Jul 26, 2011
AECI eyes bigger move into Brazil, also keen on Nigeria expansionBack
Engineering|Gold|AECI|AEL|AEL Mining Services|Ael-mining-services|Africa|Copper|Environment|Explosives|Fire|Industrial|Platinum|Africa|Botswana|Brazil|Nigeria|South Africa|USD|Building|Chemical|Chemical Sector|Chemicals|Explosives|Manufacturing|Manufacturing Sectors|Mining|Oil And Gas|Products|Services|Diamonds|Graham Edwards|Mark Kathan|Operations
© Reuse this
In an interview with Engineering News Online, he said that acquisitions worth about $150-million "may be" in the pipeline in Brazil’s chemical sector in the future. “We have been in Brazil in the past four years, have learnt lessons and are at a point where we believe we can now make a bigger move into Brazil.”
But, Edwards described a move into Brazil as “opportunistic” in nature, as most of the businesses were fully priced, and as such, any strategic move required a business model that would add value.
The company is also focused on expanding into Africa, where Edwards identified significant opportunities to grow and develop the chemical business, particularly in the oil and gas rich nation of Nigeria.
“Nigeria has a growing middle class and a robust economy – there can be opportunities for us to grow by acquisition.”
The JSE-listed group delivered a stronger performance in the first six months of the year, despite volatile trading conditions in both the mining and manufacturing sectors. AECI posted headline earnings of R284-million, an 11% improvement from the corresponding period of 2010, and profit from operations was 13% higher at R546-million.
Assisted by global increases in commodity prices but tempered by the continued strength of the rand, which averaged R6.88/$ in the half-year, revenue from continuing operations increased by 10% to R5.97-billion.
The strength of the rand continued to be a challenge for customers, but AECI said it would continue to be cost effective as it competes against imported products.
“We believe in ramping up plants and getting margins through, the rest of the business can remain stable with underlying growth from the new plants,” Edwards explained.
With regard to mining, CFO Mark Kathan said the company expected growth across all regions, with commodity demand remaining sound in both industrial and investment sectors.
AEL Mining Services MD Tobie Louw indicated that the competitive mining market would remain challenging, but pricing would remain soft, with deep level mining volumes to remain under pressure.
But, despite the continued decline in South African deep level mining, AEL Mining Services experienced strong growth in the surface and massive businesses servicing the platinum, diamonds and chrome mining sectors.
AEL’s revenue was 11% higher than 2010 at R2.54-billion, driven by a 16% escalation in ammonia prices, which also resulted in higher working capital levels. Overall volumes grew by 2.5%, and profit from operations improved by 8% to R200-million.
“The mining services environment has become more competitive and a substantial portion of AEL’s business was subjected to tender processes in the half year,” the company said.
However, AEL said it was able to retain more than 90% of its business and the market share changes did not impact performance for the period.
In the rest of Africa, good growth was delivered by the copper mining sector in Central Africa and diamond mining in Botswana continued to perform creditably, the company said. But, the contribution from gold mining in West and East Africa remained flat.
Meanwhile, the higher demand for shock tube, the building of inventories and fire on a conventional plant has slightly delayed the processes for retrenchment of employees from conventional shock tube manufacturing facilities.
Edwards described growth in South Africa’s manufacturing sector as sluggish, but positive. While the company expected its operational performance in the second half of the year to be [historically] better than
the first quarter, it said results could be affected by the current labour unrest and tightening of market conditions.
Meanwhile, the company entered into a R1.2-billion broad based black economic-empowerment (BBBEE) transaction comprising permanent employees and a community trust that would fund educational and developmental initiatives.
The JSE-listed group, which delivered a stronger performance in the first six months of the year, said on Tuesday the BBBEE transaction would advance its empowerment aim of increasing black participation by a broad spread of South Africans.
The deal, which takes AECI’s BBBEE equity ownership up to 27.4% with regard to the BBBEE Codes of Good Practice, will have a maximum term of ten years and participants will receive a dividend from the first year.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
Integrated energy and chemical company Sasol has partnered with Unisa Graduate School of Business Leadership (SBL) professor and founder and CEO of PanAvest Partnership Dr Douglas Boateng to publish a series of books on executive supply chain management aimed at...
The World Wide Fund for Nature’s (WWF’s) 2014 Living Planet Index (LPI) indicates that there has been a 52% decline in vertebrate species since 1970. The Index tracked the trends of 10 000 discrete populations of over 3000 vertebrate species between 1970 and 2010.
Rwanda has joined a number of East African countries seeking to import electricity from Ethiopia as its demand grows. After it became apparent several generation project it is implementing will not come on stream early enough, now plans to import 400 MW from Ethiopia...
Metrorail’s first new passenger train will arrive in November next year, says Passenger Rail Agency of South Africa (PRASA) CEO Lucky Montana. “Next year we will be able to put our hands around the infrastructure and equipment we have been talking about for so long.”
The Competition Commission has launched an investigation into what it says are “price fixing, market division and collusive tendering in the market for the manufacture and supply of automotive components to original equipment manufacturers” (OEMs, or vehicle...