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

AECI LIMITED(Incorporated in the Republic of South Africa)Registration number 1924/002590/06Tax reference number 9000008608("AECI" or "the Group" or "the Company")Share code: AFEISIN Number: ZAE000000220 Condensed consolidated unaudited interim financial results and cashdividend declaration for the half-year ended 30 June 2014 Safety performance improvement trend maintained TRIR 0,48161c HEPS impact of platinum mining sector strikesBulk property transaction contributed 192c to HEPSRevenue +11% to R8bnProfit from operations +33% to R814mHeadline earnings +9% to R436mEPS +51% to 537cHEPS +10% to 390c Income statement 2014 2013 2013 % First-half First-half YearR millions change Unaudited Unaudited AuditedRevenue(2)(3) +11 7 987 7 223 15 942Net operating costs (7 173) (6 611) (14 544)Profit from operations(3) +33 814 612 1 398Interest expense (99) (97) (211)Interest received 25 16 37Share of profit of equity-accounted investees, net of tax 14 20 43Profit before tax 754 551 1 267Tax expense (146) (150) (313)Profit for the period 608 401 954Profit for the period attributable to:- Ordinary shareholders 601 398 946- Preference shareholders 1 1 3- Non-controlling interest 6 2 5 608 401 954Headline earnings are derived from:Profit attributable to ordinaryshareholders 601 398 946Impairment of goodwill - - 5Impairment of property, plantand equipment - - 9Impairment of assets held forsale(3) 21 - -Profit on partial disposal ofnet investment in foreignoperation - - (38)Surplus on derecognition ofbusinesses, joint ventures andsubsidiaries disposed of - - (3)(Surplus)/loss on disposal ofproperty, plant and equipment (3) 1 (49)Surplus on disposal of assetsheld for sale(3) (202) - -Tax effects of the above items 19 * 15Headline earnings 436 399 885Per ordinary share (cents):Headline earnings +10 390 356 791Diluted headline earnings 368 333 740Basic earnings +51 537 356 845Diluted basic earnings 508 332 791Ordinary dividends declared +10 115 105 210Ordinary dividends paid 210 185 290* Nominal amount. Statement of comprehensive income 2014 2013 2013 First-half First-half YearR millions Unaudited Unaudited AuditedProfit for the period 608 401 954Other comprehensive income net of tax:Items that may be reclassifiedsubsequently to profit or loss:Foreign currency translationdifferences 21 303 362Items that may not be reclassifiedsubsequently to profit or loss:Remeasurement of defined-benefitobligations 3 (4) 86Total comprehensive income for theperiod 632 700 1 402Total comprehensive income attributable to:- Ordinary shareholders 629 697 1 389- Preference shareholders 1 1 3- Non-controlling interest 2 2 10 632 700 1 402 Statement of changes in equity 2014 2013 2013 First-half First-half YearR millions Unaudited Unaudited AuditedTotal comprehensive income for theperiod 632 700 1 402Dividends paid (242) (213) (336)Business combinations and change inownership percentage (6) (2) 7Share-based payment reserve 43 17 47Equity at the beginning of the period 6 877 5 757 5 757Equity at the end of the period 7 304 6 259 6 877Made up as follows:Ordinary share capital 116 116 116Share premium 496 496 496Reserves 644 726 813Property revaluation surplus - 237 237Foreign currency translation reserve 525 442 500Share-based payment reserve 119 46 76Other - 1 -Retained earnings 5 994 4 880 5 394Non-controlling interest 48 35 52Preference share capital 6 6 6 7 304 6 259 6 877 Statement of cash flows 2014 2013 2013 First-half First-half YearR millions Unaudited Unaudited AuditedCash generated by operations(3) 1 050 1 044 2 261Dividends received - 7 62Interest paid (99) (103) (212)Interest received 25 16 37Tax paid (279) (202) (464)Changes in working capital 72 (573) (426)Expenditure relating to defined-benefitcosts (51) (52) (104)Expenditure relating to non-currentprovisions and employee benefits (36) (17) (32)Cash available from operatingactivities 682 120 1 122Dividends paid (242) (213) (336)Cash flows from operating activities 440 (93) 786Cash flows from investing activities (309) (261) (772)Net investment expenditure (79) (52) (239)Pre-payment for business combination(4) (400) - -Proceeds on disposal of capitalproperty assets(3) 507 - -Net capital expenditure (337) (209) (533)Net cash generated/(utilised) beforefinancing activities 131 (354) 14Cash flows from financing activities (509) 318 (28)Non-current loans receivable 6 3 1Borrowings (515) 315 (29)Decrease in cash (378) (36) (14)Cash at the beginning of the period 1 219 1 069 1 069Translation gain on cash 13 102 164Cash at the end of the period 854 1 135 1 219 Statement of financial position 2014 2013 2013 30 Jun 30 Jun 31 DecR millions Unaudited Unaudited AuditedAssetsNon-current assets 6 662 6 553 6 472Property, plant and equipment 3 845 3 677 3 756Investment property 184 480 173Intangible assets 136 148 143Goodwill 1 123 1 089 1 123Pension fund employer surplus accounts 214 247 231Investments in associates 251 53 217Investments in joint arrangements 321 278 301Other investments 56 136 50Deferred tax 529 437 468Loans receivable 3 8 10Current assets 7 180 6 760 7 921Inventories(3) 2 976 2 979 3 090Accounts receivable 2 722 2 635 3 326Pre-payment for business combination(4) 400 - -Loans to joint arrangements 21 11 -Assets classified as held for sale(3) 207 - 286Cash 854 1 135 1 219Total assets 13 842 13 313 14 393Equity and liabilitiesOrdinary capital and reserves 7 250 6 218 6 819Non-controlling interest 48 35 52Preference share capital 6 6 6Total equity 7 304 6 259 6 877Non-current liabilities 2 142 2 844 2 214Deferred tax 190 210 168Non-current borrowings 1 002 1 626 1 099Non-current provisions and employeebenefits 950 1 008 947Current liabilities 4 396 4 210 5 302Accounts payable(3) 2 927 2 418 3 284Current borrowings 1 443 1 678 1 861Loans from joint arrangements 17 7 21Tax payable 9 107 136Total equity and liabilities 13 842 13 313 14 393 Reconciliation of weighted average number of shares 2014 2013 2013 First-half First-half YearMillions Unaudited Unaudited AuditedWeighted average number of ordinaryshares for basic earnings per share 111,9 111,9 111,9Dilutive adjustment for potentialordinary shares 6,5 7,9 7,7Weighted average number of ordinaryshares for diluted earnings per share 118,4 119,8 119,6 Other salient features 2014 2013 2013 First-half First-half YearR millions Unaudited Unaudited AuditedCapital expenditure 343 216 633- expansion 142 104 293- replacement 201 112 340Capital commitments(4) 434 476 746- contracted for 131 161 87- not contracted for 303 315 659Future rentals on property, plant andequipment leased 244 258 199- payable within one year 75 64 71- payable thereafter 169 194 128Net borrowings 1 591 2 169 1 741Gearing (%)* 22 35 25Current assets to current liabilities 1,6 1,6 1,5Net asset value per ordinary share(cents) 6 234 5 347 5 864Depreciation and amortisation 258 258 537ZAR/US$ closing exchange rate (rand) 10,63 9,94 10,50ZAR/US$ average exchange rate (rand) 10,70 9,20 9,63* Borrowings less cash as a percentage oftotal equity. Industry segment analysis 2014 2013 2014 2013 2014 2013 First-half First-half First-half Unaudited Unaudited Unaudited Revenue Profit from Net assets operationsR millionsExplosives 3 553 3 551 120 312 3 299 3 181Specialty chemicals 4 062 3 667 397 389 5 153 4 597Property(3) 652 278 447 50 322 811Group services and inter-segment (280) (273) (150) (139) (108) 1 7 987 7 223 814 612 8 666 8 590 Net assets consist of property, plant, equipment, investment property,intangible assets, goodwill, inventories, accounts receivable, pre-paymentfor business combination, assets classified as held for sale less accountspayable. Notes(1) Basis of preparation and accounting policiesThe condensed consolidated financial results are prepared in accordancewith IAS 34 Interim Financial Reporting and South African Institute ofChartered Accountants Financial Reporting Guidelines as issued by theAccounting Practices Committee and Financial Reporting Pronouncements asissued by the Financial Reporting Standards Council. The accountingpolicies applied in the preparation of the condensed consolidatedfinancial results are in terms of IFRS and are consistent with thoseapplied in the previous consolidated financial statements. The preparationof these condensed consolidated financial results for the half-year ended30 June 2014 was supervised by the Financial Director, Mr KM Kathan CA(SA)AMP (Harvard). The condensed consolidated financial results have not beenaudited or reviewed by the Company's auditor, KPMG Inc. (2) Includes foreign and export revenue of R2 502 million (2013: R2 348million). (3) The AECI Group agreed to dispose of the bulk of its surplus propertyassets, at Modderfontein, to Shanghai Zendai Property Limited in November2013. In March 2014, all conditions precedent to the transaction were met.Accordingly, the transaction became effective on 20 March 2014 and AECIreceived cash in the amount of R1 117 million (including VAT) in fullsettlement of the transaction. The amount comprised R54 million (includingVAT) in reimbursement for development costs incurred after the purchaseprice was set; R1,5 million in interest on the reimbursement amount, andthe purchase price of R1 061 million (including VAT). The VAT amounts paidwere R7 million and R131 million, respectively. R1,5 million wasrecognised as interest received with the balance of the amount (R978million) recognised in accordance with the Group's accounting policies. At 30 June 2014, R462 million was recognised in revenue in the propertysegment. R248 million of the full purchase price was recognised as aprofit on disposal, together with the related costs for capital landassets transferred. R13 million of the R54 million reimbursement was alsorecognised together with actual expenditure in the same amount. A furtherR221 million of the purchase price and R34 million of the reimbursementamount were recognised in the statement of financial position as cashreceived in advance, as the criteria for recognition of the disposalof these assets have not been met. In the statement of cash flows revenue of R462 million, R9 million of thereimbursement amount and related costs were included in cash generated byoperations. However, the capital profit was excluded and the proceeds ofR507 million (including R38 million for development expenditure) wereincluded as a cash inflow under investing activities. A net profit of R421 million was included in profit from operations of theproperty segment. A further profit of R47 million will be recognised whenthe remaining property assets are transferred. A portion of the R421million profit was capital and R202 million was deducted from headlineearnings. The property segment's profit from operations also included animpairment of R21 million recognised in respect of a portion of land thathas not yet been transferred and is still classified as held for sale. Inaccordance with IFRS 5, this impairment was recognised because itscarrying amount exceeds its selling price. Property assets included in assets classified as held for sale at 30 June2014 amounted to R207 million. Cash of R255 million received for thisproperty was included in accounts payable as income received in advance.Both these amounts will be recognised as a net profit on disposal whenthey are transferred to Shanghai Zendai Property Limited. (4) AECI and Clariant Southern Africa Proprietary Limited reachedagreement for AECI's wholly-owned subsidiary ImproChem Proprietary Limitedto acquire Clariant's water treatment business in Africa and its SouthAfrican assets. This was included in capital commitments at 31 December2013. R400 million was paid to Clariant as at 30 June 2014 and recognisedas a pre-payment for the business combination which became effective on1 July 2014. (5) The condensed consolidated financial results do not include all of thedisclosures required for full annual financial statements and should beread in conjunction with the consolidated annual financial statements forthe year ended 31 December 2013. CommentaryPerformanceThe first six months of 2014 were challenging for South Africa's economyas a whole and for the platinum mining sector in particular. This had anegative effect on AECI's results since revenue from customers in thissector is significant as the Group pursues its mining solutions growthstrategy. AECI nevertheless improved its year-on-year performance. Key in thisregard was the completion of the bulk surplus property sale atModderfontein. A robust result from the specialty chemicals cluster alsoassisted. Revenue increased by 11% to R7 987 million (2013: R7 223 million). Revenuegenerated outside South Africa was R2 502 million, 31% of total revenue.Profit from operations increased by 33% to R814 million compared to R612million in the prior corresponding period. Headline earnings improved by9% to R436 million (2013: R399 million). On 20 March 2014, the bulk property sale transaction at Modderfonteinbecame effective and thus cash of R1 061 million (including VAT) wasreceived. Profit from operations relating to the transaction was R421million before tax. This was included in earnings per share ("EPS"). Owingto the nature of the property sold, R240 million of the R421 million wasrecognised in headline earnings per share ("HEPS"). EPS was 537 cents (2013: 356 cents), 51% higher than in 2013, and HEPSimproved by 10% to 390 cents (2013: 356 cents). The Board has declared an interim cash dividend of 115 cents per ordinaryshare (2013: 105 cents), a 10% year-on-year increase. SafetyAECI's 12-month rolling average Total Recordable Injury Rate ("TRIR") was0,48 (2013: 0,60). An exceptional performance from AEL Mining Services("AEL") underpinned the improvement. The TRIR measures the number ofincidents per 200 000 hours worked. ExplosivesRevenue from AEL was flat at R3 553 million (2013: R3 551 million). Thenegative effects of the five-month platinum mining sector strike onvolumes and profit from operations were partly offset by a weaker ZAR/US$exchange rate. The operating margin declined to 3,4% (2013: 8,8%). Explosives volumes to mining customers increased by 1% while those forinitiating systems decreased by 39%. Profit from operations declined by62% to R120 million (2013: R312 million). It is estimated that R150million of the decline was due to the direct impact of the strikes. Inaddition, a further R62 million provision was made for the plannedrestructuring of AEL's head office at Modderfontein. The initiating systems optimisation project is nearing completion and thetargeted savings of R20 million and R60 million in 2014 and 2015,respectively, are on track. In spite of the strikes, the Southern African business performed solidlyand explosives volumes improved by 1,2%. This was largely attributable togrowth in the iron ore mining sector. High rainfall in the first quarter of the year curtailed the performanceof the surface coal mining sector. Explosives volumes in the rest of Africa grew by 5,1%. There was a strongperformance in Central Africa's copper belt. However, volumes were lowerin West Africa where customers mined higher-grade ores, at a lower cost,owing to the gold price decline. Volumes in AEL's Indonesian international business were restricted by poorthermal coal prices which led to the closure of some smaller thermal coalmines in the region. The performance of Kaltim Prima Coal ("KPC"), thelargest customer in Indonesia, remained solid. Overall volumes declined by7,4%. AEL has been invited by some of its customers to partner with them in theAustralian market. An AECI office has been established in Brisbane and abulk emulsion plant is being shipped to a site in Bajool, Queensland. Itis anticipated that trial blasts will be conducted before year-end. The equity investment in PT Black Bear Resources Indonesia ("BBRI"), forUS$23 million, was completed. BBRI's plant was successfully commissionedin February 2014 and qualified ammonium nitrate solution is being producedand supplied to KPC. Capital investment in the half-year was R225 million, of which R168million was replacement capital. Major projects included a statutoryshutdown of the No. 11 Nitric Acid Plant, a boiler replacement, expansionof the ammonia offloading facility and expenditure related to the newdetonator campus. These investments at Modderfontein will enhance AEL'soperations going forward. Specialty chemicalsThe specialty chemicals cluster delivered a pleasing result. Revenueincreased by 11% to R4 062 million (2013: R3 667 million) thanks to 5%volume growth and the effects of the ZAR/US$ exchange rate. The volumedecline in Senmin, due to the strikes, was offset by an increase in tradedvolumes in Chemical Initiatives and Nulandis. The strikes also had aneffect on the profit from operations and the trading margin of the clusteras a whole. It is estimated that R100 million in profit from operationswas lost. Nonetheless, the cluster achieved a 2% improvement, with profitfrom operations of R397 million (2013: R389 million). The operating marginwas 9,8% compared to 10,6% last year. There were excellent performances from Chemical Initiatives, ImproChem,Lake Specialties and Nulandis. The portfolio restructuring initiativesimplemented in 2013 and the successful integration of acquisitionsdelivered the expected savings and business enhancements. The acquisition of Clariant's African water treatment business("Clariant"), announced in February 2014, was finalised in June for a cashconsideration of R400 million. The business has been integrated intoImproChem and its financial results will be consolidated from July 2014.The acquisition is in line with the Group's strategy to grow its Africanfootprint in the water solutions sector. Capital expenditure for the cluster totalled R115 million (2013: R93million) of which R84 million was for expansion. Key projects included anew blending plant at SA Premix, in Burgersdorp, installation of a newreactor at ImproChem, Umbogintwini and completion of SANS TechnicalFibers' ("STF") technology conversion project in the USA. STF's singlestage equipment was commissioned in March 2014 and is ramping up. PropertyFollowing the Shanghai Zendai transaction, the property business wasrebranded as Acacia Real Estate ("Acacia"). The segment's results weredriven by the bulk property sale at Modderfontein. This transactioncontributed R421 million of the R447 million (2013: R50 million) in profitfrom operations. The transaction became effective on 20 March 2014, when the requisiteproperties were transferred to the purchaser and R1 061 million (inclusiveof VAT) was received by the Group. In total, R468 million in profit fromoperations will be recognised from the transaction, primarily whenproperty transfers to the purchaser have been concluded. For the sixmonths ended 30 June 2014, profits were recognised as already detailed. Itis likely that the balance of the profits will be recognised in 2015. The rest of Acacia's revenue and profit from operations were generated bythe leasing and services businesses that are still owned by the Group inModderfontein and Umbogintwini. The Group continues to evaluate alternatives for the disposal of itssurplus land and assets at Somerset West. A bulk disposal remains thepreferred solution and increased interest from potential purchasers hasbeen noted. Cash utilisationCapital expenditure totalled R343 million for the period (2013: R216million) with R201 million of this invested in replacement projects. Mostof the expenditure was at AEL, as already outlined. Gearing was at 22%from 25% in December 2013. Gearing was impacted by capital spend, theacquisition of Clariant, the Modderfontein transaction and the platinummining sector strikes. Net working capital improved to 19,0% of revenue(2013: 21,8%) although inventory levels increased due to diminishedofftake during the strikes. Cash interest cover improved to 13,4 times (2013: 9,3 times). Net interestpaid decreased to R74 million (2013: R87 million) as the proceeds from theproperty sale improved the debt position. DirectorateAs announced in February, Mike Leeming retired from the Board on 2 June2014 after 12 years' service. The Board thanks him for his input andguidance. Richard Dunne succeeded Mike as Chairman of the Audit Committee.Tak Hiemstra was appointed as a Non-executive Director on the Company'sBoard with effect from 1 May 2014. AECI welcomes him and looks forward tohis contribution in years to come. OutlookThe outlook for the global economy and commodity prices is stilluncertain, and growth in the South African economy is expected to remainweak for the rest of 2014. Nonetheless, AECI's growth potential in South Africa's iron ore and coalmining sectors is positive. In platinum mining, uncertainty remainsregarding the timing and extent of the industry's recovery from thestrikes. The negative effects of these have continued into the secondhalf-year and it is unlikely that AECI's businesses serving thesecustomers will recover lost profits. The outlook for the Group's strategic growth areas of agriculture andwater solutions in Africa is also positive, as are prospects foracquisitions on the continent. Businesses acquired in the last two yearsare delivering the benefits anticipated and the same is expected of therecently acquired Clariant water treatment business. Although labour relations remain of concern in South Africa it is mostpleasing that settlement of wage increases was reached in July 2014, underthe auspices of the National Bargaining Council for the Chemical Industry,without any industrial action. AECI will continue to pursue its strategy of expanding into new markets inAfrica and other countries of interest. It will build on the progress madeto date in Africa, Australasia and Latin America. Schalk Engelbrecht Mark DytorChairman Chief Executive Woodmead, Sandton29 July 2014 Directors: S Engelbrecht (Chairman), MA Dytor (Chief Executive)†,RMW Dunne*, Z Fuphe, RL Hiemstra, KM Kathan (Financial Director)†, LL Mda,AJ Morgan, LM Nyhonyha, R Ramashia. † Executive * British Group Company Secretary: EN Rapoo Notice to shareholdersInterim Ordinary Cash Dividend No. 161Notice is hereby given that on Monday, 28 July 2014 the Directors of AECIdeclared a gross interim cash dividend of 115 cents per share, in respectof the six month period ended 30 June 2014, payable on Monday, 8 September2014 to ordinary shareholders recorded in the books of the Company at theclose of business on Friday, 5 September 2014. The last day to trade cum dividend will be Friday, 29 August 2014 andshares will commence trading ex dividend as from Monday, 1 September 2014. A South African dividend withholding tax of 15% will be applicable to allshareholders who are not either exempt or entitled to a reduction of thewithholding tax rate in terms of a relevant Double Taxation Agreementresulting in a net dividend of 97,75000 cents per share to thoseshareholders who are not exempt. Application forms for exemption orreduction may be obtained from the Transfer Secretaries and must bereturned to them on or before Friday, 29 August 2014. The issued share capital at the declaration date is 128 241 140 listedordinary shares and 10 117 951 unlisted redeemable convertible B ordinaryshares. The dividend has been declared from the income reserves of theCompany. No Secondary Tax on Companies' credits are available to be used. Any change of address or dividend instruction must be received on orbefore Friday, 29 August 2014. Share certificates may not be dematerialised or rematerialised fromMonday, 1 September 2014 to Friday, 5 September 2014, both days inclusive. By order of the Board EN RapooGroup Company Secretary Woodmead, Sandton29 July 2014 Transfer SecretariesComputershare Investor Services Proprietary Limited70 Marshall StreetJohannesburg2001 and Computershare Investor Services PLCPO Box 82The PavilionsBridgwater RoadBristol BS 99 7NHEngland Registered Office1st floor, AECI Place24 The WoodlandsWoodlands DriveWoodmeadSandton SponsorRand Merchant Bank (a division of FirstRand Bank Limited), 1 MerchantPlace, cnr Fredman Drive and Rivonia Road, Sandton, 2196