One for orphans
AFTER SPENDING in excess of R1bn on capital investments in financial 2008, chemical and explosives group AECI Ltd has committed itself to spending another R2bn this financial year on six new projects for its mining services division.
The division, which specialises in explosives for the mining industry, saw a 50% revenue growth in the year while total revenue increased 48% to R12,8bn, accompanied by a 16% growth in headline earnings per share and 8% dividend growth. AECI said those were due to the good commodity prices in the first nine months of 2008.
That’s despite the electricity shortages that brought the mining industry to a standstill early 2008 and the free fall in commodity prices in the last quarter of 2008.
AECI’s other operating division, Chemical Services (Chemserve), also saw 50% revenue growth. Chemserve serves market sectors such as consumer, automotive and manufacturing industries. Of the R1bn investment expenditure in 2008, R596m was spent on Chemserve and as a result six chemical plants will be commissioned during financial 2009. Those will help AECI stay ahead of the game in terms of production capacity for when things turn for the better in the global economy.
Now that AECI has rid itself of the lossmaking SANS Fibres’ polyethylene terephthalate polymer (PET) business in the Western Cape, it has started clearing the plant in order to begin selling the land. That, together with its R2,5bn Heartland properties in Gauteng and Somerset West will provide a steady income that’s set to counter the negative effects of recession on its core businesses during the next five years when AECI realises the land.
AECI is currently trading 500c higher than its lowest price of the past year and some way off the 6900c high. At the cur- expensive at an earnings multiple of 11,5 times and the 412c HEPS it achieved last year. However, buyers of the share will be buying a defensive stock that has a strong and diverse base of income streams that provides the certainty needed by orphans and widows.