TIDM87FZ
AECI Limited
("AECI" or "the Company" or "the Group")
(Incorporated in the Republic of South Africa)
Registration number 1924/002590/06
Tax reference number 9000008608
SHARE CODE: AFE
ISIN NO: ZAE000000220
REVIEWED CONDENSED CONSOLIDATED
FINANCIAL RESULTS AND FINAL CASH DIVIDEND DECLARATION
for the year ended 31 December 2012
COMMENTARY
Performance
The Group's underlying businesses delivered a creditable performance in an
extremely challenging trading environment characterised by depressed global
economic conditions, particularly in Europe, and protracted strike action in
South Africa's mining, transport and agricultural sectors. The strikes had an
adverse impact in excess of R100 million on the Group's profit from operations.
Revenue increased by 11% to R14 916 million (2011: R13 397 million), largely as
a result of the weaker exchange rate and increased selling prices to recover
higher ammonia and chemical commodity prices. Overall volumes were flat.
Headline earnings declined by 21% to R611 million (2011: R772 million), due
mainly to non-cash IFRS charges of R168 million relating to the B-BBEE
transactions concluded early in the year. Profit from operations of R1 341
million was up 2% on the R1 316 million achieved in the prior year, the trading
margin declined to 9,0% (2011: 9,8%), earnings per share were 564 cents (2011:
724 cents) and headline earnings per share were 547 cents (2011: 720 cents).
The Board has declared a final cash dividend of 185 cents per ordinary share
(2011: 179 cents).
Safety
The Group achieved its best ever safety performance in 2012, with the Total
Recordable Incident Rate ("TRIR") improving to 0,53 (2011: 0,67). The TRIR
measures the number of incidents per 200 000 hours worked. Safety is a key
performance indicator for management and it is pleasing that the sustained
efforts in this regard have had such a positive result.
Explosives
AEL Mining Services ("AEL") increased its revenue by 15% to R6 327 million
(2011: R5 494 million). Volumes improved by 5%, mainly in markets outside South
Africa. Profit from operations declined to R431 million (2011: R510 million).
In the first half-year, supply chain constraints in respect of ammonia and
plant shutdowns adversely impacted results by R50 million. In the second six
months, AEL's results were marred by strikes at customers' sites in the local
coal, gold and platinum sectors. The loss of profits due to these disruptions
was estimated at R62 million. Higher priced ammonium nitrate in Indonesia also
affected performance in the second half.
The trading margin declined to 6,8% (2011: 9,3%).
Significant growth was recorded in the coal and open pit mining sectors in
Southern Africa. Strikes in South Africa's underground narrow reef gold and
platinum mines as well as safety-related closures compounded the loss of
revenue and profit for AEL's regional business.
Good volume and revenue growth were recorded by the African business,
especially in West Africa. AEL invested in three additional bulk emulsion
explosives manufacturing plants to improve its supply capacity. The plants are
in Burkina Faso, the Democratic Republic of Congo and Egypt and these will be
commissioned in 2013.
The international business also grew, with four new contracts secured in
Indonesia - three in the coal sector and one in underground gold mining. Supply
to these will commence in 2013.
During September 2012, AECI negotiated the acquisition of a 42% shareholding in
an equity partnership with PT Black Bear Resources Indonesia ("BBRI") for US$23
million. This three-phased investment, which is subject to certain conditions,
will give AEL in-country access to a secure source of ammonium nitrate that
will assist in sustaining the business' growth in the region. BBRI is currently
erecting a 60 000 tonne per annum ammonium nitrate facility which is due to be
commissioned by mid-2013. It is anticipated that the final phase of the
acquisition will be completed by the first quarter of 2014, once the ammonium
nitrate plant achieves name plate capacity.
The Initiating Systems Automated Plant ("ISAP") produced 90 million detonators
and 24 million automated shock tube assemblies. Production ramp-up in the first
six months was disappointing and a focused intervention commenced in July to
rectify problems and enhance efficiencies. The plant is now technically
complete and the technology has been proved. Production volumes in the second
half were adversely affected by market constraints owing to the mining strikes.
Cost savings of R57 million were achieved during the year. The reduction in
personnel at the conventional plants is underway, having been delayed by the
industrial relations climate prevailing in South Africa. Section 189 notices
were issued after year-end in terms of the Labour Relations Act, No. 66 of
1995.
Capital investment, including BBRI, totalled R409 million (2011: R276 million).
R205 million of this was for expansion projects.
Specialty chemicals
The specialty chemicals cluster's revenue increased by 11% to R8 397 million
(2011: R7 558 million) due to sustained high chemical commodity prices as the
ZAR/US$ exchange rate remained weaker in the year. Volumes were marginally
negative largely due to the strike action at customers. Profit from operations
was 7% higher at R944 million (2011: R881 million). As a result of the higher
revenue value of traded commodity products at lower margins, the overall
trading margin declined to 11,2% from 11,7% in 2011.
This was a highly commendable performance in a depressed environment for the
mining and manufacturing sectors. Particularly good results were achieved by
Akulu Marchon, Chemical Initiatives, Industrial Oleochemical Products, Lake
International Technologies and Nulandis. Senmin again delivered a solid result,
notwithstanding the platinum mining industry's difficulties in respect of
strike action and some product substitution due to high guar prices.
The negative effect of the strikes on the cluster's overall profit from mining
chemicals was estimated at R45 million.
The weaker exchange rate had little effect on customers' output as export
opportunities were curtailed by an adverse global economic climate,
particularly in the Eurozone.
The acquisition of General Electric's Chemical and Monitoring Solutions
business in Africa and the Indian Ocean Islands was completed at the end of
June, for a consideration of R167 million. The acquisition has been fully
integrated into ImproChem and will enhance ImproChem's technology and service
offering for water treatment and process chemicals markets. The realisation of
the benefits are expected from 2013.
AECI also acquired 80% of Afoodable which has been merged into Lake Foods,
expanding the company's product and service offering to include liquid
marinades and sauces.
The acquisition of Cellulose Derivatives was approved by the Competition
Tribunal, with conditions, late in the year. This business is a strategic
addition to the mining chemicals portfolio.
After a detailed strategic review AECI sold its 50% interest in Resitec in
Brazil to its joint venture partner, the MeadWestvaco Corporation. Although
investment in Brazil remains part of AECI's strategy, the review concluded that
Resitec's business model and positioning was unlikely to contribute
meaningfully to AECI's strategic objectives in the region. Net proceeds of R108
million were received on the disposal and a profit on the sale of the
investment of R10 million was realised.
Capital expenditure for the cluster totalled R161 million (2011: R150 million),
most of which was invested in expansion projects.
Property
Revenue of R400 million (2011: R476 million) from Heartland was comprised
largely of income from rentals and operation services. Land sales totalled R47
million. Operating profit decreased to R34 million (2011: R99 million) and
development expenditure of R66 million (2011: R25 million) was incurred.
Although the South African property development market remains weak overall,
demand for land for industrial end uses is improving and sales are expected at
Modderfontein in 2013.
AECI continues to assess alternative models to accelerate value realisation
from land surplus to its operational requirements.
Specialty fibres
SANS Technical Fibers ("STF") delivered revenue of R339 million (2011: R333
million) and profit from operations declined to R40 million (2011: R53
million).
Although performance was tempered by depressed global economic conditions for
most of the year, good results were delivered by STF's industrial business and
sales to the automotive sector exceeded expectations as the US economy showed a
level of recovery.
STF's results were impacted by high raw material prices and uncompetitive
two-stage technology. During 2013 new single-stage technology will be installed
and this R80 million investment will improve global competitiveness and product
diversity.
STF's results will be reported as part of the specialty chemicals cluster in
future. AECI continues to evaluate this business' long-term strategic fit in
the Group.
Financial
Capital expenditure totalled R557 million for the year (2011: R475 million),
with R265 million of this committed to expansion projects at customer sites for
explosives and mining chemicals. Cash was well maintained and gearing decreased
to 32% of shareholders' interest (2011: 36%) despite an increase in working
capital. Net working capital was 18,0% of revenue (2011: 17,7%) which reflects
the longer working capital trade cycles in operations outside South Africa.
The higher effective income tax rate of 35% related primarily to the
non-deductibility of the B-BBEE transaction IFRS 2 charges of R168 million and
the effects of tax on higher profits in geographies outside South Africa.
Cash interest cover improved to 8,2 times (2011: 7,7 times). Net interest paid
decreased to R205 million (2011: R226 million) as lower interest rates offset
the longer working capital trade cycle. No interest was capitalised in the year
(2011: R17 million).
Directorate
Fani Titi retired as a Non-executive Director and Chairman of the Board at the
Annual General Meeting in May. He was succeeded as Chairman by Schalk
Engelbrecht.
Graham Edwards, Chief Executive, will retire from the Board on 28 February
2013. Mark Dytor, who was appointed to the Board in an Executive capacity on 2
January 2013, will assume the role of Chief Executive on 1 March 2013.
The Board thanks both Fani and Graham for their dedicated service to the
Company.
Strategic focus and outlook
Management's focus in 2013 will be on improving internal efficiencies,
including working capital, and on optimising its operating platforms. At the
same time, AECI will continue to pursue its growth strategy in the rest of
Africa and further afield.
A number of factors external to the Company could affect its performance in the
coming year. The platinum sector is likely to undergo restructuring. This could
result in a contraction in South Africa's platinum mining industry which would
impact AEL and Senmin. The industrial relations climate in South Africa could
also be a determinant for AECI's local customers and operations.
Mining volumes in other countries, where Group businesses have an established
presence, are expected to increase in line with growth in emerging markets.
Manufacturing growth in South Africa is expected to continue, albeit at a slow
pace, owing to the prevailing global and local economic environments.
Schalk Engelbrecht Graham Edwards
Chairman Chief Executive
Woodmead, Sandton
26 February 2013
NOTICE TO SHAREHOLDERS
Final ordinary cash dividend No. 158
Notice is hereby given that on Monday, 25 February 2013 the Directors of AECI
declared a gross final cash dividend of 185 cents per share, in respect of the
financial year ended 31 December 2012, payable on Monday, 15 April 2013 to
ordinary shareholders recorded in the books of the Company at the close of
business on Friday, 12 April 2013.
The last day to trade cum dividend will be Friday, 5 April 2013 and shares will
commence trading ex dividend as from Monday, 8 April 2013.
A South African dividend withholding tax of 15% 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 157,25 cents per share to those shareholders who are not
exempt. Application forms for exemption or reduction may be obtained from the
Transfer Secretaries and must be returned to them on or before Friday, 5 April
2013.
The issued share capital at the declaration date is 128 241 140 listed ordinary
shares and 10 117 951 unlisted redeemable convertible B ordinary shares. The
dividend has been declared from the income reserves of the Company. No
Secondary Tax on Companies' credits are available to be used.
Any change of address or dividend instruction must be received on or before
Friday, 5 April 2013.
Share certificates may not be dematerialised or rematerialised from Monday, 8
April 2013 to Friday, 12 April 2013, both days inclusive.
By order of the Board
EN Rapoo
Company Secretary
Woodmead, Sandton
26 February 2013
Directors: S Engelbrecht (Chairman), GN Edwards (Chief Executive)+, RMW Dunne*,
MA Dytor|, Z Fuphe,
KM Kathan (Financial Director)|, MJ Leeming, LL Mda, AJ Morgan, LM Nyhonyha, R
Ramashia.
+Executive *British
Company Secretary: EN Rapoo
Transfer Secretaries
Computershare Investor Services Computershare Investor Services plc
Proprietary Limited
70 Marshall Street PO Box 82
Johannesburg The Pavilions
2001 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)
Income statement
%
R millions change 2012 2011
Revenue (2) +11 14 916 13 397
Net operating costs (13 575) (12 081)
Profit from operations +2 1 341 1 316
CST share-based payment (3) (138) -
Net income from pension fund employer
surplus accounts 8 29
Net (loss)/income from plan assets for
post-retirement medical aid liabilities (6) 5
1 205 1 350
Interest expense (4) (262) (234)
Interest received 40 27
Share of profit of associate companies * 1
Profit before tax 983 1 144
Income tax expense (5) (345) (306)
Profit for the year 638 838
Profit for the year attributable to:
- ordinary shareholders 630 777
- preference shareholders 2 2
- non-controlling interest 6 59
638 838
Headline earnings are derived from:
Profit attributable to ordinary 630 777
shareholders
Impairment of goodwill 9 -
Impairment of property, plant and 3 -
equipment
Profit on disposal of businesses, joint
ventures and
subsidiaries (15) (1)
Profit on disposal of property, plant
and equipment (18) (7)
Tax effects of the above items 2 3
Headline earnings 611 772
Per ordinary share (cents):
Headline earnings -24 547 720
Diluted headline earnings 521 719
Basic earnings -22 564 724
Diluted basic earnings 537 723
Dividends declared +3 185 179
Dividends paid 257 213
*Nominal amount
STATEMENT OF COMPREHENSIVE INCOME
R millions 2012 2011
Profit for the year 638 838
Other comprehensive income net of tax:
Foreign currency translation differences net of 41 182
deferred tax
Total comprehensive income for the year 679 1 020
Total comprehensive income attributable to:
- ordinary shareholders 672 954
- preference shareholders 2 2
- non-controlling interest 5 64
679 1 020
STATEMENT OF CHANGES IN EQUITY
R millions 2012 2011
Total comprehensive income for the year 679 1 020
Dividends paid (297) (237)
Acquisition of subsidiary 1 (37)
Issue of ordinary shares:
- at par value (3) 4 -
- at market value (6) 393 -
Net effect of acquisition of non-controlling (393) -
interest to equity (6)
Share-based payment reserve 30 -
Transfer to retained earnings for CST share-based 138 -
payment
Equity at the beginning of the year 5 214 4 468
Equity at the end of the year 5 769 5 214
Made up as follows:
Ordinary share capital 116 107
Share premium (6) 496 108
Reserves 406 344
Property revaluation surplus 237 237
Foreign currency translation reserve 143 101
Share-based payment reserve 30 -
Other (4) 6
Retained earnings (6) 4 697 4 439
Preference share capital 6 6
Non-controlling interest (6) 48 210
5 769 5 214
ORDINARY SHARES IN ISSUE
Millions 2012 2011
Listed ordinary shares
At the beginning of the year 119,1 119,1
Issued during the period for CST and KTH 9,1 -
transactions (3) (6)
At the end of the year 128,2 119,1
Treasury shares held by subsidiary company (11,9) (11,9)
116,3 107,2
Unlisted redeemable convertible ordinary shares
At the beginning of the year - -
Issued during the period for EST transaction (3) 10,1 -
At the end of the year 10,1 -
Treasury shares held by consolidated EST (3) (10,1) -
- -
Ordinary shares in issue 116,3 107,2
RECONCILIATION OF WEIGHTED AVERAGE NUMBER OF SHARES
Millions 2012 2011
Weighted average number of ordinary shares at the 119,1 119,1
beginning of the year
Weighted average number of ordinary shares issued 17,4 -
during the year
Weighted average number of ordinary shares held by (9,0) -
consolidated EST
Weighted average number of contingently returnable
ordinary shares
held by CST (3,9) -
Weighted average number of shares held by (11,9) (11,9)
consolidated subsidiary
Weighted average number of ordinary shares for 111,7 107,2
basic earnings per share
Dilutive adjustment for potential ordinary shares 5,6 -
Dilutive adjustment for share options under the
AECI share option
scheme(7) 0,1 0,2
Weighted average number of ordinary shares for
diluted earnings
per share 117,4 107,4
STATEMENT OF FINANCIAL POSITION
R millions 2012 2011
Assets
Non-current assets 6 314 6 024
Property, plant and equipment 3 733 3 721
Investment property 445 436
Intangible assets 214 77
Goodwill 1 124 1 078
Pension fund employer surplus accounts 267 259
Investments 86 22
Loans receivable 11 24
Deferred tax 434 407
Current assets 6 752 6 433
Inventories 2 867 2 584
Accounts receivable 2 737 2 772
Assets classified as held for sale - 16
Cash 1 148 1 061
Total assets 13 066 12 457
Equity and liabilities
Ordinary capital and reserves 5 715 4 998
Non-controlling interest 48 210
Preference share capital 6 6
Total equity 5 769 5 214
Non-current liabilities 2 488 2 702
Deferred tax 232 179
Non-current borrowings 1 251 1 507
Non-current provisions 1 005 1 016
Current liabilities 4 809 4 541
Accounts payable 2 912 2 987
Current borrowings 1 738 1 421
Tax payable 159 133
Total equity and liabilities 13 066 12 457
STATEMENT OF CASH FLOWS
R millions 2012 2011
Cash generated by operations 1 867 1 883
Interest paid (245) (253)
Interest received 40 27
Income tax paid (308) (319)
Changes in working capital (326) (598)
Expenditure relating to non-current provisions (98) (78)
Cash available from operating activities 930 662
Dividends paid (297) (237)
Cash flows from operating activities 633 425
Cash flows from investing activities (645) (615)
Net investment expenditure (144) (173)
Net capital expenditure (501) (442)
Net cash utilised (12) (190)
Cash flows from financing activities 75 424
Non-current loans receivable 14 (3)
Borrowings 61 427
Increase in cash 63 234
Cash at the beginning of the year 1 061 732
Translation gain on cash 24 95
Cash at the end of the year 1 148 1 061
OTHER SALIENT FEATURES
R millions 2012 2011
Capital expenditure(4) 557 475
- expansion 265 182
- replacement 292 293
Capital commitments 225 360
- contracted for 73 116
- not contracted for 152 244
Future rentals on property, plant and equipment 178 173
leased
- payable within one year 58 43
- payable thereafter 120 130
Net borrowings 1 841 1 867
Gearing (%)* 32 36
Current assets to current liabilities 1,4 1,4
Net asset value per ordinary share (cents) 4 912 4 660
Depreciation and amortisation 475 395
ZAR/US$ closing exchange rate (rand) 8,49 8,15
ZAR/US$ average exchange rate (rand) 8,20 7,25
Per ordinary share (cents)
(excluding B-BBEE transactions):
- headline earnings 697 720
- diluted headline earnings 664 719
* Borrowings less cash as a percentage of total equity.
INDUSTRY SEGMENT ANALYSIS
Revenue Profit from Net assets
operations
R millions 2012 2011 2012 2011 2012 2011
Explosives 6 327 5 494 431 510 2 837 2 569
Specialty 8 397 7 558 944 881 4 470 4 048
chemicals
Property 400 476 34 99 808 762
Specialty 339 333 40 53 187 175
fibres (USA)
Group services (547) (464) (78) (227) (94) 143
and
inter-segment
EST (30) -
share-based
payment (3)
14 916 13 397 1 341 1 316 8 208 7 697
Net assets consist of property, plant, equipment, investment property,
intangible assets, goodwill, inventory, accounts receivable and assets
classified as held for sale less accounts payable.
Notes
(1) Basis of preparation and accounting policies: The reviewed condensed
consolidated financial results are prepared in accordance with the recognition
and measurement requirements of International Financial Reporting Standards
("IFRS"), 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 the requirements of the
Companies Act of South Africa, No. 71 of 2008, 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. The preparation of these
reviewed condensed consolidated financial results for the year ended 31
December 2012 was supervised by the Financial Director, Mr KM Kathan CA(SA) AMP
(Harvard). The condensed consolidated financial results have been reviewed by
the Company's auditors, KPMG, who have issued an unqualified review opinion. A
copy of the review opinion is obtainable from AECI's registered office.
(2) Includes foreign and export revenue of R4 527 million (2011: R3 859
million).
(3) Share-based payments
CST share-based payment: The 3,5% AECI Community Education and Development
Trust ("CST") transaction became effective on 13 February 2012. The CST
subscribed for 4 426 604 ordinary shares at par value in the Company. The
shares vested immediately and a share-based payment expense of R138 million was
recognised in full in the income statement.
These shares are contingently returnable and, as a result, are excluded from
EPS and HEPS.
EST share-based payment: The 8% AECI Employees Share Trust ("EST") transaction
took effect on 9 February 2012, with the EST subscribing for 10 117 951
unlisted B ordinary shares of the Company. The dividend payable on these shares
may not exceed that for ordinary shares. Employees of the Group were allocated
7 569 669 of these shares with a grant date of 30 April 2012. The total cost is
estimated at R143 million of which R30 million was recognised in the income
statement in the year ended 31 December 2012. The remainder of the expense will
be recognised in future periods over the respective vesting periods.
(4) No interest was capitalised in the year (2011: R17 million).
(5) The higher effective income tax rate of 35% related primarily to the
non-deductibility of the B-BBEE transaction IFRS 2 charges of R168 million and
the effects of tax on higher profits in geographies outside South Africa.
(6) The Kagiso Tiso Holdings Proprietary Limited (RF) ("KTH") transaction took
effect on 18 January 2012 and involved the purchase by AECI of the 25,1%
interest held in AEL Holdco Limited by a KTH-led consortium in exchange for 4
678 667 ordinary shares in AECI. The transaction is recognised as a change in
ownership interest in terms of IAS 27 and the carrying amounts of controlling
and non-controlling interests have been adjusted. The transaction has been
measured at the fair value of the consideration paid and is based on the
closing price of R83,98 of the Company's shares on 17 January 2012. The shares
issued have been recognised in equity, with R5 million allocated to share
capital and R388 million allocated to share premium. The non-controlling
interest has been reduced by the carrying amount of R172 million, with the
balance of R221 million recognised directly in retained earnings.
(7) 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.
(8) The reviewed condensed consolidated financial statements do not include all
of the disclosures required for full annual financial statements and should be
read in conjunction with the consolidated annual financial statements for the
year ended 31 December 2011.
(9) 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.
END
Aeci 5 1/2% Prf (LSE:87FZ)
Historical Stock Chart
From Jun 2024 to Jul 2024
Aeci 5 1/2% Prf (LSE:87FZ)
Historical Stock Chart
From Jul 2023 to Jul 2024
