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
UPDATE FOR THE NINE MONTHS ENDED 30
SEPTEMBER 2023
Safety
The
Group’s Total Recordable Incident Rate (TRIR) at 30 September 2023 was 0.23 compared to 0.15 at
31 December 2022. While we have not
yet returned to the lower levels we reached in 2022, we are pleased
to report that, since the first quarter of the year, no further
major events have occurred across all key safety performance areas.
As the Group has entered a period of significant change, our safety
efforts are focussed on proactively mitigating the potential short-
and long-term effects of the change, while we continue with our
Zero Harm strategy journey.
Overview of the Group’s performance for the nine months to
30 September 2023
The Group
recorded strong results for the nine months to 30 September 2023 (the current period). Both
revenue and EBIT were up on the prior period (30 September 2022) driven by the continued solid
growth in AECI Mining. This was as a result of an increase in
mining explosives sales volumes in Southern Africa, Central Africa and Asia Pacific, the weaker ZAR/USD exchange rate
and improved profitability following the fulfilment of new
contracts in Asia Pacific and the
Rest of Africa.
Revenue
in AECI
Agri Health and AECI Water was up on
the prior period driven by higher selling prices and moderately
higher sales volumes. However, the lag in cost recovery affected
margins and is expected to correct in the last quarter of this
year.
AECI
Chemicals’ performance
was down on the prior period due to lower volumes and pricing,
resulting from a general economic downturn in South Africa and compounded by the significant
added strain of loadshedding affecting customer operations. AECI
Much Asphalt continued its recovery with sales and EBIT above the
prior period.
The Group
EBITDA and EBIT margins at 10% and 7%, respectively, were in line
with the prior period.
R million
|
Revenue
|
EBIT
|
30
Sept 23
|
30
Sept 22
|
%
Change
|
30
Sept 23
|
30
Sept 22
|
%
Change
|
AECI
Mining
|
14
896
|
12
958
|
15%
|
1
619
|
1
248
|
30%
|
AECI
Water
|
1
542
|
1
503
|
3%
|
170
|
173
|
-2%
|
AECI
Agri Health (excl Schirm)
|
3
100
|
2
961
|
5%
|
114
|
148
|
-23%
|
AECI
Chemicals (excl Much Asphalt)
|
4
167
|
4
600
|
-9%
|
281
|
342
|
-18%
|
AECI
Schirm
|
2
045
|
1
579
|
30%
|
-
201
|
-
159
|
-27%
|
AECI
Schirm Germany
|
1
534
|
1
188
|
29%
|
-
230
|
-
183
|
-26%
|
AECI
Schirm USA
|
511
|
391
|
31%
|
52
|
48
|
8%
|
AECI
Much Asphalt
|
1
894
|
1
630
|
16%
|
83
|
89
|
-7%
|
AECI
Group
|
27
654
|
25
138
|
10%
|
1
895
|
1
729
|
10%
|
Net
working capital spend at R7 143 million (30
September 2022: R7 397 million), was down 3%. Both debtors
and inventory reported marginal increases that were offset by an
increase in creditors.
The net finance costs at R425 million were up 92% from R221 million
in the prior period, significantly affecting earnings. This
increase was due to:
-
Debt related to AECI
Schirm, which continues to be loss making;
-
Continued higher working
capital level, although some improvement was achieved in the
period;
and
The net gearing ratio of 45% at 30 September
2023 was down from the previously reported 47% at
30 June 2023 following improved
working capital management and the containment of capital
expenditure. Net debt of R5 608 million at 30 September 2023 was marginally down from the R5
741 million reported on 30 June
2023.
The process to refinance the Group’s long-term debt initiated
during the current period remains underway. This includes a
successful debt capital market auction concluded in September 2023 and a loan market syndication that
will conclude in November 2023. Both
components reference the AECI Sustainability Linked Financing
Framework.
Capital expenditure (capex) investment in the current period
totalled R1 017 million (September
2022: R1 064 million) and was down 4% as the Group’s normal
maintenance program as well as the growth program linked to
recently signed contracts continued. The organic growth spend
related to AECI Schirm USA’s expansion project is now complete and
operational.
In
AECI Mining the capex was invested in four projects in Asia Pacific, solar farms in Modderfontein and
Sasolburg as well as the Mobile Manufacturing Units replacement
programme. The emulsion plant destined for the Lihir project has
been shipped from South Africa to
Papau New Guinea with operations expected in the first half of
2024.
AECI
SCHIRM
The
segment’s revenue was up compared to the prior period following
sales volume growth in both AECI Schirm USA and Germany as well as price improvements in
Germany.
The EBIT
loss at AECI Schirm Germany included R 138 million (EUR 6.9 million) in turnaround project costs
which comprised of R86 million (EUR 4.3
million) in retrenchment costs and R52 million (EUR 2.6 million) in consulting and other
fees.
The Board
approved AECI Schirm Germany comprehensive turnaround project is on
track with all milestones achieved. However, the trading
environment in the region has become even more strained and further
impacted by high energy costs and a lack of chemicals demand. This
has resulted in a downward outlook and forecast for this business,
with a recovery unlikely in the short term.
AECI
MUCH ASPHALT
Revenue
was up on the back of higher sales volumes; however EBIT was down
impacted by cost recovery delays. Extensive rains and a taxi strike
negatively affected the performance for the period. The withdrawal
of the new preferential procurement policy by SANRAL is likely to
impact the number of tenders awarded going forward, thereby
affecting the performance outlook of this business.
2023 Capital Markets Day
The Group
will be hosting a Capital Markets Day today, 6 November 2023 starting at 08H30 (SAST), where
AECI’s new strategic priorities and goals for long-term sustainable
growth will be shared. The Group Chief Executive (GCE) Holger Riemensperger will host the event and
will be joined by the Board and members of the AECI Executive Team.
Registrations for participation can be emailed to
zanele.salman@aeciworld.com.
The Capital Markets Day presentation is available on the Company
website
https://www.ftp.aeciworld-online.com/presentations/cmd-presentation-2023.pdf.
Critical
Skills Visa Application Update
The
Company, together with specialist lawyers, is supporting the GCE
Holger Riemensperger with the process of acquiring a critical
skills visa, for which he is eligible. The required SAQA
accreditation of his qualifications has recently been received. The
critical skills visa application will be submitted to the
Department of Home Affairs for processing as soon as his
professional registration, another requirement, which is currently
underway, has been completed. A critical skills visa will allow
Holger to relocate to South Africa
for work for five years. Until this is granted, Holger will
continue to lead the business from his base in Germany, visiting the country as needed for
critical meetings as is allowed by South African law.
Outlook
In the
medium term we see value unlock through the implementation of our
new strategy that will introduce initiatives and programs aimed at
driving earnings growth through a returns focused, streamlined and
resilient portfolio.
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.
Forward-looking
statements
This
update contains forward-looking statements. These statements are
based on current estimates and projections of the Executive Team,
the Board of Directors and currently available
information.
Forward-looking
statements are not guarantees of the future developments and
results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they are
based on assumptions that may not prove to be accurate.
6 November 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.