The explosives and speciality chemicals group posted explosives’ revenue of 3.5 billion rand for the 2013 and 2014 period as volumes and profit from operations were negatively affected by the five-month platinum mining strike as well as a weaker exchange rate of the rand to the US dollar.
While explosive volumes to mining customers increased by one per cent, those for initiating systems declined by 39 per cent. Profit from operations also decreased by 62 per cent to 120 million rand.
“It is estimated that 150 million rand of the decline was due to the direct impact of the strikes. In addition, a further 62 million rand provision was made for the planned restructuring of AEL’s head office at Modderfontein,” said [DATA AFE:AECI Limited] in a statement.
The group however stated that in spite of the strikes, its Southern African business performed well and explosive volumes improved by 1.2 per cent due to growth in the iron ore mining sector.
Also, explosives volumes in the rest of Africa grew by 5.1 per cent with a strong performance in Central Africa’s copper belt. Volumes were however lower in West Africa where customers mined higher-grade ores at a lower cost due to the decline in the gold price.
On the other hand, the company’s Indonesian business also performed poorly with overall volumes declining by 7.4 per cent due to a drop in thermal coal prices which resulted in the closure of a few small thermal coal mines in the region. Kaltim Prima Coal, AECI’s largest customer in Indonesia, however remained solid.
Nevertheless, the group improved its year-on-year performance, mostly attributable to the bulk sale of its Modderfontein property for one billion rand as well as solid results from its speciality chemicals division which delivered a revenue increase of 11 per cent to 4 billion rand.
While AECI’s speciality chemicals cluster posted a decline in volumes and a 100 million rand in profit loss from operations due to the strike, the division managed to increase its revenue by 11 per cent to 4 billion rand.
Total revenue therefore increased by 11 per cent from 7.2 billion rand in 2013 to 7.9 billion rand in 2014 of which 31 per cent of revenue was generated outside of Africa at 2.5 billion rand.
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Profits from operations grew by 33 per cent to 814 million rand while headline earnings improved by nine per cent to 436 million rand.
Earnings per share were 51 per cent higher at 537 cents while headline earnings per share grew by ten per cent to 390 cents.
AECI’s board also declared an interim cash dividend of 115 cents per ordinary share for the period.
The company announced that it has entered the Australian market and an office has been established in Brisbane while a bulk emulsion plant is being shipped off to a site in Queensland, with trial blasts expected to start before year end.
Also, an equity investment in the ammonium nitrate emulsion producer, PT Black Bear Resources Indonesia, for 23 million US dollars was completed by AECI during the period.
The group’s acquisition of Clariant’s African water treatment announced in February 2014 was finalised in June for a cash consideration of 400 million rand. The business has been integrated into Improchem, a wholly owned subsidiary of AECI, and its financial results are set to be consolidated from July 2014.
“The acquisition is in line with the Group’s strategy to grow its African footprint in the water solutions sector,” said the company.
AECI added that growth in South Africa’s iron ore and coal mining sectors remain positive however in platinum mining, uncertainty remains regarding the timing and extent of the industry’s recovery from the strikes.
“The negative effects of these have continued into the second half-year and it is unlikely that AECI’s businesses serving these customers will recover lost profits,” said AECI.
“AECI will continue to pursue its strategy of expanding into new markets in Africa and other countries of interest. It will build on the progress made to date in Africa, Australasia and Latin America.”