One for or­phans

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA

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.


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