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

AECI LIMITED (Incorporated in the Republic of South Africa) Registration number 1924/002590/06 Tax reference number 9000008608 ("AECI" or "the Company") Share code: AFE ISIN Number: ZAE000000220 Reviewed condensed consolidated financial results and final cash dividenddeclaration for the year ended 31 December 2013 * Best-ever safety performance with a TRIR of 0,52 * Revenue +15% to R15,9 billion, 33% generated outside SA * Headline earnings +57% to R885 million * EPS +63% to 845c * HEPS +57% to 791c * Results exclude Shanghai Zendai property transaction Income statement % 2013 2012 2012 2012R millions change Audited(2) Adjusted(2) Restated(2) Revenue(3) +15 15 908 14 916 (1 089) 13 827 Net operating costs (14 510) (13 575) 945 (12 630) Profit from operations +17 1 398 1 341 (144) 1 197 CST share-based payment - (138) - (138)(4) Net income from pensionfund employer surplus accounts - 8 (8) - Net loss from plan - (6) 6 -assets for post-retirement medical aidliabilities 1 398 1 205 (146) 1 059 Interest expense (211) (262) 6 (256) Interest received 37 40 (2) 38 Share of profit of 43 - 57 57equity-accountedinvestees, net of tax Profit before tax 1 267 983 (85) 898 Tax expense (313) (345) 36 (309) Profit for the year 954 638 (49) 589 Profit for the yearattributable to: - Ordinary shareholders 946 630 (49) 581 - Preference 3 2 - 2shareholders - Non-controlling 5 6 - 6interest 954 638 (49) 589 Headline earnings arederived from: Profit attributable to 946 630 (49) 581ordinary shareholders Impairment of goodwill 5 9 - 9 Impairment of property, 9 3 - 3plant and equipment Profit on partial (38) - - -disposal of netinvestment in foreignoperation Surplus onderecognition of businesses, jointventures and subsidiaries disposed (3) (15) - (15)of Surplus on disposal ofproperty, plant andequipment andinvestment property (49) (18) - (18) Tax effects of the 15 2 - 2above items Headline earnings 885 611 (49) 562 Per ordinary share(cents): Headline earnings +57 791 547 (44) 503 Diluted headline 740 521 (42) 479earnings Basic earnings 845 564 (44) 520 Diluted basic earnings 791 537 (41) 496 Dividends declared +14 210 185 - 185 Dividends paid 290 257 - 257 Statement of comprehensive income 2013 2012 2012 2012R millions Audited(2) Adjusted(2) Restated(2) Profit for the year 954 638 (49) 589 Other comprehensive incomenet of tax: Items that may bereclassified subsequentlyto profit or loss: Foreign currency 362 41 - 41translation differences Items that will not bereclassified subsequently to profit orloss: Actuarial gain on 86 - 49 49defined-benefitObligations Total comprehensive income 1 402 679 - 679for the year Total comprehensive incomeattributable to: - Ordinary shareholders 1 389 672 - 672 - Preference shareholders 3 2 - 2 - Non-controlling interest 10 5 - 5 1 402 679 - 679 Statement of changes in equity 2013 2012 2012 2012R millions Audited(2) Adjusted(2) Restated(2) Total comprehensive income 1 402 679 - 679for the year Dividends paid (336) (297) - (297) Business combinations and 7 1 - 1change in ownershippercentage Issue of ordinary shares: - at par value(4) - 4 - 4 - at market value(5) - 393 - 393 Net effect of acquisition - (393) - (393)of non-controllinginterest to equity(5) Share-based payment 47 30 (1) 29reserve Transfer to retained - 138 - 138earnings for CSTshare-based payment Equity at the beginning of 5 757 5 214 (11) 5 203the year Equity at the end of the 6 877 5 769 (12) 5 757year Made up as follows: Ordinary share capital 116 116 - 116 Share premium 496 496 - 496 Reserves 813 406 (1) 405 Property revaluation 237 237 - 237surplus Foreign currency 500 143 - 143translation reserve Share-based payment 76 30 (1) 29reserve Other - (4) - (4) Retained earnings 5 394 4 697 - 4 697 Preference share capital 6 6 - 6 Non-controlling interest 52 48 (11) 37 6 877 5 769 (12) 5 757 Ordinary shares in issue 2013 2012 millions millions Listed ordinary shares At the beginning of the year 128,2 119,1 Issued during the year for CST and KTH - 9,1transactions(4)(5) At the end of the year 128,2 128,2 Treasury shares held by subsidiary company (11,9) (11,9) 116,3 116,3 Unlisted redeemable convertible ordinaryshares At the beginning of the year 10,1 - Issued during the year for EST transaction - 10,1(4) At the end of the year 10,1 10,1 Treasury shares held by consolidated EST(4) (10,1) (10,1) - - Ordinary shares in issue 116,3 116,3 Reconciliation of weighted average number of shares 2013 2012 millions millions Weighted average number of ordinary shares 138,3 119,1at the beginning of the year Weighted average number of ordinary shares - 17,4issued during the year Weighted average number of ordinary shares (10,1) (9,0)held by consolidated EST Weighted average number of contingently (4,4) (3,9)returnable ordinary shares held by CST Weighted average number of shares held by (11,9) (11,9)consolidated subsidiary Weighted average number of ordinary shares 111,9 111,7for basic earnings per share Dilutive adjustment for potential ordinary 7,7 5,4shares Dilutive adjustment for share options under - 0,1the AECI share option scheme Weighted average number of ordinary shares 119,6 117,2for diluted earnings per share Statement of financial position 2013 2012 2012 2012 31 Dec 31 Dec 31 Dec 31 Dec Audited(2) Adjusted(2) Restated(2) R millions Assets Non-current assets 6 472 6 314 153 6 467 Property, plant and 3 756 3 733 (71) 3 662equipment Investment property 173 445 - 445 Intangible assets 143 214 (55) 159 Goodwill 1 123 1 124 (35) 1 089 Pension fund employer 231 267 - 267surplus accounts Investments in 217 56 - 56associates Investments in joint 301 - 318 318ventures Other investments 50 30 - 30 Loans receivable 10 11 - 11 Deferred tax 468 434 (4) 430 Current assets 7 921 6 752 (355) 6 397 Inventories(6) 3 090 2 867 (156) 2 711 Accounts receivable 3 326 2 737 (120) 2 617 Loans to joint ventures - - - - Assets classified as 286 - - -held for sale(6) Cash 1 219 1 148 (79) 1 069 Total assets 14 393 13 066 (202) 12 864 Equity and liabilities Ordinary capital and 6 819 5 715 (1) 5 714reserves Non-controlling interest 52 48 (11) 37 Preference share capital 6 6 - 6 Total equity 6 877 5 769 (12) 5 757 Non-current liabilities 2 214 2 488 (37) 2 451 Deferred tax 168 232 (31) 201 Non-current borrowings 1 099 1 251 - 1 251 Non-current provisions 947 1 005 (6) 999 Current liabilities 5 302 4 809 (153) 4 656 Accounts payable 3 284 2 912 (154) 2 758 Current borrowings 1 861 1 738 - 1 738 Loans from joint 21 - - -ventures Tax payable 136 159 1 160 Total equity and 14 393 13 066 (202) 12 864liabilities 2012 2012 2012 01 Jan 01 Jan 01 JanR millions Audited(2) Audited(2) Restated(2) Assets Non-current assets 6 024 119 6 143 Property, plant and equipment 3 721 (134) 3 587 Investment property 436 - 436 Intangible assets 77 (56) 21 Goodwill 1 078 (54) 1 024 Pension fund employer surplus accounts 259 - 259 Investments in associates - - - Investments in joint ventures - 363 363 Other investments 22 - 22 Loans receivable 24 - 24 Deferred tax 407 - 407 Current assets 6 433 (372) 6 061 Inventories(6) 2 584 (158) 2 426 Accounts receivable 2 772 (172) 2 600 Loans to joint ventures - 40 40 Assets classified as held for sale 16 - 16(6) Cash 1 061 (82) 979 Total assets 12 457 (253) 12 204 Equity and liabilities Ordinary capital and reserves 4 998 1 4 999 Non-controlling interest 210 (12) 198 Preference share capital 6 - 6 Total equity 5 214 (11) 5 203 Non-current liabilities 2 702 (49) 2 653 Deferred tax 179 (29) 150 Non-current borrowings 1 507 (13) 1 494 Non-current provisions 1 016 (7) 1 009 Current liabilities 4 541 (193) 4 348 Accounts payable 2 987 (188) 2 799 Current borrowings 1 421 (8) 1 413 Loans from joint ventures - 2 2 Tax payable 133 1 134 Total equity and liabilities 12 457 (253) 12 204 Statement of cash flows 2013 2012 2012 2012R millions Audited(2) Adjusted(2) Restated(2) Cash generated by 2 191 1 867 (90) 1 777operations Dividends received 62 - 28 28 Interest paid (212) (245) 7 (238) Interest received 37 40 (3) 37 Income tax paid (464) (308) 19 (289) Changes in working (426) (326) (5) (331)capital Expenditure relating tonon- current provisions (66) (98) (3) (101) Cash available fromoperating activities 1 122 930 (47) 883 Dividends paid (336) (297) - (297) Cash flows fromoperating activities 786 633 (47) 586 Cash flows frominvesting activities (772) (645) 29 (616) Net investment (239) (144) 10 (134)expenditure Net capital expenditure (533) (501) 19 (482) Net cash generated/(utilised) before financing 14 (12) (18) (30)activities Cash flows fromfinancing activities (28) 75 21 96 Non-current loans 1 14 - 14receivable Borrowings (29) 61 21 82 (Decrease)/increase in (14) 63 3 66cash Cash at the beginningof the year 1 069 1 061 (82) 979 Translation gain on 164 24 - 24cash Cash at the end of the 1 219 1 148 (79) 1 069year Other salient features 2013 2012R millions Restated(2) Capital expenditure 633 538 - expansion 293 259 - replacement 340 279 Capital commitments(7) 746 207 - contracted for 87 55 - not contracted for 659 152 Future rentals on property, plant and 199 130equipment leased - payable within one year 71 52 - payable thereafter 128 78 Net borrowings 1 741 1 920 Gearing (%)* 25 33 Current assets to current liabilities 1,5 1,4 Net asset value per ordinary share 5 864 4 914(cents) Depreciation and amortisation 537 460 ZAR/US$ closing exchange rate (rand) 10,50 8,49 ZAR/US$ average exchange rate (rand) 9,63 8,20 Per ordinary share (cents) (excludingCST share-based payment): - headline earnings 791 627 - diluted headline earnings 740 597 * Borrowings less cash as a percentageof total equity. Industry segment analysis 2013 2012 2013 Restated(2) Profit fromR millions Revenue Revenue operations Explosives 7 400 6 327 572 Specialty chemicals 8 359 7 621 922 Property 672 400 219 Group services and (523) (521) (315)inter-segment 15 908 13 827 1 398 2012 2013 2012 Restated(2) Restated(2) Profit from Net NetR millions operations assets assets Explosives 417 3 059 2 837 Specialty chemicals 891 4 541 4 374 Property 33 1 051 808 Group services and (144) (38) (94)inter-segment 1 197 8 613 7 925 Net assets consist of property, plant, equipment, investment property,intangible assets, goodwill, inventory, accounts receivable, and assetsclassified as held for sale less accounts payable. Specialty fibres (USA) has been reported as part of the Specialty chemicalssegment effective from 1 January 2013. The comparatives have been adjustedaccordingly. Notes 1) Basis of preparation and accounting policies The reviewed condensed consolidated financial results are prepared inaccordance with the requirements of the JSE Limited's Listings Requirements("Listings Requirements") for provisional reports and the requirements of theCompanies Act of South Africa, No. 71 of 2008. The Listings Requirementsrequire provisional reports to be prepared in accordance with the frameworkconcepts and the measurement and recognition requirements of InternationalFinancial Reporting Standards ("IFRS") and the South African Institute ofChartered Accountants Financial Reporting Guides as issued by the AccountingPractice Committee and Financial Pronouncements as issued by the FinancialReporting Standards Council and to also, as a minimum, contain the informationrequired by IAS 34 Interim Financial Reporting. The accounting policies appliedin the preparation of the reviewed condensed consolidated financial results arein terms of IFRS and are consistent with those applied in the previousconsolidated annual financial statements, except for the adoption of the newstandards as detailed below. The preparation of these reviewed condensedconsolidated financial results for the year ended 31 December 2013 wassupervised by the Financial Director, Mr KM Kathan CA(SA)AMP (Harvard). Thereviewed condensed consolidated financial results have been reviewed by theCompany's auditors, KPMG Inc., who have issued an unqualified review opinion. Acopy of the review opinion is obtainable from AECI's registered office. 2) Change in accounting policies IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors hasbeen applied retrospectively to adjust the income statement, statementofcomprehensive income, statement of changes in equity, statement of financialposition and statement of cash flows for the effects of the following new accounting standards: IAS 19 - Employee Benefits became effective from 1 January 2013. Under itsprevious accounting policy, AECI elected to recognise its defined-benefit costsin the income statement and applied asset limitation in recognising thedefined-benefit pension fund assets in the statement of financial position. Theliability for the post-retirement medical aid was recognised in the statementof financial position. The income statement effects were recognised in profitfrom operations except for the net return on the employer surplus accounts andthe net return on the post-retirement medical aid, which were separatelydisclosed after profit from operations. Under the revised IAS 19, the basis ofcalculation of finance costs has been altered and is determined by applying thediscount rate used to measure the defined-benefit obligation to the netdefined-benefit asset/obligation at the beginning of the year. Profit fromoperations now includes only the current service cost and the net interest ofthe defined-benefit asset/liability. Remeasurements of the net defined-benefitasset/liability are now recognised in other comprehensive income. There are noamendments to the statement of financial position. AECI has also adopted the new Consolidation Suite of standards: IFRS 10-Consolidated Financial Statements, IFRS 11 - Joint Arrangements, IFRS 12 -Disclosure of Interests in Other Entities, IAS 27 - Separate FinancialStatements and IAS28 - Investment in Associates and Joint Ventures, effectivefrom 1 January 2013. In terms of IFRS 11, the proportionate consolidation ofjoint arrangements is no longer permitted. Joint arrangements are nowclassified as either joint ventures or joint operations. Joint ventures arerequired to be equity accounted. For joint operations, AECI recognises itsshare of assets, liabilities, revenue and expenses. This is done on aline-by-line basis. Equity accounting of AECI's joint ventures has resulted ina restatement of the income statement, statement of comprehensive income,statement of changes in equity, statement of financial position and statementof cash flows for the year ended 31 December 2012. 3) Includes foreign and export revenue of R 5 224 million (2012 restated: R 4 345 million). 4) Share-Based payments CST share-based payment: The AECI Community Education and Development Trust("CST") subscribed for 4 426 604 ordinary shares at par value in the Company in2012. The shares vested immediately and a share-based payment expense of R138million (2012 first half) was recognised in full in the income statement. Theseshares are contingently returnable and, as a result, are excluded from EPS andHEPS. EST share-based payment: The AECI Employees Share Trust ("EST") subscribed for10 117 951 unlisted B ordinary shares of the Company. The total cost isestimated at R155 million of which R38 million (2012: R29 million) wasrecognised in the income statement. The remainder of the expense will berecognised in future periods over the respective vesting periods. 5) The Kagiso Tiso Holdings Proprietary Limited (RF) ("KTH") transaction in the2012 financial year involved the purchase by AECI of the 25,1% interest held inAEL Holdco Limited by a KTH-led consortium in exchange for 4 678 667 ordinaryshares in AECI. The shares issued were recognised in equity, with R5 millionallocated to share capital and R388 million allocated to share premium. Thenon-controlling interest was reduced by the carrying amount of R172 millionwith the balance of R221 million recognised directly in retained earnings. 6) AECI concluded agreements to dispose of a portion of its surplus propertyassets at Modderfontein to Shanghai Zendai Property Limited in November 2013. Asignificant portion of the transaction is expected to be effective during 2014.Property assets to be disposed of include vacant land and property andbuildings held for leasing purposes and these assets, amounting to R286 millionhave been reclassified from investment property to assets classified as heldfor sale at 31 December 2013 in terms of IFRS 5 Non-current Assets Held forSale and Discontinued Operations. The agreements also include the disposal ofproperty under development and the related development costs (bulkinfrastructure) of R214 million which is included in the Group's inventory asat 31 December2013. 7) Subsequent to year-end, AECI and Clariant Southern Africa ProprietaryLimited ("Clariant") have reached agreement for AECI's wholly-owned subsidiaryImproChem Proprietary Limited to acquire Clariant's water treatment business inAfrica and its South African assets for a total cash consideration of R409million. The acquisition is subject to certain conditions precedent. 8) The reviewed condensed consolidated financial results do not include all ofthe disclosures required for full annual financial statements and should beread in conjunction with the consolidated annual financial statements for theyear ended 31 December 2012 taking into account the changes in accountingpolicies as set out above. Commentary AECI produced commendable results in 2013 in an environment where trading andmarket conditions remained challenging. Revenue increased by 15% to R15 908million (2012: R13 827 million). Revenue generated outside South Africa was 20%higher at R5 224 million, representing 33% of total revenue. Headline earningsimproved by 57% to R885 million (2012: R562 million). Profit from operationsincreased by 17% to R1 398 million compared to R1 197 million in 2012, thetrading margin was 8,8% (2012: 8,7%), earnings per share ("EPS") were 845 cents(2012: 520 cents) and headline earnings per share ("HEPS") were 791 cents(2012: 503 cents). Key drivers of performance were pleasing year-on-year improvements in theexplosives and property businesses, the non-recurrence of the non-cash FRScharge relating to the community share trust component of the B-BBEEtransactions concluded in 2012, the weaker ZAR/US$ exchange rate and increasedselling prices. The Board has declared a final cash dividend of 210 cents per ordinary share(2012: 185 cents) bringing the total cash dividend for the year to315 cents pershare, a 20% increase on 2012's 263 cents per share. Safety The Group again improved its safety performance, with a best-ever TotalRecordable Incident Rate ("TRIR") of 0,52. The TRIR measures the number ofincidents per 200 000 hours worked. Safety remains a key performance indicatorfor management and it is pleasing that sustained efforts in this regard arehaving such a positive result. Explosives AEL Mining Services ("AEL") achieved a 17% increase in revenue to R7 400million (2012: R6 327 million) and overall explosives volumes to mining andquarrying customers were 5,6% higher. Profit from operations improved to R572million (2012: R417 million) after taking to account a R84 million retrenchmentcharge for the closure of the old initiating systems plants and the subsequentrelocation of production to the Initiating Systems Automated Plant ("ISAP").AEL benefited from the weakening rand as more than 50% of its revenue isgenerated outside South Africa and is mostly denominated in US dollars.Consequently, the profit improvement in AEL's foreign operations enhanced theoverall result by R72 million. In addition, a R38 million foreign exchange gainwas realised by repatriating cash to the AECI Group's central offshoreTreasury. The trading margin improved to 7,7%, (8,9% before severance costs) (2012:6,6%). The target remains to improve this to above 10%. The South African business performed well notwithstanding lower gold andplatinum prices. Explosives volumes were 6,8% higher than in 2012. Market sharegrew in the open cast and massive businesses, particularly in the iron ore andcoal sectors. New supply contracts were secured and this enabled AEL todiversify its commodity portfolio further in line with its strategy. Majorcontracts in initiating systems were retained although volumes declined in linewith decreased output from the narrow reef gold and platinum mining sectors inSouth Africa. The African business continued to expand its already extensive footprint as aresult of an increase in mining activity with the commencement of greenfieldprojects and the commissioning of three new bulk explosive plants in BurkinaFaso, the DRC and Egypt. In addition, AEL gained new supply contracts in thecopper and gold mining sectors. Explosives volume growth in Africa was 5,4%. The International business recorded improved profitability and growth eventhough some new contracts were delayed by customers owing to low thermal coaland gold prices. Explosives volume growth was 1,9%. The ammonium nitrate plant in Indonesia, part of AECI's minority investment inPT Black Bear Resources Indonesia ("BBRI"), was in commissioning by year-end.It will provide AEL with a secure in-country source of ammonium nitrate. During 2013 ISAP produced 98,9 million detonators and assembled 31,8 millionunits in line with market demand. ISAP is commercially complete and its 120million detonator output capacity has been verified. A further R30 million wasdelivered in cost savings and efficiencies. Capital investment amounted to R290 million (2012: R367 million). Of this, R126million was for expansion projects in the African business and for theimprovement of ammonia storage facilities at Modderfontein. As part of thephased investment in BBRI an additional R159 million was invested in 2013,bringing the total investment to R201 million. Further expansion in Africa and other territories of interest is expected in2014. Specialty chemicals Revenue increased by 10% to R8 359 million (2012: R7 621 million). Excludingsulphur trading, overall volumes grew by 5,2%. Profit from operations increasedby 3% to R922 million (2012: R891 million) and the operating margin was 11,0%compared to 11,7% last year. Although commodity prices increased, profitmargins in rand terms did not follow the same trend owing to the subduedtrading environment in South Africa's manufacturing sector. Higher sales attypically lower margins to the agricultural sector diluted the segment'soverall margin further. Chemfit, Chemical Initiatives, ImproChem, Nulandis and Senmin delivered verygood performances when compared to 2012. Senmin's results in 2012 werenegatively impacted by strikes in South Africa's platinum mining industry but astrong recovery was evident in 2013. ImproChem benefited from the integrationof General Electric's Chemical and Monitoring Solutions business in Africa,which was acquired in 2012. Other companies in the specialty chemicals clusterwere challenged by the volatile conditions prevailing in South Africa'smanufacturing sector. A number of businesses in the cluster were restructured in the year, at a totalcost of about R30 million. ChemSystems terminated its electroplating activitiesand Chemisphere Technologies, which supplies specialty chemical products andservices to the pulp and paper industry, will be integrated into ChemSystems asa business unit in 2014. Industrial Urethanes was brought into Lake Specialtiesand Infigro was moved to Lake Foods in the first half of the year. The acquisition of SA Premix was finalised in June 2013 and integrated intoChemfit's business in the third quarter. SA Premix produces and distributesanimal feed formulations that fortify and enhance the nutritional content offeeds. A new blending plant is scheduled to come on line early in 2014. In January 2014 AECI announced that it had reached agreement with ClariantSouthern Africa Proprietary Limited ("Clariant") for AECI's wholly-ownedsubsidiary ImproChem to acquire Clariant's water treatment business in Africaand its South African assets for a total cash consideration of R409 million.Also included in the acquisition is a 50% shareholding in Blendtech, Clariant'sB-BBEE partner in South Africa. The acquisition is in line with the Group'sstrategy to grow its footprint in the water solutions sector. It is subject tocertain conditions precedent, including approval by the relevant competitionauthorities. Capital expenditure for the cluster totalled R236 million (2012: R145 million)of which R151 million was for expansion, mainly at SANS Technical Fibers in theUSA where conversion to single stage nylon-spinning equipment is close tocompletion. Property Revenue from Heartland's combined activities increased by 68% to R672 million(2012: R400 million). Operating profit increased from R33 million to R219million. Revenue comprised the recognition of land sale transactions totallingR306 million (2012: R53 million) mostly in Longlake Ext 1 and WestlakeIndustrial, primarily for industrial end-uses. Heartland's results do not include income from the Shanghai Zendai bulk saletransaction which will take effect in 2014. On the back of weak demand for office space and no discernible improvement invacancy rates, office market rentals and office land sales continued to showlacklustre growth overall although there was better demand for office space inSomerset West, Western Cape. In the housing sector the entry level market wasstrong. To accelerate the realisation of value from its surplus property assets, inNovember 2013 AECI concluded an agreement for the disposal of the bulk of itssurplus property assets at Modderfontein and its property development businessto Shanghai Zendai Property Limited ("Shanghai Zendai") for R1 061 million(including VAT). Approval for the transaction was received from the CompetitionCommission in South Africa in January 2014 as was the approval of ShanghaiZendai's shareholders. For the transaction to take effect, properties to the value of R513 million(including VAT) (the "First Tranche") must be transferred to Shanghai Zendai'sSouth African subsidiaries. This transfer process has commenced and itscompletion is anticipated by no later than 31 July 2014, subject to therelevant extension provisions of the transaction. Once the First Tranche hasbeen executed the full purchase price will be remitted to AECI. The full termsof the transaction were published on the Stock Exchange News Service on 4November 2013. On receipt of the cash proceeds, the Board will evaluate optionsfor the application thereof. The Group continues to investigate solutions for the disposal of its surplusland and assets at Somerset West. Financial Capital expenditure totalled R633 million for the year (2012: R538 million)with R293 million of this invested in expansion projects at AEL's customersites, SANS Technical Fibers' expansion in single stage technology and theimprovement of ammonium nitrate storage and nitric acid production facilitiesat Modderfontein. Gearing was at 25% from 35% in June 2013 and 33% in December2012. Net working capital was 19,7% of revenue (2012: 18,6%), reflecting thelonger working capital trade cycles in operations outside South Africa and inthe property market. Cash interest cover improved to 11,3 times (2012: 7,8 times). Net interest paiddecreased to R175 million (2012: R201 million) as interest rates remained lowand offset the longer working capital trade cycle. Higher corporate centre charges were incurred, due largely to an increase inthe provision for AECI's long-term incentive scheme which tracks the shareprice and HEPS, a higher provision for costs associated with the Company'sdefined-benefit retirement and post-retirement medical aid, as well astransaction costs relating to the disposal of land to Shanghai Zendai. Inaddition, the management of the Group's environmental costs and liabilityprovision were moved from the property segment to the corporate centre in 2013. Restatement of 2012 comparatives On 1 January 2013, the following accounting standards applicable to theAECIGroup's reporting took effect: - IAS 19: Employee Benefits - IFRS 10: Consolidated Financial Statements - IFRS 11: Joint Arrangements As a result of these changes comparative figures for the periods 1 January 2012and 31 December 2012 have been restated. The effect of the restatements was adecrease in HEPS of 8%, from 547 cents per share to 503 cents per share. Directorate Mike Leeming will retire as a Non-executive Director of the Company at theAnnual General Meeting to be held on 2 June 2014. Mike has served on the Boardand several Board Committees since 2002. The Board thanks him for his dedicatedservice over the past 11 years. The recruitment process to appoint anadditional Non-executive Director to fill the vacancy has commenced. Strategic focus and outlook AECI's explosives and mining chemicals businesses are poised for further growthin South Africa in open cast mining, particularly in iron ore and coal, whilethe narrow reef platinum and gold sectors are expected to remain under pressureowing to weaker commodity prices and escalating costs. Industrial action willhave a negative effect on local markets. Strikes in the platinum miningindustry in 2014 have already impacted on AECI's results in the early part ofthe year. The benefits of growth outside South Africa from both green- and brownfieldexpansion projects in the copper, gold and iron ore mining sectors, as well asthose of the BBRI investment, are expected from 2014. The expansion of the Group's African footprint will continue to be supportednot only in mining solutions but also in other markets of strategic interestnamely water, oil, energy and gas; food additives; agriculture and specialtychemicals distribution. Further restructuring in the explosives business as well as the specialtychemicals cluster can be expected as the Group continues to review itsportfolio and cost base to ensure the best possible alignment with customerrequirements and the maximisation of growth opportunities in all countrieswhere it operates. Acquisitions in South Africa, the rest of Africa and in selected other regionsin AECI's markets of interest will continue to be pursued in the coming year. Schalk Engelbrecht Mark DytorChairman Chief Executive Woodmead, Sandton25 February 2014 Notice to shareholders Final ordinary cash dividend No. 160 Notice is hereby given that on Monday, 24 February 2014 the Directors of AECIdeclared a gross final cash dividend of 210 cents per share, in respect of thefinancial year ended 31 December 2013, payable on Monday, 14 April 2014 toordinary shareholders recorded in the books of the Company at the close ofbusiness on Friday, 11 April 2014. The last day to trade cum dividend will be Friday, 4 April 2014 and shares willcommence trading ex dividend as from Monday, 7 April 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 Agreement resultingin a net dividend of 178,50000 cents per share to those shareholders who arenot exempt. Application forms for exemption or reduction may be obtained fromthe Transfer Secretaries and must be returned to them on or before Friday, 4April 2014. The issued share capital at the declaration date is 128 241 140 listed ordinaryshares and 10 117 951 unlisted redeemable convertible B ordinary shares. Thedividend has been declared from the income reserves of the Company. NoSecondary Tax on Companies' credits are available to be used. Any change of address or dividend instruction must be received on or beforeFriday, 4 April 2014. Share certificates may not be dematerialised or rematerialised from Monday, 7April 2014 to Friday, 11 April 2014, both days inclusive. By order of the Board EN RapooGroup Company SecretaryWoodmead, Sandton25 February 2014 Transfer SecretariesComputershare Investor Services Proprietary Limited70 Marshall StreetJohannesburg2001 Computershare Investor Services PLC PO Box 82The PavilionsBridgwater RoadBristol BS 99 7NH England Registered Office1st floor, AECI Place24 The Woodlands Woodlands Drive WoodmeadSandton SponsorRand Merchant Bank (A division of FirstRand Bank Limited)