AECI
LIMITED
(Incorporated
in the Republic of South
Africa)
(Registration
Number 1924/002590/06)
Tax
reference number: 9000008608
Share
code: AFE ISIN:
ZAE000000220
Hybrid
code: AFEP ISIN: ZAE000000238
Bond
company code: AECI
LEI:
3789008641F1D3D90E85
(AECI or
the Company or the Group)
VOLUNTARY
PRE-CLOSE PERIOD UPDATE FOR THE FIVE MONTHS ENDED 31 MAY 2023
Safety and sustainability statement
As at
31 May 2023, the Group’s total
recordable injury rate (TRIR) was 0.23. Safety is a priority and we
are committed to our goal of Zero Harm. This means that employees
and management fully support all Zero Harm initiatives and believe
Zero is possible.
In 2022,
we achieved our best-ever health and safety performance since we
began tracking the related metrics. In 2023, however, there has
been an increase in the number of recordable incidents including,
and regrettably, two work-related fatalities. As part of our
response we launched a safety improvement plan focusing on two of
our Zero Harm fundamentals: accountable
leadership; and our risk-based approach.
As a Board
and the Executive Team, we extend our deepest condolences to the
families, friends and co-workers of our deceased colleagues. It is
imperative that we reverse this deterioration. These events are a
sober reminder of the importance of being laser-focused on creating
a safe working environment for all our people at all
times.
Overview of the Group’s performance for the five months to
31 May 2023
The Group
recorded strong results in the first five months of the 2023
financial year (the current period). Group revenue, at R15 351
million, increased by 22% compared to the five months ended
31 May 2022 (the prior period). EBIT
was 25% higher at R 1 008 million, notwithstanding the R 154
million loss (31 May 2022: R 57
million loss) incurred by AECI Schirm Germany. EBITDA and EBIT
margins at 10% and 7%, respectively, were in line with the prior
period, demonstrating the Group’s resilience in an operating
environment characterised by ongoing volatility and
change.
Net
working capital spend for the year to 31 May
2023, at R 1 076 million, was in part driven by increased
sales volumes in certain businesses. The higher than usual debtors,
as well as elevated inventory levels necessary to support sales
volume growth in some regions, also contributed to high working
capital levels.
The net
gearing ratio of 50% at 31 May 2023
(45% at 31 December 2022) was in line
with previous guidance and driven by relatively higher net debt,
which contributed to higher finance costs on the back of rising
interest rates. The current levels of working capital also
contributed to this increase. The Group’s net debt to EBITDA at
31 May 2023 was 1.7 times, remaining
well within the loan covenant threshold of 2.5 times. The reduction
of net debt as well as net working capital remain key focus areas
for management and the Board, with operational initiatives and
programmes introduced targeted at restoring balance sheet
strength.
The process to refinance the Group’s long-term debt was initiated
during the period, with a single coordinator appointed for all
three phases of the refinancing. These include the refreshment of
the existing Domestic Medium Term Note Programme targeted for Q3
2023. The loan market syndication is expected in Q4
2023.
Capital
expenditure (capex) investment in the current period totalled R 511
million, in line with expectations. This included the organic
growth spend related to AECI Schirm USA’s expansion project as well
as the AECI Mining Explosives solar project and MMU replacement
programme.
Operational review for the five months to 31 May 2023
AECI MINING
AECI
Mining maintained its pleasing momentum, with an improvement in
overall sales volumes and margins. Revenue of R 8 354 million was
up 35% compared to the prior period on the back of further market
share gains in South Africa,
Central Africa, East Africa and Asia
Pacific. EBIT for the segment increased by 45% to R 809
million and an EBIT margin of 10% was achieved. Lower ammonia input
prices during the period as well as the weaker ZAR/USD exchange
rate at the end of the period also contributed to
performance.
AECI
WATER
Revenue at
R 865 million was up 15% on the prior period as sales to public
water customers grew further and demand from existing customers in
the industrial sector improved. EBIT at R 99 million was
significantly up from the R 44 million achieved in the prior period
following the cost recovery lag experienced in 2022.
AECI
AGRI HEALTH (AECI SCHIRM, AECI PLANT HEALTH AND AECI ANIMAL
HEALTH)
Revenue at
R 2 879 million was up 15% on the prior period, with improved sales
in all businesses. EBIT posted a loss of R 43 million impacted by
AECI Schirm Germany’s performance. AECI Plant Health maintained the
growth trend of in-house formulated product sales volumes
(including bulk nutrition), which are at higher margins than those
for third-party traded products.
Excluding
AECI Schirm Germany, segmental revenue at R 1 993 million was 10%
higher compared to the prior period and EBIT increased by 24% to R
110 million.
AECI
SCHIRM
The
revenue of R 1 194 million was up 31% on the prior period following
sales volume growth in AECI Schirm USA. The EBIT loss of R118 million reflects
AECI Schirm Germany’s loss of R 154 million which included an R 89
million (EUR 4.3 million) in
retrenchment costs. Overall, the EUR and USD exchange rate
translation to a weaker ZAR at the end of the period boosted
performance somewhat.
The Board
approved comprehensive turnaround project for AECI Schirm Germany
is ongoing and further updates will be provided when the Group
announces the interim final results for the six months ending
30 June 2023.
AECI CHEMICALS
Revenue
for the segment at R 3 237 million was in line with the prior
period. This South Africa focused
segment was affected by lower demand from customers impacted by
loadshedding. Consequently, EBIT at R 151 million was 39% below the
prior period due to margin pressures as well as foreign exchange
losses related to product imports. EBIT margin was at 5% and cash
generation by businesses in the segment remained strong.
Commitment to B-BBEE ownership goals
As
previously communicated, the AECI Employees Share Trust (EST)
implemented in 2012 vested on 9 February
2023 with no value and was wound up. The beneficiaries did
benefit from receiving dividends over the prescribed
period.
In an
effort to preserve employee goodwill and ensure continued
productivity, the Board and the Executive Team approved an ex
gratia payment to all eligible employees to honour the spirit of
the EST. The final details as well as the impact of this will be
communicated in due course.
The Group
remains unequivocally committed to furthering AECI’s B-BBEE
ownership goals and continues to look for meaningful ways that will
enable this achievement. One option remains a relevant employee
scheme that takes into consideration key learnings from the
previous EST. In line with this, a new scheme to replace the EST is
being considered. This new scheme will aim to deliver sustainable
Black ownership shareholding in the Group and tangible empowerment
for employees. Any proposal remains subject to approval by our
Board and shareholders.
Conclusion
We expect
to release the Group's interim final results for the six months
ending 30 June 2023 on or about
Wednesday, 26 July 2023.
Shareholders
and noteholders are advised that the information contained in this
voluntary announcement has not been audited, reviewed, or reported
on by the Group’s external auditor. This update does not constitute
a forecast.
Management
will host a conference call at 15:00 CAT today to answer any
questions from investors.
29 June 2023
Equity and
Debt Sponsor
Rand Merchant Bank (A division of FirstRand Bank
Limited)
Contact
details
Group
Investor Relations
zanele.salman@aeciworld.com
Groupcommunications@aeciworld.com
Telephone:
+27 (0)11 806 8700
About
AECI
AECI is a
diversified chemicals solutions company employing 7 168 people at
more than 100 sites. We have a presence in 22 countries on six
continents. Founded in 1896 to service South Africa’s burgeoning
gold and diamond mining industries, the company was formally
established in 1924. AECI was listed on the Johannesburg Stock
Exchange in 1966. A mainstay of the economy in South Africa, over the years we have expanded
our presence and evolved our product and service offering to a
broad base of customers. Our products and services include
mine-to-mineral solutions; water treatment solutions; chemical raw
materials and related services; asphalt and bitumen for road
construction; food and beverage ingredients and commodities;
vitamin and mineral animal feed premixes; crop protection products
and plant nutrients; as well as property leasing and the provision
of utilities. Our operating businesses are structured into four key
operating business segments – AECI Mining, AECI Water, AECI Agri
Health and AECI Chemicals.