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Summarised audited consolidated financial results and final cash dividend declaration for the year ended 31 Dec 2016
AECI Limited
(Incorporated in the Republic of South Africa)
Registration number 1924/002590/06
Tax reference number 9000008608
(“AECI” or “the Company” or “the Group”)
Share code: AFE
ISIN: ZAE000000220
Summarised audited consolidated financial results and final
cash dividend declaration for the year ended 31 December 2016
Highlights
Profits from operations of core businesses: Specialty Chemicals
+8,3% to R1 214m Explosives +7,4% to R449m
Excellent cash generation: +52% to R1 918m, net debt reduced by
R881m to R297m
Safety performance: TRIR of 0,45
HEPS -9% to 818c underlying HEPS +29% to 920c
Final ordinary cash dividend: +15% to 300cps
Income statement
% 2016 2015
R millions Note change Audited Audited
Revenue 2 1 18 596 18 446
Net operating costs (17 261) (16 743)
Profit from operations (22) 1 335 1 703
Impairment of equity-accounted investee — (51)
Share of profit of equity-accounted
investees, net of tax 28 28
Profit from operations and equity-
accounted investees 1 363 1 680
Net finance costs (215) (187)
Interest expense (270) (253)
Interest received 55 66
Profit before tax 1 148 1 493
Tax expense (336) (464)
Profit for the year 812 1 029
Profit for the year attributable to:
— Ordinary shareholders 777 1 007
— Preference shareholders 3 3
— Non-controlling interest 32 19
812 1 029
Headline earnings are derived from:
Profit attributable to ordinary
shareholders 777 1 007
Impairment of goodwill 28 4
Impairment of property, plant and
equipment 54 19
Impairment of equity-accounted investees — 51
Gain on bargain purchase — (23)
Loss/(surplus) on disposal of property,
plant and equipment 9 (26)
Surplus on disposal of assets classified
as held for sale — (48)
Foreign currency translation differences
reclassified on net investments in
foreign operations 17 —
Tax effects of the above items (21) 4
Headline earnings 864 988
Per ordinary share (cents):
Headline earnings (9) 818 894
Diluted headline earnings 800 870
Basic earnings (19) 735 911
Diluted basic earnings 720 886
Ordinary dividends declared 15 300 260
Ordinary dividends paid 395 350
Special dividend paid — 375
Statement of comprehensive income
2016 2015
R millions Audited Audited
Profit for the year 812 1 029
Other comprehensive income net of tax:
Items that may be reclassified subsequently
to profit or loss:
— Foreign currency translation differences (376) 808
— Effective portion of cash flow hedges (3) —
Items that may not be reclassified subsequently to
profit or loss:
— Remeasurement of defined-benefit and post-retirement
medical aid obligations — 820
Total comprehensive income for the year 433 2 657
Total comprehensive income attributable to:
— Ordinary shareholders 405 2 619
— Preference shareholders 3 3
— Non-controlling interest 25 35
433 2 657
Statement of changes in equity
2016 2015
R millions Audited Audited
Total comprehensive income for the year 433 2 657
Dividends paid (435) (838)
Share-based payment reserve 45 (17)
Shares repurchased (39) (563)
Equity at the beginning of the year 9 042 7 803
Equity at the end of the year 9 046 9 042
Made up as follows:
Ordinary share capital 110 110
Reserves 1 280 1 605
Foreign currency translation reserve 1 086 1 455
Other reserves (1) —
Share-based payment reserve 195 150
Retained earnings 7 523 7 217
Non-controlling interest 127 104
Preference share capital 6 6
9 046 9 042
Reconciliation of weighted average number of shares
2016 2015
Millions Audited Audited
Weighted average number of ordinary shares at the
beginning of the year 132,4 138,3
Weighted average number of unlisted ordinary shares held
by consolidated EST (10,1) (10,1)
Weighted average number of contingently returnable
ordinary shares held by CEDT (4,4) (4,4)
Weighted average number of shares held by consolidated
subsidiary (11,9) (11,9)
Weighted average number of shares repurchased during
the year (0,3) (1,4)
Weighted average number of ordinary shares for basic
earnings per share 105,7 110,5
Dilutive adjustment for potential ordinary shares 2,3 3,1
Weighted average number of ordinary shares for diluted
earnings per share 108,0 113,6
Statement of financial position at 31 December
2016 2015
R millions Note Audited Audited
Assets
Non-current assets 7 538 8 374
Property, plant and equipment 3 3 990 4 296
Investment property 140 137
Intangible assets 211 257
Goodwill 4 1 541 1 590
Pension fund employer surplus accounts 5 583 982
Investments in joint ventures 327 313
Investments in associates 194 250
Other investments 25 27
Deferred tax 527 522
Current assets 8 282 9 420
Inventories 3 174 3 358
Accounts receivable 3 342 3 825
Other investments 190 67
Assets classified as held for sale 6 60 —
Tax receivable 51 56
Cash 1 465 2 114
Total assets 15 820 17 794
Equity and liabilities
Equity 9 046 9 042
Ordinary share capital and reserves 8 913 8 932
Non-controlling interest 127 104
Preference share capital 6 6
Non-current liabilities 2 324 1 871
Deferred tax 254 427
Non-current borrowings 1 600 672
Contingent consideration 58 70
Non-current provisions and employee benefits 5 412 702
Current liabilities 4 450 6 881
Accounts payable 4 148 4 003
Current borrowings 162 2 620
Contingent consideration — 15
Loans from joint ventures 75 36
Tax payable 65 207
Total equity and liabilities 15 820 17 794
Statement of cash flows
2016 2015
R millions Audited Audited
Cash generated by operations 2 328 2 607
Dividends received 46 30
Interest paid (238) (253)
Interest received 55 66
Tax paid (636) (532)
Changes in working capital 488 (215)
Cash outflows relating to defined-benefit and post-
retirement medical aid obligations (27) (284)
Cash outflows relating to non-current provisions and
employee benefits (76) (64)
Settlement of performance shares (22) (94)
Cash available from operating activities 1 918 1 261
Dividends paid (435) (838)
Cash flows from operating activities 1 483 423
Cash flows from investing activities (452) (844)
Net investment expenditure 36 (334)
Net capital expenditure (488) (510)
Net cash generated/(utilised) before financing
activities 1 031 (421)
Cash flows from financing activities (1 549) 691
Non-current loans receivable — 4
Shares repurchased (39) (563)
Borrowings raised 1 110 7 424
Borrowings repaid (2 620) (6 174)
Net (decrease)/increase in cash (518) 270
Cash at the beginning of the year 2 114 1 376
Translation (loss)/gain on cash (131) 468
Cash at the end of the year 1 465 2 114
Industry segment analysis
2016 2015
R millions Audited Audited
External revenue
Explosives 7 918 8 169
Specialty Chemicals 10 363 9 434
Property 315 843
Inter-segment — —
18 596 18 446
Profit from
operations
Explosives 449 418
Specialty Chemicals 1 214 1 121
Property 87 527
Group services (415) (363)
1 335 1 703
Operating
Assets
Explosives 4 255 5 333
Specialty Chemicals 7 672 7 521
Property 315 387
Group services 216 222
12 458 13 463
2016 2015
R millions Audited Audited
Inter-segment
revenue
Explosives 56 67
Specialty Chemicals 422 452
Property 83 79
Inter-segment (561) (598)
— —
Depreciation
and amortisation
Explosives 339 329
Specialty Chemicals 264 242
Property 9 8
Group services 14 11
626 590
Operating
Liabilities
Explosives 1 260 1 512
Specialty Chemicals 2 571 2 365
Property 72 114
Group services 245 12
4 148 4 003
2016 2015
R millions Audited Audited
Total segment
revenue
Explosives 7 974 8 236
Specialty Chemicals 10 785 9 886
Property 398 922
Inter-segment (561) (598)
18 596 18 446
Impairments
Explosives 54 18
Specialty Chemicals 28 5
Property — —
Group services — —
82 23
Capital expenditure
Explosives 257 313
Specialty Chemicals 179 235
Property 26 14
Group services 40 21
502 583
Operating assets consists of property, plant and equipment, investment
property, intangible assets, goodwill, inventories, accounts receivable
and assets classified as held for sale. Operating liabilities consists
of accounts payable.
In 2014, AECI revised its strategy and developed five key growth pillars,
which have since been the focus of its integrated reporting. Progress has
been made in managing the Group’s businesses in terms of these pillars and
the process of altering internal reporting to reflect this has commenced.
In future, management reporting will be structured by pillar and the same
restructuring will apply to reporting in the annual financial statements.
Other salient features
2016 2015
R millions Audited Audited
Capital expenditure 502 583
— expansion 183 275
— replacement 319 308
Capital commitments 233 436
— contracted for 62 71
— not contracted for 171 365
Future rentals on leased property, plant and equipment 443 331
— payable within one year 123 112
— payable thereafter 320 219
Net borrowings 297 1 178
Depreciation and amortisation 626 590
Gearing (%)?* 3 13
Current assets to current liabilities 1,9 1,4
Net asset value per ordinary share (cents) 8 107 8 096
ZAR/US$ closing exchange rate (rand) 13,73 15,48
ZAR/US$ average exchange rate (rand) 14,72 12,76
* Borrowings less cash, as a percentage of equity.
Notes
(1) (a) Basis of preparation and accounting policies
The summarised consolidated financial results are prepared in accordance with
the requirements of the JSE Limited’s Listings Requirements (“Listings
Requirements”) for provisional reports and the requirements of the Companies
Act of South Africa applicable to summarised financial statements. The Listings
Requirements require provisional reports to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (“IFRS”); the South African
Institute of Chartered Accountants Financial Reporting Guides as issued by
the Accounting Practices Committee; Financial Pronouncements as issued by
the Financial Reporting Standards Council; and to also, as a minimum, to
contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the audited consolidated
financial statements, from which the summarised consolidated financial results
were derived, are in terms of IFRS and are consistent with those applied in the
previous consolidated financial statements. New standards adopted did not have
a material effect on the financial results.
The preparation of these summarised consolidated financial results for the year
ended 31 December 2016 was supervised by the Financial Director, Mr KM Kathan
CA(SA)AMP (Harvard).
(b) Financial statement preparation and independent audit
The summary report is extracted from audited information but is itself not
audited. The financial statements were audited by KPMG Inc. who expressed an
unmodified opinion thereon.
The audited financial statements and the auditor’s report thereon are available
for inspection at the Company’s registered office. The Company’s Directors take
full responsibility for the preparation of the provisional report and for the
financial information having been extracted correctly from the underlying
financial statements.
The summarised consolidated financial results do not include all of the
disclosures required for full financial statements and should be read in
conjunction with the consolidated annual financial statements for the year
ended 31 December 2016.
(2) Revenue includes foreign and export revenue of R6 479 million
(2015: R6 361 million).
(3) Impairment of plant and equipment
During the year, the directors performed a detailed impairment assessment in
respect of the property, plant and equipment (“PPE”) within the Explosives
segment in South Africa. The recoverable amounts in respect of each cash
generating unit (“CGU”) was estimated based on the greater of its value in
use and fair value less costs of disposal. Key inputs and assumptions used
in determining value in use was revenue growth, remaining useful lives of
the PPE and an appropriate discount rate applied to the future expected
cash flows.
An impairment of R52 million was recognised in respect of plant and equipment
used to service customers in the South African coal mining sector. The
impairment arose due to continued adverse trading conditions in the local
coal market.
Management estimated the recoverable amount of the cash-generating unit related
to the assets used to service the coal mining sector. The recoverable amount was
estimated based on the assets’ fair value less costs of disposal. The impairment
loss was included in net operating costs. Fair value less costs of disposal was
determined by assessing the market value of the assets in their current condition
and location.
In 2016, following changes to the use of certain robotic equipment that is part of
AEL’s ISAP plant, the Group reassessed its estimates and R8 million of the 2015
impairment was reversed.
In 2016 a decision was taken to exit the explosives manufacturing market
in Egypt, resulting in the moveable assets of the business being transferred
elsewhere in the Explosives segment. An impairment loss of R10 million was
recognised on the remaining immovable assets, which represented the net book
value of these assets.
(4) Impairment of goodwill
Exposure to South Africa’s poultry industry, which has been disrupted by amended
legislation regulating brining levels and imports, resulted in the recognition of
an impairment loss of R28 million in respect of the goodwill in the Cobito business.
The impairment loss was included in net operating costs. The business is part
of Lake Foods, which in turn is part of the Specialty Chemicals segment.
(5) Settlement of post-retirement medical aid obligations
As stated in AECI’s 2015 integrated report, voluntary alternative benefit offers had
been made to active employees eligible for a post-retirement medical aid subsidy
so as to settle their defined-benefit entitlements. The offers were made to
eligible employees who are contributing members of the AECI Employees Provident
Fund (“AEPrF”), the AECI Defined Contribution Pension Fund (“ADCPF”) and the
AECI Employees Pension Fund (“AEPF”).
Offers made to active employees were funded from employer surplus accounts (“ESA”)
with a section 15E transfer from the ESA of the AECI Pension Fund (“APF”) to the
AEPF and the ADCPF required to enable the settlement. The section 15E transfer
was approved by the Financial Services Board. The ESA transfers took place in
March 2016, with the settlement offers finalised in June 2016 for those employees
who had accepted the offer.
In 2016, AECI reissued offers to eligible pensioner members who had previously
rejected or not responded to the alternative benefit offer made to them in 2014
and implemented in 2015. The pensioner members were given the opportunity to accept
the offer previously made, which would be implemented as though they had accepted
the original offer. At the end of the year, an additional 367 pensioners had accepted
the offer. Implementation will occur in 2017 and AECI has recognised the settlement
of these post-retirement medical aid subsidy obligations. The pensioner offers will
be funded from the ESA in the APF for former members of that fund and in cash for
other pensioners via a section 14 transfer to Momentum Group Limited (“MMI”) and
the purchase of annuities for cash from MMI.
The amount transferred from the ESA was R250 million whilst the accrual for
settlement in 2017 amounts to R172 million (with R95 million of this to be
transferred from ESA). The related liability that was derecognised had a
carrying amount of R273 million, resulting in a loss on settlement of
R149 million, which is included in net operating costs for the year.
(6) Assets classified as held for sale
Management is committed to a plan to sell the Olive Pride business and
anticipates the disposal to be completed within the next financial year.
The assets are available for immediate sale in their present condition.
Accordingly, the business is presented as a disposal group held for sale
as at 31 December 2016. No impairment loss was required to be recognised
as its carrying amount is lower than its fair value less costs to sell. No
cumulative income or expenses related to the disposal group are included
in other comprehensive income. The Olive Pride business is part of the
Specialty Chemicals segment.
The carrying amount of total assets classified as held for sale is:
R millions
Goodwill 27
Property, plant and equipment 1
Intangible assets 21
Inventory 11
Assets classified as held for sale 60
(7) Shares repurchased
During the year AECI completed the general repurchase of shares in terms of
the general authority to do so that was approved by the Company’s shareholders
at the Annual General Meeting on 1 June 2015. 442 212 shares were repurchased
at a cost of R39 million.
(8) Contingent liabilities
The investigation process undertaken by the Competition Commission of South
Africa (“the Commission”) in 2014, on allegations of collusion by Akulu Marchon
“Akulu” with a competitor, progressed. The Commission rejected Akulu’s application
for leniency. The matter is in the process of being finalised with the Commission.
A provision, based on Group management’s estimate, has been recognised in respect
of the matter.
The Group is involved in various legal proceedings and is in consultation with
its legal counsel, assessing the outcome of these proceedings on an ongoing basis.
As proceedings progress, the Group’s management makes provision in respect of
legal proceedings where appropriate. Litigations, current or pending, are not
likely to have a material adverse effect on the Group.
(9) The Group entered into various sale and purchase transactions with related
parties in the Group in the ordinary course of business on terms that are no more
and no less favourable than transactions with unrelated external parties. The
nature of which is consistent with those previously reported. All transactions
and balances with these related parties have been eliminated appropriately
in the consolidated results.
(10) The Group measures forward exchange contracts at fair value
(amounting to a net liability of R40 million) using inputs as described in
level 2 of the fair value hierarchy. The fair values for forward exchange
contracts are based on quotes from brokers. Similar contracts are traded in
an active market and the quotes reflect the actual transactions on similar
instruments. Other financial assets and financial liabilities, carried at fair
value through profit or loss amounted to R190 million and R58 million respectively,
using inputs described in level 1 and 3, respectively, of the fair value hierarchy.
There were no transfers between levels 1, 2 or 3 of the fair value hierarchy
during the year ended 31 December 2016.
(11) The summarised consolidated financial results do not include all of the
disclosures required for full financial statements and should be read in
conjunction with the consolidated annual financial statements for the year
ended 31 December 2016.
Commentary
Financial performance
The Group’s core operating segments, Explosives and Specialty Chemicals,
delivered a commendable performance in a trading environment that remained
very difficult both locally and internationally. Although the global resources
sector showed some recovery and overall commodity prices increased in the latter
part of 2016, volatility persisted and the longer- term sustainability of
improved conditions in the sector remain uncertain. Growth in South Africa’s
manufacturing sector was negligible and the agricultural sector in a number
of Southern African countries remained constrained by the effects of the
drought for most of the year.
The Group’s revenue increased by 1% to R18 596 million (2015: R18 446 million),
of which 35% was generated outside South Africa. Profit from operations declined
by 22% to R1 335 million (2015: R1 703 million). Headline earnings declined by
13% to R864 million (2015: R988 million), while HEPS declined by 9% to 818 cents
(2015: 894 cents) and EPS was 735 cents (2015: 911 cents).
In addition to the effects of the prevailing environment, the Group’s
performance was also impacted by the following:
* the sale of sizeable parcels of land in Somerset West in 2015, which
positively impacted HEPS in that year by 295 cents;
* in 2015 and 2016, the Group undertook to complete the de-risking of
its defined-benefit (“DB”) obligations for past and current employees. The
settlement of these obligations, in terms of IAS 19 Employee Benefits,
was charged to the income statement. The negative impact on HEPS for 2015 and
2016 was 116 cents and 102 cents per share, respectively.
Taking the above adjustments into account, the Group’s underlying performance
can be analysed as follows:
Change
2016 2015 (%)
Reported HEPS 818 894 (9)
Somerset West land sales (295)
DB obligations de-risking 102 116
Underlying HEPS 920 715 29
The Board has declared a final gross cash dividend of 300 cents per ordinary
share, an increase of 15% from 2015’s 260 cents per share, bringing the total
ordinary dividend for the 2016 financial year to 435 cents, 13% higher than
the prior year’s 385 cents. A South African dividend withholding tax of 20%
will be applicable to the final dividend, resulting in a final net dividend
of 240 cents per share payable to those shareholders who are not eligible for
exemption or reduction of the withholding tax.
Safety
The aspiration remains zero harm to employees and contractors. The Total
Recordable Injury Rate (“TRIR”) was 0,45 in 2016. It was disappointing
that this was behind the 0,35 achieved last year and management remains
focused on improvements. The TRIR measures the number of incidents per
200 000 hours worked.
Segmental performance
Explosives
AEL Mining Services’ (“AEL”) revenue declined by 3,2% to R7 974 million
(2015: R8 236 million). This was due mainly to the sharp decline in
ammonia prices in the second half of the year and the strengthening of the
rand against the US dollar in the same period. Approximately 60% of AEL’s
revenue is US dollar based.
Profit from operations increased by 7,4% to R449 million (2015: R418 million).
AEL’s assets deployed in the local coal mining sector were impaired as a
consequence of disappointing results in that business. The net cost of the
impairment was R54 million (2015: R18 million). Excluding impairments,
profit from operations would have increased by 15,4% to R503 million and
the operating profit margin would have been 6,3%.
Overall explosive volumes were flat. In South Africa, explosive volumes
improved by 1,1%. This improvement, in an environment where overall
mining production contracted significantly, was largely due to two new
contracts gained in the iron ore and uranium surface mining sectors, the
supply of which commenced mid-year. Generally, customers continued to
restructure their mining plans and reduce waste mining, resulting in
the mining of high grade ores.
Volumes of initiating systems, which are supplied to the underground mining
market, declined by 5,1%. This was due to the loss of sales to one mine
and several protracted safety-related Section 54 stoppages at customer
sites. Furthermore, customers ceased operations at loss-making mines,
with the platinum sector being the most affected. Gold mining activity
remained robust.
In the rest of Africa, overall volumes were 2,9% lower year-on-year. Volumes
in the Democratic Republic of Congo were negatively impacted by unusually
high rainfall which curtailed output early in the year. In the second
half-year, most copper miners in Central Africa reduced their production
rates as a consequence of the lower copper price and some mines were put
under care and maintenance. Business in the region remains highly
competitive.
There was an increase in demand from the gold mining sector in West and East
Africa. AEL was awarded four new tenders, three in West Africa and one in
East Africa. These will make a positive contribution by the end of
2017. The four contracts all meet the AECI Group’s return hurdle rates and
represent additional annual revenue of US$25 million for AEL. One contract
was lost in Egypt in the fourth quarter.
The profitability of AEL’s International businesses, mainly in Australia and
Indonesia, improved although margins were still under sustained pressure.
There was good volume growth in Australia and the contractual arrangement
with the major customer has been extended for a further three years.
In Indonesia, volumes sold to the largest customer stabilised and AEL’s
supply contract has been extended. With increases in thermal coal prices,
volumes are expected to increase in 2017. The BBRI ammonium nitrate
solution manufacturing ran well, albeit at a 55% utilisation rate.
AEL has a 42,6% minority ownership stake in BBRI.
AEL’s cash management in the year was exceptional. Net working capital
reduced by more than R400 million and capital expenditure was controlled
to below the depreciation charge. Capital expenditure was R257 million,
of which R50 million was for investments at customer sites to support
growth and to service new business.
Input VAT refunds in Indonesia
In November, AEL’s explosives licensee in Indonesia applied for tax amnesty
in terms of a programme offered by the Indonesian Tax Office. The licensee’s
amnesty application was with reference to all tax assets and liabilities for
the financial years up to and including 2015. As a result, the VAT refund due
to the licensee will not be recovered from the Indonesian Tax Office. AECI
is pursuing alternatives for recovery with the licensee. Full provision for
the outstanding VAT was made in 2015. Good progress has been made in
submitting VAT returns on the licensee’s behalf for the 2016 financial
year to recover the credit due to AECI.
Specialty Chemicals
Revenue increased by 9,1% to R10 785 million (2015: R9 886 million). Profit
from operations improved by 8,3% to R1 214 million (2015: R1 121 million).
The increase in revenue was driven by higher prices as a result of the weaker
average rand exchange rate against the US dollar and the benefits of the
acquisitions finalised in 2015. Overall volumes declined by 1,6%, a
consequence of the severe drought conditions and the decline of South
Africa’s poultry industry. The goodwill relating to the poultry business
was impaired at a cost of R28 million. Operating margin remained at a
pleasing 11,3%.
Senmin, the mining chemicals business achieved excellent results. Volumes
grew by 7,5% and profit from operations increased by 10,5% on the back
of exports.
Robust performances, with improvements in excess of 20%, were delivered
by Chemical Initiatives, ChemSystems, ImproChem, Nulandis and SANS
Technical Fibers.
The results of ImproChem, AECI’s water treatment business, were adversely
impacted by the protracted drought in Southern Africa. This was offset
by savings from the integration of manufacturing sites and growth in
the public water market in the rest of Africa.
Nulandis’ agrochemicals business was also impacted by drought conditions,
which still persist in the Western Cape, but benefited from the
acquisition of Farmers Organisation and Biocult in 2015.
Lake Foods’ performance was curtailed by the adverse conditions in the
poultry industry and that of Southern Canned Products was negatively
impacted by low demand from its large beverage customers. The sale of
an initial 51% of the Olive Pride business to Clover SA Ltd was
approved unconditionally by the Competition Commission of South Africa
by year-end and the transaction will take effect in 2017.
The Specialty Chemicals cluster remained highly cash generative and
controlled working capital very well during the year. Capital
expenditure for the segment was R179 million. Of this amount,
R127 million was for expansion purposes. During 2017, R90 million
will be invested to expand Senmin’s xanthates production capacity
by 4 000 tonnes a year. These products are used in the extraction
of gold, platinum and copper. The project is expected to come
on line early in 2018.
Property
All bulk land surplus to AECI’s operational requirements and
available for redevelopment in the short term was disposed of
in the prior two financial years. The Group’s remaining property
activities comprise mainly the leasing of buildings at Modderfontein
(Gauteng) and Umbogintwini (KwaZulu- Natal), as well as the provision
of services at the Umbogintwini Industrial Complex.
Results in the prior year included the bulk sale of the Somerset West
site. As such, revenue from the Property segment declined to R398 million
(2015: R922 million) while profit from operations was a pleasing R87 million.
Cash utilisation
Cash available from operating activities increased by 52% to R1 918
million (2015: R1 261 million). This was particularly pleasing, given that
2015’s results included the sale of the Somerset West properties. The
improvement in cash generation was primarily due to good working capital
management by all Group businesses and by AEL in particular. In spite of
some large customers extending their payment terms at year end, the
ratio of net working capital to revenue reduced to 12,7% from 17,2%
in the prior year.
Capital expenditure, which was curtailed to below the depreciation and
amortisation charge, was R502 million (2015: R583 million). Of this amount,
R183 million was expansion capital.
Cash interest cover was at 11,0 times (2015: 12,4 times). It was affected
by higher interest rates and the share repurchase programme completed
during the year. Consequently, the net interest cost increased to
R215 million (2015: R187 million).
More than R1 billion in dividend proceeds from the Group’s African
subsidiaries was repatriated to South Africa. These funds were used
to settle short-term borrowings.
Confirmation of changes to the board of directors
As announced in July 2016, Schalk Engelbrecht and Richard Dunne will
retire from their positions as Non-executive Directors of the Company.
Schalk will retire as Chairman of the Company and the Board today and
Richard will retire at the Annual General Meeting of the Company’s
shareholders scheduled for 29 May 2017. The Board thanks them for
their valuable contributions to the affairs of the Company and the
Board over many years. On 1 September 2016, the Board welcomed Moses
Kgosana as a new Non-executive Director.
As previously reported, Khotso Mokhele will succeed Schalk Engelbrecht
as Chairman on 1 March 2017 and the Board looks forward to working with
Khotso in his new role.
Outlook
The global outlook is more positive than it was a year ago. Better
overall GDP growth is forecast, the US dollar is expected to remain
strong and it is not anticipated that oil prices will return to the
low levels seen in the early part of 2016. This should have a positive
effect on input chemical prices. Commodity prices in general appear
to be on an upward trend, a positive signal for activity in the
mining sector.
In South Africa, the GDP growth forecast for 2017 and 2018, though
still modest, indicates an improvement in economic activity from
2016’s low base.
A more positive overall environment will benefit AECI as it implements its
strategy. Group businesses are focused on the mining sector; the water
treatment industry in Africa, where water remains a scarce resource
required by every sector of the economy; agrochemicals in Southern Africa,
where rainfall patterns appear to have normalised on the whole; the food
industry in Southern Africa, where growth continues to outpace that of
GDP; and the diverse industries that comprise South Africa’s manufacturing
sector. The Group’s customer-centric and value-adding specialty chemicals
businesses are well placed to benefit from improvements in this sector.
Cash management will remain a focus area, as will the pursuit of accelerated
growth through acquisitions and the realisation of benefits from strategic
value growth initiatives embarked on in the last two years.
Schalk Engelbrecht Mark Dytor
Chairman Chief Executive
Woodmead, Sandton
28 February 2017
Directors: S Engelbrecht (Chairman), GW Dempster, MA Dytor (Chief Executive),
RMW Dunne*, Z Fuphe, G Gomwe**, M Kgosana, KM Kathan (Executive), LL Mda,
KDK Mokhele, AJ Morgan, R Ramashia
*British **Zimbabwean
Group Company Secretary: EN Rapoo
Notice to shareholders
Declaration of final ordinary cash dividend no. 166
Notice is hereby given that, on Monday, 27 February 2017, the directors of
AECI declared a gross final cash dividend of 300 cents per share, in respect
of the financial year ended 31 December 2016. The dividend is payable on Monday,
10 April 2017 to holders of ordinary shares recorded in the register of the
Company at the close of business on the record date, being Friday, 7 April 2017.
The last day to trade “cum” dividend will be Tuesday, 4 April 2017 and shares
will commence trading “ex” dividend as from the commencement of business on
Wednesday, 5 April 2017.
A South African dividend withholding tax of 20% will be applicable to all
shareholders who are not either exempt or entitled to a reduction of the
withholding tax rate in terms of a relevant Double Taxation Agreement
resulting in a net dividend of 240 cents per share payable to those
shareholders who are not eligible for exemption or reduction. Application
forms for exemption or reduction may be obtained from the Transfer Secretaries
and must be returned to them on or before Tuesday, 4 April 2017.
The issued share capital at the declaration date is 121 829 083 listed ordinary
shares, 10 117 951 unlisted redeemable convertible B ordinary shares and
3 000 000 listed cumulative preference shares. The dividend has been declared
from the income reserves of the Company.
Any change of address or dividend instruction must be received on or before
Tuesday, 4 April 2017.
Share certificates may not be dematerialised or rematerialised from
Wednesday, 5 April 2017 to Friday, 7 April 2017, both days inclusive.
By order of the Board
EN Rapoo
Group Company Secretary
Woodmead, Sandton
28 February 2017
Transfer Secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Computershare Investor Services PLC
PO Box 82, The Pavilions, Bridgwater Road, Bristol BS 99 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)
1 Merchant Place, cnr Fredman Drive and Rivonia Road
Sandton, 2196
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