AECI on ac­qui­si­tion road as it ramps up profit

The Star Early Edition - - COMPANIES - Sandile Mchunu

SOUTH African-based ex­plo­sives and spe­cial­ity chem­i­cals com­pany AECI Lim­ited is look­ing to ex­pand its ge­o­graphic foot­print and mar­ket reach through or­ganic growth and ac­qui­si­tions in the year ahead.

AECI chief ex­ec­u­tive Mark Dy­tor was con­fi­dent the group would add more ac­qui­si­tions in the next months and would seek to di­ver­sify and look abroad.

“We have al­ready gained new min­ing con­tracts in Africa and Aus­tralia for the next fi­nan­cial year and we are con­fi­dent about 2018. We are also look­ing at bring­ing in one or two ac­qui­si­tions; hope­fully we will an­nounce them in the next cou­ple of months. We want to add some ac­qui­si­tions and to the in­vest­ment we have just an­nounced in the US,” Dy­tor said.

The group re­cently demon­strated this ap­petite by in­vest­ing $5 mil­lion (R65m) in re­new­able chem­i­cals busi­ness, Ori­gin Ma­te­ri­als, a start-up based in Cal­i­for­nia last week.

The group has said this in­vest­ment po­si­tioned AECI to take ad­van­tage of the global shift to­wards re­new­able prod­ucts and to ben­e­fit from op­por­tu­ni­ties in the re­new­able and bio-based chem­i­cals in­dus­tries.

AECI has five re­port­ing seg­ments: min­ing op­er­a­tions, wa­ter so­lu­tions, agri­cul­ture, food and ex­plo­sives and chem­i­cals, which were de­vel­oped af­ter the group’s 2014 strat­egy.

In the six months to end of June, the com­pany im­proved on last year’s per­for­mance.

Dur­ing the pe­riod the group saw con­di­tions in the lo­cal and in­ter­na­tional min­ing sec­tor im­prov­ing with some com­mod­ity price in­creases pro­vid­ing the stim­u­lus for higher min­ing out­put year-on-year. In the agri­cul­tural sec­tor, nor­malised weather pat­terns in south­ern Africa’s sum­mer rain­fall re­gions en­abled a re­cov­ery.

How­ever, in the Western Cape the ef­fects of the drought “re­main of grave con­cern”, the group said.

But AECI con­tin­ued to face chal­lenges in South Africa as ac­tiv­ity in the lo­cal man­u­fac­tur­ing sec­tor slowed fur­ther and the strength of the rand ex­change rate against ma­jor cur­ren­cies off­set mod­er­ate in­creases in com­mod­ity chem­i­cal prices.

De­spite these chal­lenges, the group man­aged to re­port an in­crease of 32 per­cent in head­line earn­ings per share (Heps) to 386 cents a share, up from 293c, while profit from op­er­a­tions in­creased by 19 per­cent to R677m, up from R571m as com­pared with last year. Rev­enue de­clined 7 per­cent to R8.48 bil­lion, down from R9.07bn.

The group said 34 per­cent of to­tal rev­enue was gen­er­ated out­side of South Africa.

The board has de­clared an in­terim cash div­i­dend of 138c per or­di­nary share, which is 2 per­cent higher than the 135c de­clared a year ago.

Shares in AECI fell 1.43 per­cent to close at R105.94 on the JSE yes­ter­day.

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