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:
3789008641
F1D3D90E85
(AECI
or
the
Company
or
the
Group)
VOLUNTARY
UPDATE
FOR
THE
TEN
MONTHS
ENDED
31 OCTOBER
2024
2024,
a
year
of
transition
for
AECI
Since
announcing
our
case
for
change
and
our
strategy
on
6
November
2023,
we
have
made substantial progress in executing our strategy, and we have
achieved key strategic milestones, which
include:
·
the
implementation
of
our
new
operating
model;
·
the
establishment
of
a
new
executive
leadership
team
that
is
driving
our
transformation
in
line
with
the roll-out of the new operating model;
·
the
rolling
out
of
our
leadership
compact,
culture
code
and
desired
behaviours
designed
to
foster
a
high
performance culture;
·
progressing
portfolio
optimisation
through
the
signing
of
sale
agreements
for
AECI
Animal
Health
and
AECI Much Asphalt;
·
delivering
our
2024
R800
million
EBITDA
run
rate;
·
stabilising
the
Group's
ammonia
supply
in
line
with
our
drive
for
operational
and
functional
excellence;
·
increasing
investment
in
maintenance
of
our
existing
asset
base;
and
·
delivering
on
our
globalisation
strategy by
increasing
our
mining
explosives sales
volumes
in
Central Africa
and
Asia
Pacific following the
fulfilment
of
new
Asia
Pacific
and
Rest
of
Africa
contracts.
The achievement of these key strategic milestones positions us well
to continue driving operational efficiencies,
boosting
profitability
in
the
short
to
medium
term
and
laying
a
solid
foundation
for
sustainable long-term growth.
Statement
from
the
Group
CEO
"This year has been a transformative
journey for AECI, marked by significant progress in executing our
strategy and reshaping the organisation to meet evolving market
demands. These changes have
strengthened
our
management
structure
and
team,
improved
efficiencies,
and
positioned
us
well
to
achieve
our
strategic
ambitions.
While the Group faced challenges in the Mining segment, including
declining domestic volumes and ammonia prices. Our international
contracts in Asia-Pacific have
helped mitigate these pressures.
With
the
value
delivery
from
our
strategic
initiatives
on
track
and
a
clear
vision
for the
future, I
am
confident
in
our
ability
to
deliver
lasting
value
and
to
seize
new
opportunities."
RESULTS
FOR
THE
10
MONTHS ENDED
31
OCTOBER
2024
Safety
As
of
31
October
2024,
the
Group's
Total
Recordable
Incident
Rate
(TRIR)
improved
to
0.31,
down
from
0.35
in 31 December
2023.
As
we
advance
on
our
transformation
journey,
our
safety
initiatives
remain
centered
on proactively
implementing sustainable
improvements
that
support
our
Zero Harm
strategy.
Group
Financial
Performance
Revenue
for
the
10
months
to
31
October
2024
(the
current
period)
was
down
4%
to
R29
788
million
from R31 098 million in the prior period (31
October 2023) on the back of lower ammonia prices and
reduced sales
volumes.
R'million
|
|
YTD
Oct
2024
|
YTD
Oct
2023
|
Change(%)
|
|
Revenue
|
|
29
788
|
|
31
098
|
(4%)
|
|
EBITDA*
|
|
2
518
|
|
3
072
|
(18%)
|
|
EBITDA
margin
|
|
8%
|
|
10%
|
(20%)
|
|
Profit
from
operations
|
|
1
531
|
|
2
157
|
(29%)
|
|
Profit
from
operations
margin
|
|
5%
|
|
7%
|
(29%)
|
|
Normalised
measures
|
|
|
EBITDA
(normalised)
|
|
3
273
|
|
3
297
|
(1%)
|
|
EBITDA
margin (normalised)
|
|
11%
|
|
11%
|
-
|
|
Profit
from
operations
(normalised)
|
|
2
286
|
|
2
382
|
(4%)
|
|
Profit
from
operations
margin
(normalised)
|
|
8%
|
|
8%
|
-
|
*Earnings
before
interest,
tax,
depreciation
and
amortisation
Normalised measures are used by management to assess underlying
performance and exclude one-off, non-recurring items such as
impairments, transformation project costs, and divestment-related
expenses.
These measures provide a more consistent view of operational
performance and are supplementary to IFRS measures.
To date, the Group has incurred net once off investment spend of
R755 million. The majority was primarily geared towards the
successful
achievement
of
our
2026
ambition
and
value
unlock and comprises:
·
R409
million
transformation
project
costs;
·
R110
million
in
divesture
costs;
·
R204
million
investment
spend
resulting
mainly
from
statutory
shutdowns
in
H1;
and
·
R32
million
Schirm
turnaround
spend
in
H1.
A reconciliation of normalised measures to the reported measures at
30 October 2024 is provided
below:
|
|
Reported
|
Adjustment
|
Normalised
|
|
EBITDA*
|
R2,518m
|
R755m
|
R3,273m
|
|
Profit from Operations
|
R1,531m
|
R755m
|
R2,286m
|
*Earnings
before
interest,
tax,
depreciation
and
amortization
The
prior
period
results
are
adjusted
for
R119
million
in
AECI
Schirm
turnaround costs
and
R106
million
in Employee
Share
Trust
(EST) costs.
Normalised measures are not a substitute for IFRS-compliant
measures and should be used in conjunction with these metrics for a
comprehensive assessment.
Normalised profit from operations was down 4% (R2 286 million) on
the
prior period (31 October 2023:
R2
382
million) impacted
by
higher
depreciation
driven
by
maintenance
capital
expenditure which aligns
with our
renewed
focus
on protecting and investing in
our
asset
base.
The
Group's
normalised
profit
from
operations
margin
was
in
line
with
the
prior
period
at
8%, demonstrating the
resilience
of
our
underlying businesses
underpinned
by
diverse
commodities,
regions
and
effective risk
management
processes.
This
performance
was
delivered
in
a
challenging
trading
environment
marked
by declining commodity
prices,
high interest
rates, high inflation, supply
chain
disruptions and
a
slowdown in
the South
African
macroeconomic environment and
the
mining industry.
Net working capital
of R6 456 million improved from the
prior
period (31 October 2023: R6 851
million), translating
to a
net working
capital
percentage
of
18% in
line
with
prior
period.
Net
debt
decreased
to R4 783
million
from
the
prior
period (31
October
2023:
R5
224
million),
translating
to
gearing of 38% (31
October
2023: 42%)
which
falls
within
our
guided
range
of 20% -
40%.
Management
remains committed
to
reducing
debt,
applying
stringent
net
working
capital
management
and driving
operational
and
strategic
free
cash
flow
initiatives
to
strengthen
the
balance sheet.
The Group's net
debt to
EBITDA, as
defined
in
covenant
agreements,
was
1.4
times,
remaining well
within
the loan
covenant
threshold of 2.5 times.
The
Group
recorded
a
positive
free
cash
flow
of
R82
million
(31
October
2023:
R1
470
million)
after
taking into account softer business performance, timing on working
capital outflows to support operational
requirements
and
strategy
execution.
While
these
factors
impact short-term
cash
flow,
they
are
essential
to
positioning the business
for sustained
future
performance.
Capex spend for the
period was R845 million (31 October
2023: R1
134 million).
R601 million was for maintenance
(31
October
2023: R595
million)
and R244 million (31
October
2023: R540
million)
was for
expansion.
Depreciation and amortisation were ahead of the prior period at
R950 million (31 October 2023: R879
million) due to growth capex in AECI Mining Australia and AECI
Schirm USA. Profit from operations
includes goodwill impairment of R22 million (31 October 2023: nil).
Group
impairments
and
effective
tax
rate
guidance
Our
portfolio
optimisation
programme
has
resulted
in
management
having
to
assess
the
Net
Asset Value (NAV) of AECI Animal Health and AECI Much Asphalt in
relation to their fair value less costs to sell. This has
resulted
in
the
recognition
on
R22
million
impairment on
AECI
Animal Health
in
H1
and
we
anticipate
an
impairment
on
the
disposal
of
AECI
Much
Asphalt
in
the
region
of
R600
million.
Furthermore,
an
assessment
on
AECI
Schirm
operations
is
ongoing
and
the
Group
expects
to
recognise
a
significant
impairment
on
the
business.
Both
AECI
Much
Asphalt
and
AECI
Schirm
were
acquired
in
2018
for
a
purchase
consideration
of R2 347
million and R1
997
million,
respectively. On
consolidation
AECI
recognised
goodwill
of
R1
531
million for
AECI Much
Asphalt
and R305 million for AECI Schirm. As previously reported, both
businesses experienced sustained long term operational
underperformance
which
impacted
cash
flows, profits
and
ultimately
NAV.
The
anticipated
impairments
are
expected
to
impact
profit
as well
as
the
Group's
Effective
Tax Rate. The rate is expected to be significantly higher than the
reported 54.5% at 30 June 2024.
Management are dedicating
the
necessary
resources
towards reducing
the rate into an
acceptable range going forward.
Segmental
performance
|
Revenue
|
Profit/(loss)
from
operations
|
|
|
YTD
|
YTD
|
%
|
YTD
|
YTD
|
%
|
|
R
million
|
Oct24
|
Oct23
|
Change
|
Oct24
|
Oct23
|
Change
|
|
AECI
Mining
|
15
725
|
16
513
|
(5%)
|
1
426
|
1
789
|
(20%)
|
|
AEI
Chemicals
|
7
805
|
8
110
|
(4%)
|
692
|
616
|
12%
|
|
AECI
Property
Services
and
Corporate
|
527
|
505
|
4%
|
(578)
|
(182)
|
>100%
|
|
AECI
Managed
Businesses
|
6097
|
6
414
|
(5%)
|
(7)
|
(58)
|
88%
|
|
Other
|
(366)
|
(444)
|
18%
|
(2)
|
(8)
|
75%
|
Normalised measures
|
|
Profit/(loss)
from
operations (normalised)
|
|
|
YTD
|
YTD
|
%
|
|
R
million
|
Oct24
|
Oct23
|
Change
|
|
AECI
Mining
|
1
641**
|
1
853
|
(11%)
|
|
AEI
Chemicals
|
701#
|
640
|
10%
|
|
AECI
Property
Services
and
Corporate
|
(80)##
|
(168)
|
52%
|
|
AECI
Managed
Businesses
|
26"
|
65
|
(60%)
|
|
Other
|
(2)
|
(8)
|
75%
|
**
Normalised
measure
-
adjusted
for
R204
million investment
spend
and
R11
million transformation project costs
(31 October 2023: EST cost R64
million)
#Normalised
measure - adjusted
for
R9
million
transformation project
costs,
(31
October
2023:
EST
cost R24 million)
Normalised
measure
-
adjusted for R498 million
transformation
project
and divesture
costs,
(31
October
2023:
EST cost R14 million)
"Normalised
measure - adjusted
for
AECI
Schirm
turnaround
costs
of
R32
million
and
R1
million transformation project
costs
(31
October
2023:
Turnaround
cost R119
million
and
EST
cost
R4
million)
AECI
Mining
While
there
was
a
notable
decline
in
ammonia
prices
in
the
first
half
of
2024, the
market
has
shown
signs of recovery in the fourth quarter, with prices rebounding due
to supply constraints and other market
dynamics.
The
addition
of
new
Transnet
rail
wagons
has
greatly
improved
our
Richards
Bay's
storage-to-rail
ammonia
supply
to
our
Modderfontein
site, enhancing
supply
security
and
boosting
operational
efficiency.
Revenue in the Mining segment for the 10 months ended 31 October 2024 was 5% lower compared to the
prior period. This decline reflects a combination of factors
including
lower
ammonia
prices and lower sales volumes in the South African market
following a drop in mining production volumes in gold, platinum
group metals (PGMs) and iron ore due to operational and
supply
chain
challenges
and
global
macroeconomic uncertainties.
Profit
from
operations
for
the
period,
adjusted
for the
investment
spend,
was
11
%
lower than
the
prior
period
due to a slower than anticipated recovery in South Africa. Despite the challenging
operating conditions,
normalised
profit
from
operations
margins
at
10%
were
slightly
lower than the prior
period (31
October
2023:
11%).
Our
business
continues
to
grow
globally,
with
new
contracts
in
Asia
Pacific,
where
bulk
explosives
volumes
were
up
24%
and
electronics
grew by
44%. We
also
continue
growing in
Central
Africa,
where robust
mining
activity drives growth.
AECI
Chemicals
The segment's revenue for
the period declined by
4% due to persistent challenges in the
South African manufacturing
and
industrial
sectors,
coupled
with
an
oversupply
of
key
products,
which
exerted
pressure on
pricing
and
demand.
Despite
these
headwinds,
we
delivered
a
substantial
increase
(10%)
in
profit
from
operations, driven
by
disciplined
cost
management
and
enhanced
operational
efficiencies. This
disciplined
approach contributed to an improved
operating margin of 9% (31 October
2023: 8%), underscoring the effectiveness
of
our
strategy
to
enhance
profitability
even
amid
revenue
constraints.
AECI
Managed
businesses
Revenue was down 5% compared to the prior period. The segment
recorded a normalised profit from operations
of
R26
million, down
from R65
million
as at
31
October
2023.
During
the
period, we
made
solid
progress
in
our
divestment
strategy
by
signing
sale
agreements
for AECI
Much Asphalt and AECI Animal Health, two
of the
six
targeted divestments. This is
a
crucial step in our commitment to streamline the portfolio and
focus on our core business. The subdued mergers and
acquisitions
environment
experienced this
year has
impacted
our
divestment process. We, however,
remain
committed
to a
disciplined
approach, prioritising
long-term
value
creation
as
we navigate
the divestment process in these conditions.
AECI
Property
Services
and
Corporate
This
segment
recorded
a
normalised
loss
from
operations
of
R80
million
(31
October
2023:
R168
million loss) after
accounting for
income
on sale of property.
Conclusion
In conclusion, we anticipate that the business's underlying
performance (normalised), for the full year, will be in line with
the prior year, underscoring our organisational strength. With a
clear focus on executing our strategy and transforming the Group,
we are advancing operational efficiencies and setting the stage for
sustainable growth. We remain fully committed to achieving our
strategic goals, creating long-term shareholder value, and building
a solid foundation for future success.
2024
Capital
Markets
Day
The Group will host a Capital Markets Day today, 28 November 2024 starting at 1 0H00 (SAST). We
will give a comprehensive update on the execution of our strategic
priorities and goals. The Capital Markets Day presentation is
available on the Company website:
https://investor.aeciworld.com/results-reports-presentations.php
Disclaimers
Normalised measures are used by management to assess the underlying
sustainable performance of the Group and do not replace the
measures determined in accordance with IFRS as an indicator of the
Group's performance, but rather should be used in conjunction with
the most directly comparable IFRS measures.
The financial information on which this trading statement is based
has yet to be reviewed or reported on by the Group's external
auditors.
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 do not guarantee the future developments
and results outlined therein. They depend on several factors,
involve various risks and uncertainties, and are based on
assumptions that may not prove to be accurate.
28 November 2024
Equity Sponsor
Rand Merchant Bank (a division of
FirstRand Bank Limited)
Debt Sponsor
Questco Proprietary Limited
Equity Sponsor
Rand Merchant Bank (a division of
FirstRand Bank Limited)
Debt Sponsor
Questco Proprietary Limited
