Jul 25, 2012
AECI focuses growth on Mozambique, West AfricaBack
Engineering|Gold|Johannesburg|AECI|AEL|AEL Mining Services|Ael-mining-services|Africa|CoAL|Copper|Explosives|Industrial|Mining|Platinum|Property Development|Africa|Latin America|South America|Cameroon|Mauritania|Mozambique|Niger|South Africa|Chemicals|Explosives|Explosives Manufacturer|Industrial Chemicals|Manufacturing|Property Development|Services|Speciality Chemicals|Still-lagging Manufacturing Sector|Graham Edwards|Iron Ore|Iron-ore|Mark Dytor|Schalk Venter|Operations|East Africa|Southeast Asia|West Africa
© Reuse this
This formed part of AECI’s growth strategy in the rest of Africa and further afield.
At the company’s six-month results presentation, in Johannesburg, he told Engineering News Online that AEL was aiming to tap into the developing Mozambican coal sector and the growing iron-ore sector in West African countries, including Mauritania, Cameroon and Niger.
“Up until now, our growth has been in gold in West Africa, but now new iron-ore deposits are being developed and coal will become big in East Africa, in Mozambique,” he noted.
AEL Mining Services MD Schalk Venter stated the company was also focusing on its continued growth in South East Asia, as well as expanding its electronic detonators market in Latin America.
Currently, 54% of the group’s revenue was generated from mining, and with the sector declining in South Africa, AECI chemicals executive Mark Dytor said the company would, over the next 18 months, focus on expanding its special chemicals business into Africa where mining activity was soaring.
AECI was also still perusing its Brazilian strategy and had visited more than 20 potential targets for acquisition in that country’s speciality chemicals sector.
Further, South Africa’s still-lagging manufacturing sector and expectations of slow growth ahead, also motivated AECI’s redirected focus to the rest of Africa and South America. Manufacturing accounts for 35% of the group’s revenue.
Meanwhile, despite volatile trading conditions and operational issues in some of its key businesses during the first six months of 2012, AECI’s revenue increased by 17% to R6.95-billion. This was owing to an increase in ammonia and chemical commodity prices in the first quarter, a weaker rand/dollar exchange rate and volume growth of 8.2%, owing to acquisitions made in 2011.
Headline earnings declined by 58% to R120-million, mainly owing to International Financial Reporting Standard charges of R148-million pursuant to the broad-based black economic-empowerment transaction concluded earlier this year. This also resulted in headline earnings per share falling by 59% to 108c a share.
Explosives revenue from AEL was 14% higher at R2.91-billion, as ammonia prices increased by an average of 14% and AEL’s overall volumes improved by 4.2%.
However, profit from operations declined by 8.5% to R183-million, while the operating margin deteriorated to 6.3%, down form 7.9% last year.
AEL’s working capital increased owing to the importation of ammonia and ammonium nitrate at an additional cost of R35-million in response to ammonia supply constraints.
A planned shutdown of No 11 nitric acid plant, at Modderfontein, caused further buy-ins at a cost of R15-million.
In AECI’s specialty chemicals division, revenue increased by 20% to R3.95-billion, also pushed up by volume growth, the weakening of the rand and higher chemical commodity prices. Profit from operations was 6% higher at R411-million and the operating margin was 10.4%.
In the company’s property business, operating profit decreased by 42% to R21-million, as no property sales were finalised in the period.
AECI stated that the property development market remained muted except for specific well-located areas, but Edwards maintained that the prospects for property sales were improving.
The company’s outlook for the explosives and mining chemicals sectors remained promising.
Edwards indicated that sales volumes were expected to be stable, despite the global slowdown. Gold, coal, copper and iron-ore mining in the rest of Africa was expected to be robust, while platinum and gold mining in South Africa would continue to decline.
AECI’s focus for the rest of the year would be on improving internal efficiencies, including working capital, and on optimising operating platforms.
“There is significant potential for improvement in operations and internal efficiencies in explosives and specialist chemicals; however, restructuring charges are likely to be incurred,” Edwards warned.
The board declared an interim cash dividend of 78c a share for the period under review.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Researcher and Deputy Editor Online
Other Chemicals News
Updated 6 hours ago The tide has turned for South African ports and the Transnet National Ports Authority (TNPA) is pressing ahead with its investment under Transnet’s Market Demand Strategy (MDS) notwithstanding poor economic growth. TNPA CEO Richard Vallihu told a TPA...
Updated 7 hours ago A 7 500 m2 rooftop solar system has been installed on several buildings at the V&A Waterfront, in Cape Town. The powering of several buildings on the iconic property will result in an estimated 1 640 000 kWh/y of clean energy. So far, 900 kW have been successfully...
Updated 7 hours ago The 865 km gas pipeline from the central processing facility (CPF) in Temane, Mozambique, to Secunda, South Africa, is to undergo a further $210-million expansion, the Republic of Mozambique Pipeline Investments Company (Rompco) confirmed on Monday. Rompco is a joint...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 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 infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...