JSE-listed AECI on Wednesday reported positive financial results for the six months ended June 30.
Together with contributions from the acquisitions of Schirm and Much Asphalt in February and April respectively, AECI increased its revenue by 24% to R10.47-billion and profit from operations by 35% to R911-million.
Headline earnings increased to R483-million, in line with the 19% growth in headline earnings a share to 458c.
“Although demand and prices in the global resources sector remained buoyant overall, the strong rand exchange rate partly offset the benefits of higher chemical input prices and also had a negative impact on earnings generated outside South Africa,” CEO Mark Dytor said at a presentation of the company’s results in Johannesburg.
He pointed out that exchange rate volatility was persistent throughout the six months under review and, while the global outlook was more positive generally, recent shifts in world trade relationships have created a level of uncertainty.
Meanwhile, the acquisitions had a combined 10% positive overall effect on headline earnings and Schirm’s profit from operations included a one-off net gain of R32-million.
Teams across all of the group’s disciplines have been active in closing the acquisitions and integrating them into AECI in terms of systems, culture, policies and standards.
“Conditions in the local economy, including the mining and manufacturing sectors, remained depressed in the first six months of the year and the effects of the drought in the Western Cape persisted,” Dytor pointed out.
He added that the positive changes in the political environment at the end of 2017 had not yet translated into accelerated economic growth and a step-change in the short term appeared unlikely.
Dytor stated that growth in South Africa’s gross domestic product would require good road infrastructure and the company remained positive that investment would occur in this space in the foreseeable future.
“The global demand for cobalt and copper drove mining activity in the central African region, which helped grow AECI’s explosives volumes in the rest of Africa by 10.6%, as well as higher levels of exports in sales of sulphuric acid in its Chemicals pillar,” he said.
He further noted that the ramp-up of new contracts in Francophone West Africa also contributed to the mining sector’s performance.
In Australia, higher sales and the deployment of reactive ground technology at a large mine also assisted the performance of Mining Solutions.
Volumes in the Asia Pacific region as a whole were up by 47%.
The ongoing drought in the Western Cape affected AECI’s Water & Process and Plant & Animal Health businesses.
Rainfall in the most affected areas in recent months, however, improved the outlook moving forward.
Four desalination plants for customers in the fisheries and food processing industries in the Western Cape were commissioned successfully and long-term service and chemical supply agreements are in place to support the infrastructure.
“To maintain the growth trend achieved in the first six months of this year, AECI’s focus to year-end will be on generating and managing cash, clawing back working capital, finalising the integration of its acquisitions and extracting the value expected from them, and capitalising on opportunities for synergies within and across its businesses,” he said.
The board declared an interim cash dividend of 149c a share, an increase of 8% year-on-year.