Aeci 5 1/2% Prf Regulatory News (87FZ)

22 Feb 2005 07:00

AECIGroup audited financial resultsfor the year ended 31 December 2004Specialty product and service solutions¢â‚¬¢ Headline earnings per share up 10%¢â‚¬¢ Dividends for the year up 15% to 138 cents per share¢â‚¬¢ Sales volumes and revenues up 4% and 3%¢â‚¬¢ Return on invested capital (ROIC) higher at 16%¢â‚¬¢ Gearing reduced from 40% to 24%CommentaryPerformanceHeadline earnings of 392 cents per ordinary share were 10 per cent higher thanin 2003. This result was achieved after recognising charges for restructuringequivalent to 27 cents per share. An increased final dividend of 94 cents perordinary share has been declared (78 cents in 2003) to bring the totaldividends for the year to 138 cents (120 cents in 2003) with a dividend coverof 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 centrespectively from 2003. Growth slowed in many local markets in the second halfof the year as the continued appreciation of the rand against the US dollarfurther pressured the mining and manufacturing industries. Gross margins werelargely maintained despite a surge in many raw material prices caused by globaldemand growth and high energy costs. The ongoing improvement in operating costsand margins, together with pleasing results from the property portfolio,delivered an increase in the overall trading margin to 9.4 per cent of salesfrom 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 fromimprovements in operating performance. Overall mining activity was down withreduced gold mining in South Africa partly offset by modest growth in platinumand other mining activities elsewhere in Africa. Restructuring costs of R33million were expensed in the year. Imports of state-subsidised initiators fromChina had a limited impact on some sectors of the initiating systems market inthe second half of the year.The 50:50 joint venture with Dyno Nobel ASA in electronic detonators wasimplemented in September 2004. International trials of the new generationdetonator technology are now in progress.Chemical Services continued to experience mixed trading conditions with lowerselling prices in some markets, pressured by the stronger rand, offsetting thebenefit of higher volumes. Rationalisation of manufacturing facilities andtight control of costs enabled margins to be maintained. Initiatives takenduring the year to raise the performance of certain businesses in theportfolio, particularly automotive coatings, are expected to deliver positiveresults in 2005.Dulux achieved excellent results in South Africa with higher volumes and animproved mix of its branded products. Profits from its export and Africanoperations were lower due to currency effects and unfavourable marketconditions.The restructuring programme at SANS Fibres was progressed in line with plan anda restructuring charge of R6 million was expensed in the second half of theyear. Subject to the average exchange rate not appreciating significantly from2004, the progress made on new product development, conversion efficiencies andcost reduction should enable SANS to deliver an improving performance duringthe course of 2005.The property activities of Heartland produced outstanding profits and cash flowin favourable market conditions. Substantial sales of land for residential,commercial and light industrial use were recorded at Modderfontein, SomersetWest and Umbogintwini.FinancialAn impairment charge of R13 million was raised primarily in respect of theGroup's residual investment in Botswana Ash. The exceptional charge of R23million also includes the closure of a resin plant in the automotive coatingsbusiness offset by gains arising from the sale of intellectual property toDetNet, the electronic detonator joint venture.Capital expenditure of R277 million was controlled to a level somewhat higherthan the depreciation charge for the period. Group working capital of R960million was contained to 12 per cent of sales.Net borrowings of R633 million were R386 million lower than at December 2003with property activities contributing a net cash flow of R270 million in theyear. Net financing costs of R139 million (R152 million in 2003) included R13million of non-cash mark-to-market adjustments related to interest rate hedginginstruments in compliance with AC 133. Cash interest cover improved further to7.0 times while gearing reduced to 24 per cent of shareholder funds from 40 percent at December 2003.In view of the lower level of gearing, the Board has resolved to seek approvalfrom shareholders for a general repurchase of up to 10 per cent of the ordinaryshares in the Company, subject to market conditions from time to time. Theappropriate resolution will be included in the Notice of the Annual GeneralMeeting of the Company which is to be held on 23 May 2005.PortfolioAs previously announced, the 50:50 joint venture in electronic detonationsystems with Dyno Nobel ASA of Norway became effective in September 2004, andthe acquisition of a 25.1 per cent interest in the Group's explosives businessby 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, adistributor 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.OutlookThe Group's portfolio of businesses has demonstrated its robustness and hasresponded effectively to the changing environment of relatively strongcommodity prices and rand exchange rate accompanied by low inflation andinterest rates. This environment is not expected to change significantly in theyear ahead and the progressive benefits of actions taken to align each businesswith these conditions should accordingly emerge more fully in 2005.Assuming no material strengthening of the rand exchange rate from the 2004average, and with a further contribution in prospect from property activities,management is targeting an increase in headline earnings for the full 2005financial year.Alan Pedder CBE Schalk EngelbrechtChairman Chief executiveSandton21 February 2005Income 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 239shareholders Headline earnings are derived from: Net profit attributable to ordinary 283 239shareholders 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 98Notes(1) Accounting policies are in accordance with South African Statements ofGenerally Accepted Accounting Practice, conform to International FinancialReporting Standards and are consistent with those applied in the previousfinancial year.(2) Includes foreign sales of R1 506 million (2003 - R1 483 million).(3) The transitional provision for post-employment medical aid benefits hasbeen 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 financialstatements for the year ended 31 December 2004. A copy of the auditors'unqualified report is available for inspection at the Company's registeredoffice.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 817solutions Specialty 3 302 3 197 380 372 1 459 1 490chemicals Specialty 1 595 1 714 3 22 667 761fibres 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 713Assets consist of property, plant, equipment and goodwill, inventory, accountsreceivable less accounts payable. Assets in the property segment include landrevaluation 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 021Statement 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 329and equipment Foreign currency translation reserve net of deferred (3) 18taxation Retained earnings of associates 1 1 Other 3 (1) Retained income 1 871 1 710 2 605 2 494Cash 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 642year Translation loss on cash and cash equivalents (17) (23) Cash and cash equivalents at the end of the year 362 461Other 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 223DirectorateAE Pedder CBE* (Chairman), S Engelbrecht (Chief executive), NC Axelson¢â‚¬ , CBBrayshaw,MJ Leeming, TH Nyasulu, CML Savage, LC van Vught*British ¢â‚¬ ExecutiveAECI LimitedIncorporated in the Republic of South Africa (Registration No. 1924/002590/06)Share code AFE ISIN No. ZAE000000220www.aeci.co.zaAEL LogoMining solutionsDevelopment, manufacture and supply of value-adding services, initiatingsystems and explosives to the mining, quarrying, and allied industries.Chemical Services LogoSpecialty chemicalsLargest specialty chemical operation in southern Africa, supplying a diverserange of specialties, raw materials and related services to a broad spectrum ofindustries.SANS Fibres LogoSpecialty fibresProduction, marketing and distribution of specialty nylon and polyester yarnfor local and export markets; production of PET bottle polymer.Dulux LogoDecorative coatingsA leading decorative coatings supplier in southern Africa. Dulux enjoys astrong market position as an innovator and supplier of high performanceproducts to a wide variety of customers.Heartland LogoPropertyHeartland Properties manages the realisation of land and related assets thathave become surplus to the Group's requirements.AECI LIMITEDAECI LIMITEDIncorporated in the Republic of South Africa(Registration No. 1924/002590/06)Share code AFE ISIN No. ZAE000000220NOTICE TO SHAREHOLDERSFinal ordinary dividend No. 142NOTICE IS HEREBY GIVEN that on Monday, 21 February 2005 the directors of AECILimited declared a final dividend of 94 cents per share, in respect of thefinancial year ended 31 December 2004, payable on Monday, 25 April 2005 toordinary shareholders recorded in the books of the Company at the close ofbusiness on Friday, 22 April 2005.The last day to trade cum dividend will be Friday, 15 April 2005 and shareswill commence trading ex dividend as from Monday, 18 April 2005.Any change of address or dividend instruction must be received on or beforeFriday, 15 April 2005.Share certificates may not be dematerialised or rematerialised from Monday, 18April 2005 to Friday, 22 April 2005 both days inclusive.This announcement will be mailed to shareholders on or about Tuesday, 22February 2005.By order of the BoardMJF PotgieterSecretaryWoodmead, Sandton21 February 2005Transfer secretariesComputershare Investor Services 2004 (Pty) Limited70 Marshall Street, Johannesburg, 2001andComputershare Investor Services plcPO Box 82, The Pavilions, Bridgwater RoadBristol BS 99 7NH, EnglandSponsorJP MorganEND