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

26 Jul 2005 08:34

AECI LIMITEDGroup interim financial resultsfor the half-year ended 30 June 2005Specialty product and service solutions¢â‚¬¢ Headline earnings per share up 23%¢â‚¬¢ Dividend increased to 54 cents per ordinary share¢â‚¬¢ Operating margin up from 7.8% to 9.3%¢â‚¬¢ Return on average invested capital (ROIC) increased to 16%CommentaryPerformanceHeadline earnings for the first half-year were 194 cents per ordinary share, 23per cent higher than in the first half of 2004. An increased dividend of 54cents per ordinary share has been declared, giving a dividend cover of 3.6times compared with 44 cents per share and 3.6 times cover in 2004. Thedividend declaration is published in full elsewhere.Sales revenues of Group businesses increased by 3 per cent over the same periodlast year though revenue-weighted volume was marginally lower in aggregate.Demand from the local mining and manufacturing sectors improved in the secondquarter in response to a somewhat weaker rand exchange rate against the USdollar. Gross margins were maintained despite the effect of high oil prices oncertain raw material costs whilst the operating margin increased to 9.3 percent from 7.8 per cent in the same period last year. The 12 month return onaverage invested capital (ROIC) for the Group, excluding revaluation of land,increased to 16 per cent from 14 per cent in June 2004.African Explosives achieved a pleasing result as an excellent performance byoperations elsewhere in Africa together with the benefits of last year'srestructuring more than offset some decline in sales to the local gold miningsector. The competitive challenge posed by imports of state-subsidisedinitiators from China continued but was reasonably contained in the period.DetNet, the 50:50 joint venture with Dyno Nobel ASA, accelerated internationaltrials of the new generation electronic detonator technology and sales areexpected to gather pace in the second half of the year.Chemical Services posted a solid result despite adverse trading conditions ascustomers in the mining and manufacturing sectors continued to wrestle with theeffects of the strong exchange rate in the first quarter. Initiatives takenlast year to raise the performance of certain businesses in the portfolio,particularly automotive coatings, have been productive and further positiveresults are expected to accrue in the second half.At SANS Fibres, the recovery programme of new product development, conversionefficiency and cost reduction delivered a much improved performance. The jointventure operations in Stoneville, North Carolina, USA, traded profitably in theperiod. In the short term, SANS' performance will continue to be sensitive toexchange rate movements.A good performance by Dulux in South Africa more than compensated for lowerprofits from its other African operations.The property activities of Heartland delivered better than expected results asfavourable market conditions persisted with significant sales at bothModderfontein and Umbogintwini.FinancialCapital expenditure of R152 million, incurred mainly on expansion projects inAfrican Explosives and Chemical Services, was R39 million higher than thedepreciation charge for the period. In addition, Chemical Services investedapproximately R140 million in two acquisitions during the half-year. Groupworking capital was influenced in part by the weaker exchange rate at 30 Junerelative to December 2004 and increased to R1 349 million and 17 per cent ofsales compared with 15 per cent in June 2004.The Group's net borrowings of R941 million were R93 million lower than at June2004. Cash interest cover at 10.3 times was substantially higher than the 6.7times achieved in the first half of 2004 whilst gearing reduced to 34 per centof shareholders' funds from 41 per cent at June 2004 (24 per cent at December2004).At the Annual General Meeting of the Company held on 23 May, shareholdersauthorised a general repurchase of up to 10 per cent of the ordinary shares inthe Company. No repurchases were undertaken in the period.PortfolioAs previously announced, Chemical Services acquired UAP, a distributor ofagro-chemicals, with effect from January 2005 and Chemiphos, a producer offood-grade phosphates, with effect from May 2005. Both companies have performedin line with expectation since acquisition. Subject to regulatory approvals,Chemical Services will also acquire J E Orlick and Associates with effect fromSeptember 2005.In a further empowerment transaction, negotiations are well-advanced regardingthe sale by Chemical Services of a 25.1 per cent equity interest in ImproChem(Pty) Limited, a wholly-owned subsidiary engaged in the business of watertreatment, to the Tiso Group. Tiso is the Group's empowerment partner inAfrican Explosives. The transaction is expected to take effect in September2005.OutlookThe progressive benefit of actions taken in prior years in response to arelatively strong exchange rate and low inflation will continue to emerge inthe second half-year. If the current and somewhat more competitive level of theexchange rate were to be sustained it would be helpful to the Group's exportbusinesses and also to most of the local customer base.Volatility in oil intermediates and hence raw material prices seems likely tocontinue for some time. Nonetheless, with a similar contribution in prospectfrom property activities in the second half, management is targeting asignificant increase in headline earnings per share for the full 2005 financialyear.Alan Pedder CBE Schalk Engelbrecht Chairman Chief executive Sandton25 July 2005Income statement 2005 2004 2004 First half First half Year % Unaudited Unaudited Audited change R millions R millions R millions Revenue (1) +3 3 998 3 867 7 911 Profit from operations +24 371 300 743 Net financing costs (47) (61) (139) Income from associates and 2 1 3investments 326 240 607 Transitional provision for (10) (10) (20)post-employment medical aid benefits (2) Amortisation of goodwill (3) - (52) (104) Exceptional items 3 (3) (23) Profit before taxation 319 175 460 Taxation (94) (63) (173) Normal activities (94) (64) (167) Exceptional items - 1 (6) Net profit 225 112 287 Attributable to preference (16) (1) (4)and outside shareholders Normal activities (16) (1) (7) Amortisation of goodwill - - 2 Exceptional items - - 1 Net profit attributable to 209 111 283ordinary shareholders Headline earnings are derived from: Net profit attributable to 209 111 283ordinary shareholders Transitional provision for 10 10 20post-employment medical aid benefits (2) Amortisation of goodwill (3) - 52 104 Exceptional items (3) 3 23 Outside shareholders' share - - (3)of the above items Tax effects of the above (3) (4) -items 213 172 427 Per ordinary share (cents): Headline earnings +23 194 158 392 Diluted headline earnings 190 154 383 Attributable earnings 190 102 260 Diluted attributable 186 99 254earnings Dividends declared +23 54 44 138 Dividends paid 94 78 122 Ordinary shares (millions) - in issue 110 109 109 - weighted average number of 110 109 109shares - diluted weighted average 112 112 111number of shares Notes(1) Includes foreign sales of R887 million (2004 - R743 million).(2) 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.(3) The interim financial results have been prepared in accordance with SouthAfrican Statements of Generally Accepted Accounting Practice and conform toInternational Financial Reporting Standards. Accounting policies are consistentwith those applied in the previous financial year except for the adoption ofIFRS 2 (Share-based payments) and IFRS 3 (Business combinations), IAS 16(Property, plant and equipment), IAS 36 (Impairment of assets) and IAS 38(Intangible assets). With the adoption of IFRS 3, the amortisation of goodwillhas ceased with effect from the current financial year. The adoption of theother standards has not had a material impact on the Group's financial results.Industry segment analysisfor the half-year ended 30 June Revenue Profit from Assets operations 2005 2004 2005 2004 2005 2004 Unaudited Unaudited Unaudited R millions R millions R millions Mining solutions 1 089 1 045 116 101 923 892 Specialty chemicals 1 670 1 615 174 169 1 803 1 388 Specialty fibres 828 810 19 1 700 746 Decorative and 293 301 15 12 139 115packaging coatings Property 174 168 68 37 531 657 Group services, (56) (72) (21) (20) (167) (108)intergroup and other 3 998 3 867 371 300 3 929 3 690Assets consist of property, plant, equipment and goodwill, inventory, accountsreceivable less accounts payable. Assets in the property segment include landrevaluation of R423 million (2004 - R460 million).Balance sheetat 30 June 2005 2004 2004 30 June 30 June 31 Dec Unaudited Unaudited Audited R millions R millions R millions Assets Non-current assets 2 959 3 018 2 935 Property, plant and equipment 1 693 1 685 1 659 Goodwill 887 852 822 Investments 87 89 94 Deferred taxation assets 292 392 360 Current assets 3 309 2 931 2 942 Inventory 1 352 1 081 1 160 Accounts receivable 1 622 1 442 1 420 Cash and cash equivalents 335 408 362 Total assets 6 268 5 949 5 877 Equity and liabilities Ordinary capital and reserves 2 744 2 507 2 605 Preference capital and outside 58 13 41shareholders' interest in subsidiaries Total shareholders' interest 2 802 2 520 2 646 Non-current liabilities 1 222 771 1 426 Deferred taxation liabilities 22 45 33 Long-term borrowings 689 215 899 Long-term provisions 511 511 494 Current liabilities 2 244 2 658 1 805 Accounts payable 1 625 1 370 1 619 Provision for restructuring 3 21 9 Short-term borrowings 587 1 227 96 Taxation 29 40 81 Total equity and liabilities 6 268 5 949 5 877Statement of changes in equity 2005 2004 2004 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Net profit 225 112 287 Dividends paid (104) (86) (135) Revaluation of derivative 1 4 5instruments Foreign currency translation 26 (18) (53)differences net of deferred taxation Ordinary shares issued 6 6 8 Changes in the Group - (14) 13 Other 2 (5) - Net increase in equity for the 156 (1) 125period Equity at the beginning of the 2 646 2 521 2 521period Equity at the end of the period 2 802 2 520 2 646 Made up as follows: Share capital and share premium 451 443 445 Non-distributable reserves 307 311 289 Surplus arising on revaluation 279 307 288of property, plant and equipment Foreign currency translation 22 - (3)reserve net of deferred taxation Retained earnings of associates 1 1 1 Other 5 3 3 Retained income 1 986 1 753 1 871 Preference capital 6 6 6 Outside shareholders' interest 52 7 35in subsidiaries 2 802 2 520 2 646Cash flow statement 2005 2004 2004 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Cash generated by operations 487 404 957 Dividends received 1 1 2 Net financing costs (47) (61) (126) Taxes paid (89) (81) (128) Changes in working capital (299) (62) 120 Expenditure relating to (3) (4) (21)long-term provisions Expenditure relating to (6) (30) (36)restructuring Cash available from operating 44 167 768activities Dividends paid (104) (86) (135) Cash (applied to)/retained from (60) 81 633operating activities Cash utilised in investment (276) (97) (238)activities Proceeds from disposal of 17 - 58investments and businesses Investments (143) (2) (27) Net capital expenditure (150) (95) (269) Net cash (utilised)/generated (336) (16) 395 Cash effects of financing 281 (38) (485)activities Proceeds from issue of new 6 6 8shares Decrease in cash and cash (49) (48) (82)equivalents Cash and cash equivalents at the 362 461 461beginning of the period Translation gain/(loss) on cash 22 (5) (17)and cash equivalents Cash and cash equivalents at the 335 408 362end of the period Other salient features 2005 2004 2004 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Capital expenditure 152 116 277 - expansion 108 63 157 - replacement 44 53 120 Capital commitments 171 179 294 - contracted for 6 25 25 - not contracted for 165 154 269 Future rentals on property, 183 156 196plant and equipment leased - payable within one year 43 41 43 - payable thereafter 140 115 153 Contingent liabilities and 283 234 278guarantees Net borrowings 941 1 034 633 Gearing (%) 34 41 24 Current assets to current 1.5 1.1 1.6liabilities Net asset value per ordinary 2 491 2 302 2 381share (cents) Depreciation 113 111 224DirectorateAE Pedder CBE* (Chairman), S Engelbrecht (Chief executive)¢â‚¬ , NC Axelson¢â‚¬ , CBBrayshaw,MJ Leeming, TH Nyasulu, F Titi, 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.zaAELMining solutionsDevelopment, manufacture and supply of value-adding services, initiatingsystems and explosives to the mining, quarrying, and allied industries.Chemical ServicesSpecialty chemicalsLargest specialty chemical operation in southern Africa, supplying a diverserange of specialties, raw materials and related services to a broad spectrum ofindustries.Sans FibresSpecialty fibresProduction, marketing and distribution of specialty nylon and polyester yarnfor local and export markets; production of PET bottle polymer.DuluxDecorative 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.HeartlandPropertyHeartland Properties manages the realisation of land and related assets thathave become surplus to the Group's requirements.AECI LIMITEDIncorporated in the Republic of South Africa(Registration No. 1924/002590/06)Share code: AFE ISIN No. ZAE000000220Notice to shareholdersInterim ordinary dividend No. 143NOTICE IS HEREBY GIVEN that on Monday, 25 July 2005 the directors of AECILimited declared an interim dividend of 54 cents per share, in respect of thefinancial year ending 31 December 2005, payable on Monday, 19 September 2005 toordinary shareholders recorded in the books of the Company at the close ofbusiness on Friday, 16 September 2005.The last day to trade cum dividend will be Friday, 9 September 2005 and shareswill commence trading ex dividend as from Monday, 12 September 2005.Any change of address or dividend instruction must be received on or beforeFriday, 9 September 2005.Share certificates may not be dematerialised or rematerialised from Monday, 12September 2005 to Friday, 16 September 2005, both days inclusive.This announcement will be mailed to all recorded shareholders on or aboutTuesday, 26 July 2005.By order of the BoardMJF PotgieterSecretarySandton25 July 2005Transfer secretariesComputershareComputershare Investor Services 2004 (Pty) Limited70 Marshall Street, Johannesburg, 2001andComputershare Investor Services plcPO Box 82, The Pavilions, Bridgwater RoadBristol BS 99 7NH, EnglandSponsorJP MorganRegistered officeFirst floor, AECI Place24 The WoodlandsWoodlands DriveWoodmeadSandtonENDAECI LTD