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

25 Jul 2006 08:46

AECIGroup interim financial results for the half-year ended 30 June 2006¢â‚¬¢ Headline earnings per share up 95%¢â‚¬¢ Dividend per ordinary share increased to 64 cents¢â‚¬¢ Revenue up 17%¢â‚¬¢ Return on invested capital (ROIC) higher at 19%Income statement 2006 2005 2005 First half First half Year % Unaudited Unaudited Audited change R millions R millions R millions Revenue (2) +17 4 666 3 998 8 768 Profit from operations +56 580 371 887 Net financing costs (43) (47) (90) Income from associates and 4 2 5investments 541 326 802 Transitional provision for post-employment medical aid benefits (3) - (10) (20) Impairment of goodwill - - (10) Exceptional items (2) 3 (27) Profit before tax 539 319 745 Tax (111) (94) (225) Net profit 428 225 520 Attributable to preference and (13) (16) (34)outside shareholders Net profit attributable to 415 209 486ordinary shareholders Headline earnings are derived from: Net profit attributable to 415 209 486ordinary shareholders Transitional provision for post-employment medical aid benefits (3) - 10 20 Impairment of goodwill - - 10 Exceptional items before tax 2 (3) 27 Tax effects of the above items - (3) (13) Headline earnings 417 213 530 Per ordinary share (cents): Headline earnings +95 378 194 482 Diluted headline earnings (4) 372 190 473 Attributable earnings 376 190 442 Diluted attributable earnings 370 186 434(4) Dividends declared +19 64 54 175 Dividends paid 121 94 148 Ordinary shares (millions) (5) - in issue 110 110 110 - weighted average number of 110 110 110shares - diluted weighted average 112 112 112number of shares (4) Notes(1) The interim financial results have been prepared in compliance withInternational Financial Reporting Standards. Accounting policies are consistentwith those applied in the previous financial year.(2) Includes foreign sales of R990 million (2005 - R887 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) Calculated in accordance with IAS33. In 2005, the Company purchased calloptions over AECI ordinary shares which will obviate the need for the Companyto issue new shares in terms of the AECI share option scheme. Therefore, therewill be no future dilution of earnings from this source.(5) Net of 10 311 120 (2005 - 10 311 120) treasury shares held by a subsidiarycompany.Balance sheetat 30 June 2006 2005 2005 30 June 30 June 31 Dec Unaudited Unaudited Audited R millions R millions R millions Assets Non-current assets 3 210 2 941 3 056 Property, plant and equipment 1 849 1 693 1 723 Goodwill 1 001 887 920 Investments 101 69 91 Deferred tax assets 259 292 322 Current assets 4 024 3 327 3 559 Inventory 1 497 1 352 1 372 Accounts receivable 2 182 1 622 1 778 Cash and cash equivalents 345 353 409 Total assets 7 234 6 268 6 615 Equity and liabilities Ordinary capital and reserves 3 186 2 744 2 857 Preference capital and outside shareholders' interest in subsidiaries 109 58 83 Total shareholders' interest 3 295 2 802 2 940 Non-current liabilities 1 064 1 222 1 132 Deferred tax liabilities 26 22 31 Long-term borrowings 549 689 559 Long-term provisions 489 511 542 Current liabilities 2 875 2 244 2 543 Accounts payable 1 795 1 628 1 777 Short-term borrowings 1 046 587 648 Tax 34 29 118 Total equity and liabilities 7 234 6 268 6 615Industry segment analysis for the half-year ended 30 June Profit Revenue from operations Assets 2006 2005 2006 2005 2006 2005 Unaudited Unaudited Unaudited R millions R millions R millions Mining 1 152 1 089 105 116 1 037 923solutions Specialty 2 082 1 696 210 176 2 219 1 807chemicals Specialty 786 828 (28) 19 691 700fibres Decorative 297 267 13 13 168 135coatings Property 458 226 292 68 786 545 Group services, intergroup and (109) (108) (12) (21) (167) (184)other 4 666 3 998 580 371 4 734 3 926Assets consist of property, plant, equipment and goodwill, inventory, accountsreceivable less accounts payable. Assets in the property segment include landrevaluation of R404 million (2005 - R423 million).Cash flow statement 2006 2005 2005 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Cash generated by operations 689 487 1 165 Dividends received 3 1 4 Net financing costs paid (51) (47) (90) Taxes paid (142) (89) (129) Changes in working capital (422) (299) (295) Expenditure relating to long-term (59) (3) (33)provisions Expenditure relating to restructuring - (6) (9) Cash available from operating 18 44 613activities Dividends paid (135) (104) (167) Cash (applied to)/retained from (117) (60) 446operating activities Cash utilised in investment (354) (276) (530)activities Proceeds from disposal of investments 2 17 27and businesses Investments (154) (143) (218) Net capital expenditure (202) (150) (339) Net cash utilised (471) (336) (84) Cash effects of financing activities 388 281 212 Share options hedge premium paid - - (120) Proceeds from issue of new shares - 6 8 (Decrease)/increase in cash and cash (83) (49) 16equivalents Cash and cash equivalents at the 409 380 380beginning of the period Translation gain on cash and cash 19 22 13equivalents Cash and cash equivalents at the end 345 353 409of the period Statement of changes in equity 2006 2005 2005 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Net profit 428 225 520 Dividends paid (135) (104) (167) Revaluation of derivative instruments - 1 - Foreign currency translation differences net of deferred tax 46 26 6 Ordinary shares issued - 6 8 Changes in the Group 13 - 12 Other 3 2 - Share options hedge premium net of - - (85)deferred tax Net increase in equity for the period 355 156 294 Equity at the beginning of the period 2 940 2 646 2 646 Equity at the end of the period 3 295 2 802 2 940 Made up as follows: Share capital and share premium 453 451 453 Non-distributable reserves 319 307 276 Surplus arising on revaluation of property, plant and equipment 263 279 268 Foreign currency translation reserve 49 22 3net of deferred tax Retained earnings of associates 1 1 1 Other 6 5 4 Retained income 2 414 1 986 2 128 Preference capital 6 6 6 Outside shareholders' interest in 103 52 77subsidiaries 3 295 2 802 2 940Other salient features 2006 2005 2005 First half First half Year Unaudited Unaudited Audited R millions R millions R millions Capital expenditure 210 152 351 - expansion 142 108 235 - replacement 68 44 116 Capital commitments 226 171 97 - contracted for 50 6 23 - not contracted for 176 165 74 Future rentals on property, plant and equipment leased 236 183 235 - payable within one year 46 43 47 - payable thereafter 190 140 188 Contingent liabilities and guarantees 238 283 292 Net borrowings 1 250 923 798 Gearing (%) 38 33 27 Current assets to current liabilities 1.4 1.5 1.4 Net asset value per ordinary share 2 885 2 491 2 587(cents) Depreciation 106 113 212CommentaryPerformanceHeadline earnings for the first half-year were 378 cents per ordinary share, 95per cent higher than in the first half of 2005. An unusually large disposallifted profit from operations in the property segment to R292 million from R68million in the comparable period last year, equivalent to an increase inearnings of approximately 180 cents per share. An increased dividend of 64cents per ordinary share has been declared, giving a dividend cover of 5.9times compared with 54 cents per share and 3.6 times cover in 2005. Thedividend declaration is published in full elsewhere.Revenues of Group businesses increased by 17 per cent over the same period lastyear. Excluding the effect of acquisitions, revenue increased by 12 per cent.Demand from the local manufacturing sector improved in the second quarterlargely due to the weaker rand exchange rate. Gross margins were under pressurefrom increases in oil-based and certain other raw material costs which couldnot be fully recovered in the market. The operating margin improved to 12.4 percent of sales from 9.3 per cent in the same period last year and the 12 monthreturn on average invested capital (ROIC) for the Group, excluding revaluationof land, was 19 per cent compared to 16 per cent at June 2005.African Explosives' detonator margins continued to be under pressure fromimports of state-subsidised products from China which precluded any priceadjustments in the South African market. However, operations elsewhere inAfrica again delivered pleasing results, whilst the profitable exports ofammonium nitrate achieved in 2005 could not be sustained. Commissioning of thefirst phase of automated production of initiating systems at Modderfontein iswell advanced with production expected in October. The second phase, estimatedto cost R100 million, is underway with completion scheduled for the thirdquarter of 2007.DetNet, the 50:50 joint venture with Dyno Nobel, increased international salesand broadened international validation of the new generation electronicdetonator.Chemical Services posted an excellent result with profit from operations 19 percent higher than in 2005, supported by pleasing performances from the sevenbusinesses acquired over the past 18 months. Demand from the localmanufacturing sector was resilient and is expected to strengthen if the recentweaker tendency in the exchange rate is sustained. The acquisition of a 60 percent interest in Resitec in Brazil, at a cost of R43 million, was completedwith effect from 1 April. Further potential acquisitions in that country arebeing evaluated.The recovery programme at SANS Fibres was set back severely in the firstquarter by two unexpected and extended power outages which impacted operationsfor weeks thereafter. An insurance claim covered only part of the overall cost.In addition, output of polyester polymer and PET was restricted for a periodfollowing a scheduled maintenance shutdown of the plants in March. Tradingperformance improved in the latter part of the period, assisted by the weakerexchange rate, and international demand for the company's specialty fibresremains strong. Plant operating performance remains the key focus of therecovery programme. The joint venture operations in Stoneville, North Carolinafurther improved profitability in the period.At Dulux, higher sales volumes of its premium branded products in South Africaoffset the effect of higher raw material costs on margins. Profits from itsother African operations were higher than in 2005.Realisation of property surplus to operating requirements substantiallyexceeded expectation with the sale by AECI Limited of the 61 hectare Milnertonsite for R260 million. In addition, the property activities of Heartlandrecorded profit from operations of R38 million after recognising R37 million ofremediation costs as an expense. The cash spend on remediation activitiesamounted to R90 million in the period.FinancialCapital expenditure of R210 million, incurred mainly on expansion projects inAfrican Explosives and Chemical Services, was almost double the depreciationcharge for the period. In addition, Chemical Services invested R145 million inseveral acquisitions during the half-year. Group working capital was inflatedby the Milnerton property sale in June. Excluding this receivable, workingcapital increased to R1 624 million and 18 per cent of sales from 17 per centof sales in June 2005.The Group's net borrowings of R1 250 million were R327 million higher than atJune 2005. Cash interest cover at 13 times was substantially higher than the 10times achieved in the first half of 2005. Gearing increased to 38 per cent ofshareholders' funds from 33 per cent at June 2005 (27 per cent at December2005).At the Annual General Meeting of the Company held on 23 May, shareholdersauthorised a general repurchase of up to 5 per cent of the ordinary shares inthe Company. No repurchases were undertaken in the period.Post balance sheet eventOn 19 July the Trustees of the AECI Pension Fund resolved to establish ageneral reserve account of R750 million within the Fund, and to effecttransfers on a regular basis from that reserve to an employer surplus account,on condition that the Company undertakes at least to maintain for 10 years thepresent rate of contribution to the Fund in respect of employee members. Theemployer surplus account would be utilised primarily to fund an allowance toeach pensioner older than 65 equivalent to the portion of the medical aidcontribution paid by the Company on behalf of the pensioner. The Board resolvedtoday to give this undertaking. The effect of the arrangement will be to reducein future years the amount of medical aid contributions paid by the Company onbehalf of retired employees, and hence the value of the provision forpost-employment medical aid benefits in the balance sheet. The quantum of thereduction in the provision has not been finalised by the independent actuary.No adjustment to the provision was made at 30 June.PortfolioAs previously announced, Chemical Services acquired Leochem, a producer ofpersonal care intermediates, with effect from March 2006 and Resitec, aproducer of oleo-chemicals in Brazil, with effect from April 2006. Bothcompanies have performed in line with expectation since acquisition.OutlookGlobal growth appears robust despite heightened geo-political uncertainty inthe Middle East and an upward tendency in interest rates. Maintaining andimproving margins through timeous response to volatile raw material prices andexchange rates represents the major challenge for the Group in the second halfof the year.The contribution from property activities is likely to be substantially lowerin the second half than in 2005 as the stock of land immediately available forsale is currently limited. However, earnings may be boosted by the release ofpart of the provision for post-employment medical aid benefits following theagreement with the AECI Pension Fund. Excluding this release, management istargeting a second half result similar to that of 2005.Alan Pedder CBE Schalk EngelbrechtChairman Chief executiveSandton24 July 2006Notice to shareholdersInterim ordinary dividend no. 145NOTICE IS HEREBY GIVEN that on Monday, 24 July 2006 the directors of AECILimited declared an interim ordinary dividend of 64 cents per share, in respectof the financial year ending 31 December 2006, payable on Monday, 18 September2006 to ordinary shareholders recorded in the books of the Company at the closeof business on Friday, 15 September 2006.The last day to trade cum dividend will be Friday, 8 September 2006 and shareswill commence trading ex dividend as from Monday, 11 September 2006.Any change of address or dividend instruction must be received on or beforeFriday, 8 September 2006.Share certificates may not be dematerialised or rematerialised from Monday, 11September 2006 to Friday, 15 September 2006, both days inclusive.This announcement will be mailed to all recorded shareholders on or aboutTuesday, 25 July 2006.By order of the BoardE A ReaActing secretarySandton24 July 2006DirectorateAE Pedder CBE* (Chairman), S Engelbrecht (Chief executive), NC Axelson¢â‚¬ , CBBrayshaw, MJ Leeming, LM Nyhonyha, F Titi, LC van Vught*British ¢â‚¬ ExecutiveAECI LimitedIncorporated in the Republic of South Africa (Registration no. 1924/002590/06)Share code AFEISIN no. ZAE000000220www.aeci.co.zaSpecialty product and service solutionsMining solutionsDevelopment, manufacture and supply of value-adding services, initiatingsystems and explosives to the mining, quarrying, and allied industries.Specialty chemicalsLargest specialty chemical operation in southern Africa, supplying a diverserange of specialties, raw materials and related services to a broad spectrum ofindustries.Specialty fibresProduction, marketing and distribution of specialty nylon and polyester yarnfor local and export markets; production of PET bottle polymer.Decorative 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.PropertyHeartland manages the realisation of land and related assets that have becomesurplus to the Group's requirements.ENDAECI LTD