JSE-listed AECI on Tuesday said its core operating segments, explosives and specialty chemicals, have delivered “commendable” performances in 2016, despite a difficult domestic and global trading environment.
Group revenue grew by 1% year-on-year to R18.6-billion for the 12 months to December 31, with 35% of revenue generated outside South Africa. Headline earnings, however, fell by 13% to R864-million, while headline earnings per share (HEPS) were down 9% to 818c.
Profit from operations declined by 22% to R1.33-billion.
Several one-off anomalies affected top-line performance year-on-year.
The group’s results for 2015 included the sale of AECI’s bulk property assets in Somerset West, which added R394-million in profit.
Further, the company completed the derisking of its defined-benefit obligations for past and current employees this year and the related settlement costs were charged to the income statement. This negatively impacted HEPS for 2015 and 2016 by 116c and 102c respectively.
Meanwhile, revenues in the explosives business declined by 3.2% to R7.97-billion owing to the sharp decline in ammonia prices and the strengthening of the rand against the dollar in the second half of the year.
“Approximately 60% of this segment’s revenue is US dollar based,” CEO Mark Dytor said.
He noted, however, that the explosives business had improved its profitability by 7.4% to R449-million.
The specialty chemicals businesses recorded an 8.3% increase in profit to R1.21-billion.
“In specialty chemicals specifically, revenue increased by 9.1% to R10.79-billion, driven by higher prices owing to the weaker average exchange rate against the dollar and the benefits of the acquisitions finalised in 2015.”
AECI increased its cash generation by 52% to R1.92-billion owing to the effective management of costs and working capital, particularly in its explosives business, said Dytor.
A final cash dividend of 300c per ordinary share was declared, bringing the total ordinary dividend for the 2016 financial year to 43c, 13% higher than in 2015.
Dytor, meanwhile, said commodity prices appear to be on an upward trajectory, which he notes is a positive signal for the mining industry.
“AECI’s explosives business remains highly competitive and tender processes continue. Recently, four new tenders were awarded to AECI’s explosives business, representing additional annual revenues of $25-million from the end of 2017.”
To meet the growing demand for mining chemicals in Africa, R90-million is being invested in increasing the group’s xanthates manufacturing capacity by 4 000 t/y.
The larger facility will come on line in early 2018 and will support the beneficiation of copper, gold and platinum.
Better overall gross domestic product (GDP) growth is forecast for South Africa and the rest of the world and the dollar is likely to remain strong.
The ongoing improvement in oil prices should also have a positive effect on the price of commodity chemicals and AECI’s water, oil and gas business in West Africa.
In Southern Africa, growth in the food industry continues to outpace GDP and, in the agrochemicals and water segements, the normalisation of rainfall patterns present significant opportunities.
“A more positive overall environment will benefit AECI as it implements its strategy,” said Dytor.