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AECI mining projects boost earnings amid other pressures

6th November 2023

By: Marleny Arnoldi

Deputy Editor Online

     

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An increase in mining explosives sales volumes in Southern Africa, Central Africa and Asia Pacific has helped to keep JSE-listed chemicals group AECI’s revenue and earnings in the nine months to September 30 on par with the same period of last year.

The group’s Mining division has recorded a 30% increase in earnings before interest and taxes (Ebit) in the period to R1.6-billion, which offset year-on-year decreases of 2% and 23% in Ebit for the Water and Agri Health divisions, respectively.

Agri Health Ebit decreased to R148-million in the period under review, while Water Ebit decreased to R170-million.

Although the two divisions recorded higher revenue driven by higher selling prices and moderately higher sales volumes, a lag in cost recovery affected margins and is expected to correct in the last quarter of the year.

The AECI Chemicals division also recorded lower volumes and pricing, resulting from a general economic downturn in South Africa, compounded by the added strain of loadshedding affecting consumer operations. Chemicals recorded an 18% decline in Ebit to R342-million in the nine months under review, compared with the same nine months of 2022.

The AECI Schirm division, which comprises the group’s Germany- and US-based operations, recorded a loss of about R159-million; however, the division has had good sales volume growth and price improvements. The Ebit loss at AECI Schirm Germany included R138-million in turnaround project costs, with the project being on track as of November 6.

AECI explains that the trading environment in Germany has become strained and impacted by high energy costs, coupled with low chemicals demand, resulting in a downturned outlook for AECI Schirm in the short term.

The AECI Much Asphalt division posted lower Ebit of R89-million, down 7% year-on-year, on the back of cost recovery delays, extensive rains and a taxi strike in the period under review,

Moreover, AECI advises that the process to refinance the group’s long-term debt remains under way, following initiation in the reporting period. This includes a debt capital market concluded in September and a loan market syndication that will conclude in November.

The company’s capital expenditure investment in the reporting period of just more than R1-billion is targeted as normal maintenance, four mining projects in Asia Pacific, solar farms in Modderfontein and Sasolburg, as well as mobile manufacturing unit replacement.

In the medium term, AECI expects to unlock value through implementation of a new strategy that will introduce initiatives and programmes aimed at driving earnings growth through a returns-focused and streamlined portfolio.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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