JOHANNESBURG – Industrial chemicals and explosives manufacturer AECI is continuing to look at expansion opportunities for its explosives business, AEL Mining Services, into markets beyond South Africa, especially the rest of Africa, Asia Pacific and South America, CEO Graham Edwards said Tuesday.

“Countries such as Morocco and Mozambique hold significant growth opportunities for AEL and the company is well positioned for this, as Africa will be the future hub in terms of resource growth,” he said at AECI’s financial year-end results presentation in Johannesburg.

Edwards said the group would also actively pursue opportunities for the expansion of its specialty chemicals cluster into other geographies this year.

“Our speciality chemicals cluster is based in South Africa and we are looking to expand into Central Africa in line with AEL’s footprint, from there moving to West and East Africa,” he pointed out.

Edwards said that while the manufacturing and mining production sectors appeared to be recovering, recent volatility suggested that this recovery remained fragile.

“However, AECI is confident in its ability to respond appropriately,” he noted.

Edwards said AECI delivered pleasing results in a trading environment challenged by currency and commodity volatility, labour strikes and heavy rainfall that impacted on opencast mining operations in some areas.

The company’s revenue grew by 16% to R13.39-billion, up from R11.56-billion in 2010. Despite volumes showing weak growth of 7%, the weaker rand against the dollar and rising chemical prices in the fourth quarter helped revenue growth.

Headline earnings of R772-million were 25% higher than R619-million in 2010 and profit generated from operations recorded a 24% increase to R1.31-billion from about R1.06-billion in the previous corresponding period.

The group’s trading margin improved to 9.8% from 9.2% in the previous year and headline earnings an ordinary share was up 25% to 720 c from 577 c.

Profit for the year also came in at R838-million, compared with R640-million in 2010.

OUTLOOK

Edwards said growth momentum in the company’s underlying businesses was expected to continue into 2012, specifically referring to its explosives and specialty chemicals businesses, which were the biggest drivers behind the growth recorded in its latest financial results.

“We foresee steady volume growth, depending on European and US demand growth that is seemingly starting to come through, while China’s so-called ‘soft landing’ from its property bubble, which is resulting in the loosening up of its bank requirements, add to some optimism,” he stated.

Edwards added that the company was also expecting growth from its acquisitions made last year, which included multinational company T&C Chemicals and farming and veterinary equipment supplier Instavet and that it was looking at further acquisitions this year.

However, he warned that the first quarter of the 2012 financial year would be tough, as the company was undertaking some market changes in this period.
 

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