant, equipment, investment property, goodwill,
inventory and accounts receivable less accounts payable.
Notes
(1) Basis of preparation and accounting policies
The condensed consolidated financial results are prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards, the presentation and disclosure requirements of IAS 34 - Interim
Financial Reporting, the AC500 series issued by the Accounting Practices Board,
the Listings Requirements of the JSE Limited, and in the manner required by the
South African Companies Act, No. 61 of1973, as amended.
Accounting policies have been applied consistently by all entities in the Group
and are consistent with those applied in the previous financial year.
(2) Includes foreign and export revenue of R3 111 million (2009: R2 520
million).
(3) Calculated in accordance with IAS33. 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.
(4) Net of 11 884 669 (2009: 11 884 669) treasury shares held by a subsidiary
company.
(5) The discontinued operations refer to the businesses of SANS Fibres where
manufacturing activities ceased at the end of March 2009.
(6) The auditors, KPMG Inc., have reviewed these condensed consolidated
financial results. The auditors` unqualified review report is available for
inspection at the Company`s registered office.
(7) The condensed consolidated financial statements do not include all of the
information required for full annual financial statements and should be read in
conjunction with the consolidated annual financial statements for the year ended
31 December 2009.
(8) The preparation of the 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.
Commentary
Performance
The Group delivered pleasing results for 2010, underpinned by a strong recovery
in mining and manufacturing production volumes in the year. Consumer spending
improved as interest rates declined and this also assisted the Group`s
businesses that service related sectors. Revenue from continuing operations
increased by 8% to R11 569 million (2009:
R10 709 million), driven by commodity price increases but tempered by the 11%
strengthening of the rand against the US dollar year-on-year. Overall volumes
grew by 11% and profit from continuing operations increased by 38% to R1 062
million (2009: R767 million).
Lower interest rates and improved cash generation impacted positively on
headline earnings as net finance costs, after capitalising borrowing costs,
decreased to R154 million (2009: R222 million).
Headline earnings were 67% higher at R619 million (2009:
R370 million).
The Board has declared a final cash dividend of 135 cents per ordinary share
(2009: 62 cents).
Safety and health performance is expressed as the Total Recordable Incident
Rate. It is gratifying to report that in 2010 the Group achieved its lowest ever
level of employee injuries and illnesses. The rate of 0,58 represents a 23%
reduction from the level recorded in the prior reporting period.
Mining services
AEL Mining Services ("AEL") delivered a commendable performance, particularly
noteworthy if viewed in the context of the slow start to the year when surface
mining operations in southern Africa were negatively affected by heavy rainfall
and those in the narrow reef sector experienced shaft closures. Revenue
increased by 19% to R4 832 million (2009: R4 070 million). This is attributable
to ammonia price increases and volume growth of 13%. Profit from operations rose
by 27% to R378 million (2009: R298 million) and the operating profit margin was
at 7,8% (2009: 7,3%). This improvement was facilitated by higher efficiencies on
the Initiating Systems Automation Project (ISAP) in its ramp-up phase, as well
as being indicative of the benefits of enhanced service package offerings to
customers. Retrenchment costs of R49 million affected AEL`s operating profit.
R39 million of this amount is a provision for restructuring of the old manual
shocktube plants, to be completed during 2011.
In AEL`s southern African business, sales into the surface and massive sectors
recorded good growth, particularly in platinum mining. Volumes for the narrow
reef market declined by 3,5%.
The African business grew in line with a strong recovery in Botswana`s diamond
mining as well as improvements in the copper industry in central Africa. This
growth was achieved notwithstanding delays in customers` projects. Gold mining
activity in west and east Africa was depressed by production cutbacks and the
suspension of operations.
The International business recorded pleasing progress as AEL gained new business
in Indonesia as well as additional sales channel volumes in Europe and South
America.
Of the R344 million invested in capital expenditure,
R102 million was spent on ISAP. Ramp-up of ISAP progressed well, with the
production run-rate more than doubling in the second half of the year. The ISAP
project will be fully complete in the first quarter of 2012. The balance of the
capital expenditure was utilised for expansion in Indonesia and for smaller
capital replacement projects in Africa and South Africa.
Specialty chemicals
Profit from continuing operations improved sharply by 68% to R811 million (2009:
R483 million) although revenue declined marginally to R6 453 million (2009: R6
524 million) owing to the effects of the strong rand as well as changes in
product mix. The operating profit margin improved to 12,6% (2009: 7,4%) as a
result of excellent cost control in the period as well as the non-recurrence of
the effects of the bad debt write-off of 2009. Volumes increased by 10% year-on-
year.
There were improved performances from most of the businesses in the portfolio,
with those from Akulu Marchon, Industrial Oleochemical Products, ImproChem and
Lake International Technologies being particularly noteworthy. Senmin`s results
were adversely impacted by the rand exchange rate and by start-up costs as the
Polyacrylamide (PAM) facility was being ramped up.
The restructuring of Plastamid was completed in the second half-year and this
business was divisionalised into Industrial Urethanes, at a total net cost of
R10 million.
Strong cash generation owing to improved profitability, lower capital
expenditure and working capital containment were features of 2010.
Of the R241 million capital expenditure in the year,
R92 million was for Senmin`s strategic projects. At Senmin, the Carbon
Disulphide project is complete and the Acrylamide and PAM facilities have been
commissioned, with the qualification process due for completion in the first
quarter of 2011.
The specialty chemicals portfolio will be enhanced in the coming year, with
three acquisitions finalised or close to finalisation for a total consideration
of about R180 million. An agricultural chemicals distribution business will be
integrated into Plaaskem, a toll manufacturing business will enhance SA Paper
Chemicals` customer offering and a bulk caustic soda distribution business will
be integrated into Crest Chemicals.
Property
The property market continued to lag behind the South African economy`s recovery
in 2010 and no significant property sale transactions were recorded. Heartland`s
results were delivered primarily by the leasing and services portfolios.
Operating profit improved to R66 million from R33 million in 2009. This
improvement is largely due to the non-recurrence of the cancellation of property
transactions accounted for in 2009.
In property development, Heartland maintained its focus on preparing land for
release to the market once market conditions improve. The most significant
achievement in this regard was progress on Longlake at Modderfontein, a 220
hectare parcel of saleable land suitable for all land uses. Township and
environmental approvals were received, zoning rights were granted and
infrastructural designs were approved.
The property market remained curtailed by the lack of end-user finance.
Specialty fibres
SANS Technical Fibers, based in the USA, benefitted from global recovery in the
automotive and consumer sectors. Revenue improved by 48% to US$40 million (2009:
US$27 million), largely driven by volume growth of 48%. Operating profit
quadrupled to US$4,5 million (2009:
US$1,1 million).
Plant capacity was expanded by 33% with the installation of equipment
transferred from the former SANS Fibres site in Bellville. The project, at a
cost of US$3 million, was completed within budget and ahead of schedule. The new
capacity was fully utilised from the start-up date and, given the global
automotive sector`s positive outlook, this uptake scenario is not expected to
change.
Finance and corporate centre
Gearing continued to improve to 40% of shareholders` fund at year-end (2009:
53%) as capital expenditure declined to
R634 million (2009: R1 150 million) and profitability improved in the period.
Net working capital was well managed at 15,1% of gross revenue (2009: 15,9%).
Cash interest cover improved to 5,6 times (2009: 3,5 times). Net interest paid,
before capitalising borrowing costs of
R93 million (2009: R105 million), decreased to R247 million (2009: R327
million). The decrease is attributable to sustained working capital control,
improved cash generation and the decline in interest rates.
The Group services cost was R226 million (2009: R56 million). This material
movement is analysed as follows:
an additional R80 million provision in respect of legacy costs. The largest
portion of this was an adjustment in the Post-retirement Medical Aid Liability
due to medical aid inflation, a 0,25% decrease in the net discount rate, and the
inclusion of additional members;
an increase of R51 million in long-term incentive provisions as the Group`s
earnings and the Company`s share price improved in 2010;
in 2009, R18 million was recognised as profit on the disposal of the listed
share portfolio of the captive insurance entity.
Outlook
The recovery in the mining sector and steady increases in global chemical prices
are good indicators of improving demand, albeit in a more competitive
environment. This bodes well for the Group in terms of volumes.
The focus for 2011 will be to:
complete ramp-up of the PAM and ISAP projects so as to optimise their
beneficial use, thereby enhancing the Group`s financial performance;
maintain a sharp focus on costs and working capital management, and on enhanced
product and service delivery to customers; and
successfully integrate the acquisitions into the specialty chemicals portfolio.
Fani Titi Graham Edwards
Chairman Chief Executive
Woodmead, Sandton
21 February 2011
Notice to shareholders
Final ordinary cash dividend No. 154
Notice is hereby given that on Monday, 21 February 2011 the Directors of AECI
declared a final cash dividend of 135 cents per share, in respect of the
financial year ended 31 December 2010, payable on Monday, 18 April 2011 to
ordinary shareholders recorded in the books of the Company at the close of
business on Friday, 15 April 2011.
The last day to trade cum dividend will be Friday, 8 April 2011 and shares will
commence trading ex dividend as from Monday, 11 April 2011.
Any change of address or dividend instruction must be received on or before
Friday, 8 April 2011.
Share certificates may not be dematerialised or rematerialised from Monday, 11
April 2011 to Friday, 15 April 2011, both days inclusive.
This announcement will be mailed to all recorded shareholders on or about
Tuesday, 22 February 2011.
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, Adv 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: 22/02/2011 07:05:25 Supplied by www.sharenet.co.za
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