AECI
LIMITED
(Incorporated
in the Republic of South
Africa)
(Registration
No. 1924/002590/06)
Share
code: AFE ISIN:
ZAE000000220
Hybrid
code: AFEP ISIN: ZAE000000238
Bond
company code: AECI
LEI:
3789008641F1D3D90E85
(AECI or
the Company or the Group)
UNAUDITED
CONSOLIDATED INTERIM FINANCIAL RESULTS AND CASH DIVIDEND
DECLARATION FOR THE HALF-YEAR ENDED 30 JUNE
2023
-
Revenue up
19% to R18 404 million
-
EBITDA1
up 18% to
R1 826 million
-
EBIT2
up 20% to
R1 269 million
-
HEPS up 5%
to 603 cents
-
EPS up 5%
to 600 cents
-
Growth
capex of R360 million (55% of total R652 million capex)
-
Cash
dividend down 48% to 100 cents per
share
1 Earnings
before interest, taxation, depreciation and amortisation calculated
as profit from operations and equity-accounted investees, plus
depreciation, amortisation and impairments.
2 Earnings
before interest and taxation is defined as profit before interest,
taxation and share of profit of equity-accounted investees, net of
taxation.
SAFETY
The
Group's Total Recordable Incident Rate (TRIR) at 30 June 2023 was 0.24 compared to 0.15 at
31 December 2022. During the first
four months of this year, the Group had an unfortunate rise in
recordable incidents, which regrettably included two work-related
fatalities.
A Safety
Improvement Initiative was launched in May
2023 to re-ignite the focus on safety. It prioritises two of
the Group's Zero Harm fundamentals, namely accountable leadership
and risk-based safety with a clear expectation of leadership action
and targeted attention on four major safety risks identified from
the incidents. Early indicators have shown a reduction in both the
severity and frequency of incidents and no significant incidents
have occurred since April.
Management's
focus remains steadfast on addressing the root causes and improving
safety performance across AECI.
RESULTS
OVERVIEW
The Group
achieved strong results in the first six months of the 2023
financial year (the current period), with revenue reaching R18 404
million, up 19% compared to the six months ended 30 June 2022 (the prior period). EBIT of R1 269
million (H1 2022: R1 056 million) was 20% higher, notwithstanding
the R180 million loss (H1 2022: R86 million loss) incurred by AECI
Schirm Germany. EBITDA and EBIT margins remained stable at 10% and
7%, respectively, demonstrating the resilience of the Group's core
businesses in an operating environment characterised by ongoing
volatility and change.
However,
EPS of 600 cents (H1 2022:
573 cents) and HEPS of 603 cents (H1 2022: 573
cents) were up by only 5% due to higher finance costs and an
effective tax rate increase as a result of the AECI Schirm Germany
losses.
R million
(unless stated otherwise)
|
H1
2023
|
H1
2022
|
%
change
|
Revenue
|
18
404
|
15
505
|
19
|
EBITDA
|
1
826
|
1
545
|
18
|
EBITDA
margin (%)
|
10
|
10
|
-
|
Depreciation
and amortisation
|
537
|
486
|
10
|
EBIT
|
1
269
|
1
056
|
20
|
EBIT margin
(%)
|
7
|
7
|
-
|
Net profit
after taxation
|
650
|
626
|
4
|
Earnings
per share (EPS) (cents)
|
600
|
573
|
5
|
Headline
earnings per share (HEPS) (cents)
|
603
|
573
|
5
|
Cash
generated from operations
|
2
063
|
1
720
|
20
|
The net
gearing ratio of 47% (45% at 31 December
2022) was within the previously communicated guidance range
of 40% - 60%. This level is considered high in the current interest
rate cycle.
Net debt
of R5 741 million (FY 2022: R5 345 million) was driven in part by
net working capital spend for the period of R351 million (FY 2022:
R2 570 million) to support increased sales volumes in certain
businesses and counter potential supply chain interruptions
(namely, potential work stoppages and ammonia supply
challenges).
The net
finance costs of R274 million (H1 2022: R124 million) were 121%
higher due to:
-
Debt
related to AECI Schirm, which is loss making.
-
Continued
higher working capital levels.
-
Higher
interest rates.
The
Group's net debt to EBITDA, as defined in covenant agreements, at
30 June 2023 was 1.6 times, remaining
well within the loan covenant threshold of 2.5 times.
In view of
the above, the reduction of net debt as well as net working capital
remain key focus areas for management and the Board, with
operational initiatives and programmes introduced to further
strengthen the balance sheet.
The
process to refinance the Group's long-term debt was initiated
during the current period, with a single coordinator appointed
across all the phases of the refinancing. These include a
sustainability-linked framework, a refreshed Domestic Medium Term
Note Programme and public auction targeted for Q3 2023. A loan
market syndication is expected to follow in early Q4
2023.
Capital
expenditure (capex) in the current period amounted to R652 million,
in line with expectations. This included the organic growth spend
related to AECI Schirm USA's
expansion project as well as AECI Mining Explosives' solar projects
and its mobile manufacturing units (MMUs) replacement
programme.
The
net asset value per share attributable to ordinary shareholders
increased by 7% to 11 024 cents (H1 2022: 10 343 cents).
The
Board declared an interim cash dividend of 100 cents per share (H1
2022: 194 cents per share).
SEGMENTAL
REVIEW
AECI
Mining's revenue
was up 29% to R10 004 million (H1 2022: R7 749 million). This was
driven primarily by strong volume growth in bulk explosives and
initiating systems. The segment's total revenue generated outside
of South Africa increased to 69%
(H1 2022: 64%). EBIT of R1 038 million (H1 2022: R713 million) was
up 46% and the EBIT margin strengthened to 10% compared to 9% in
the prior period.
AECI
Water's revenue at
R1 061 million (H1 2022: R979 million) was up 8% following market
expansion in the mining industry in Central and West Africa and increased sales in the
industrial sector. EBIT for the segment at R126 million, was up 26%
(H1 2022: R100 million) and the EBIT margin improved to 12% (H1
2022: 10%).
AECI
Agri Health's revenue of
R3 375 million (H1 2022: R2 889 million) was up 17%. An operating
loss of R57 million was incurred (H1 2022: R11 million profit),
inclusive of AECI Schirm Germany's loss. Excluding AECI Schirm,
revenue for the segment of R1 939 million (H1 2022: R1 826 million)
was up 6%, EBIT of R79 million (H1 2022: R77 million) was up 3% and
the EBIT margin was unchanged at 4%.
AECI
Schirm's revenue of
R1 436 million (H1 2022: R1 063 million) was up 35% following sales
volume growth in AECI Schirm USA
and higher selling prices in AECI Schirm Germany. The EBIT loss of
R136 million (H1 2022: R66 million loss) reflects AECI Schirm
Germany's loss of R180 million (H1 2022: R86 million loss) which
included R89 million (EUR 4.3
million) in severance costs and R30 million in consulting
fees. AECI Schirm USA's EBIT was
R58 million (H1 2022: R36 million). The plant capacity upgrade at
the Ennis, Texas, facility was
completed and the plant in Benton,
Illinois is expected to be fully operational by the end of
July 2023.
The Board
approved comprehensive turnaround project for AECI Schirm Germany
is progressing well and is on track to deliver in line with
previous guidance. Additional measures were also introduced in the
current period, aimed at improving profitability
further.
AECI
Chemicals' revenue of
R3 943 million (H1 2022: R3 921 million) was up 1%. EBIT was R209
million (H1 2022: R314 million) and the EBIT margin was under
pressure, at 5% (H1 2022: 8%). Several factors contributed to this
performance, including a decline in certain commodity chemical
input prices and lower sales volumes in AECI Food & Beverage
and AECI SANS Fibers.
AECI
Much Asphalt's revenue of
R1 154 million (H1 2022: R1 028 million) was up 12% and EBIT of R22
million (H1 2022: R61 million) was down 64% due to margin pressure.
Sales volumes continue to improve.
COMMITMENT TO B-BBEE OWNERSHIP GOALS
As
previously communicated, the AECI Employees Share Trust (EST)
implemented in 2012 vested on 9 February
2023 with no value and was wound up. The beneficiaries did
benefit from receiving net dividends of R35 million over the
prescribed period.
In an
effort to preserve employee goodwill and ensure continued
productivity, the Board and the AECI Executive Committee approved
an ex gratia payment totalling R106 million to all eligible
employees.
AECI
remains unequivocally committed to furthering the Company's B-BBEE
Ownership goals and continues to look for meaningful ways to enable
this. One option remains a relevant employee scheme that takes into
consideration key learnings from the previous EST. In line with
this, a new scheme to replace the EST is being considered. This new
scheme will aim to deliver sustainable Black ownership shareholding
in the Company and tangible empowerment for employees. Any proposal
remains subject to approval by the Board and
shareholders.
FUTURE FOCUS AND PROSPECTS
The
priorities for the next six to 12 months include the
following:
-
Delivery
of the AECI Schirm Germany turnaround project.
-
Operational
interventions and programmes aimed at further strengthening the
balance sheet, expected to reduce working capital and
gearing.
-
Value
unlock driven through continued focus on improving returns from
existing businesses, organic growth as well as targeted portfolio
optimisation. Clear policies and processes will drive decision
making.
A process
to revise the Group strategy has commenced and Board approval is
expected towards the end of the year.
DIVIDEND
Declaration of interim ordinary cash dividend No.
179
Notice is
hereby given that on Tuesday, 25 July
2023 the Directors of AECI declared a gross interim cash
dividend of 100 cents per share in
respect of the six months ended 30 June
2023. The dividend is payable on Monday, 4 September 2023 to holders of ordinary shares
recorded in the register of the Company at the close of business on
the record date, being Friday, 1 September
2023.
The last
day to trade "cum" dividend will be Tuesday, 29 August 2023 and shares will commence trading
"ex" dividend as from the commencement of business on Wednesday,
30 August 2023.
A South
African dividend withholding tax of 20% will be applicable to all
shareholders who are not either exempt or entitled to a reduction
of the withholding tax rate in terms of a relevant Double Taxation
Agreement, resulting in a net dividend of 80
cents per share payable to those shareholders who are not
eligible for exemption or reduction. Application forms for
exemption or reduction may be obtained from the Transfer
Secretaries and must be returned to them on or before Tuesday,
29 August 2023.
The issued
share capital of the Company at the declaration date is 105 517 780
listed ordinary shares and 3 000 000 listed cumulative preference
shares. The dividend has been declared from the income reserves of
the Company.
Any change
of address or dividend instruction must be received on or before
Tuesday, 29 August 2023.
Share
certificates may not be dematerialised or rematerialised between
Wednesday, 30 August 2023 and Friday,
1 September 2023, both days
inclusive.
By order
of the Board
Cheryl Singh
Group
Company Secretary
Woodmead,
Sandton
AVAILABILITY
OF THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE
HALF-YEAR ENDED 30 JUNE
2023
The
unaudited consolidated interim financial results for the half-year
ended 30 June 2023 are available
at:
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/AFE/Interim23.pdf
https://www.ftp.aeciworld-online.com/pdf/investors/interim-results/2023/interim-results-2023.pdf
Any
investment decisions made by investors and/or shareholders and/or
noteholders should be based on consideration of the unaudited
consolidated interim financial results for the half-year ended
30 June 2023.
Directors:
KDK
Mokhele (Chairman), H Riemensperger1
(Group
CE), ST Coetzer2,
SA Dawson3,
FFT De Buck, WH Dissinger1,
KM Kathan (Executive), P Mishic O'Brien4,
AM Roets, PG Sibiya
1 German 2
Canadian 3 Australian 4 American
Group Head
Investor Relations: Z Salman
Group
Company Secretary: C Singh
Board
sign-off date: 25 July
2023
Results
released on: 26 July 2023
Equity
Sponsor and Debt Sponsor
Rand Merchant Bank (A division of FirstRand Bank
Limited)
1 Merchant
Place, Cnr Fredman Drive and Rivonia Road, Sandton, 2196
Registered
office
First
floor, AECI Place, 24 The Woodlands, Woodlands Drive, Woodmead,
Sandton
Share
transfer secretaries
Computershare
Investor Services Pty Limited, Rosebank Towers,
15
Biermann Avenue, Rosebank, 2196
And
Computershare Investor Services PLC, PO Box 82, The
Pavilions,
Bridgwater
Road, Bristol BS 99 7NH, England