Group audited financial results to 31.12.04
February 22 2005 - 2:00AM
PR Newswire (US)
Group audited financial results to 31.12.04 AECI 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 deferred (3)
18 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 Services - (602)
Limited Proceeds from disposal of investments and businesses 58 1
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 AECI Limited Incorporated in the Republic of South
Africa (Registration No. 1924/002590/06) Share code AFE ISIN No.
ZAE000000220 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. AECI LIMITED AECI LIMITED
Incorporated in the Republic of South Africa (Registration No.
1924/002590/06) Share code AFE ISIN No. ZAE000000220 NOTICE TO
SHAREHOLDERS Final ordinary dividend No. 142 NOTICE IS HEREBY GIVEN
that on Monday, 21 February 2005 the directors of AECI Limited
declared a final dividend of 94 cents per share, in respect of the
financial year ended 31 December 2004, payable on Monday, 25 April
2005 to ordinary shareholders recorded in the books of the Company
at the close of business on Friday, 22 April 2005. The last day to
trade cum dividend will be Friday, 15 April 2005 and shares will
commence trading ex dividend as from Monday, 18 April 2005. Any
change of address or dividend instruction must be received on or
before Friday, 15 April 2005. Share certificates may not be
dematerialised or rematerialised from Monday, 18 April 2005 to
Friday, 22 April 2005 both days inclusive. This announcement will
be mailed to shareholders on or about Tuesday, 22 February 2005. By
order of the Board MJF Potgieter Secretary Woodmead, Sandton 21
February 2005 Transfer secretaries Computershare Investor Services
2004 (Pty) Limited 70 Marshall Street, Johannesburg, 2001 and
Computershare Investor Services plc PO Box 82, The Pavilions,
Bridgwater Road Bristol BS 99 7NH, England Sponsor JP Morgan END
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