South African chemicals and explosives group AECI reported a near doubling of interim profits to R484-million for the six months to June 30, 2010, and reported a 127% rise in headline earnings to 238 c a share when compared with the corresponding period in 2009.

Revenue from continuing operations rose 3% to R5,4-billion during the period and a cash dividend of 70 c a share was declared.

Speaking to Engineering News Online following the release of the results on Wednesday, CEO Graham Edwards attributed the turnaround to an increase in sales volumes, which was supported by the fact that the group's strategic growth projects, which had been implemented over a three-year period, were all currently being ramped up.

The JSE-listed company saw volumes grow by 15%, mainly owing to its explosives business, AEL, which expanded its position in the African market and also cast its net into the South American and Indonesian markets.

Edwards said that the company has held a strong market position in West Africa and East Africa, and was now focused on bolstering its business further in Central Africa, including Zambia and the Democratic Republic of Congo.

Further, South America would become the newest target for the company's explosive business. "We are considering strategic acquisitions and joint-venture opportunities with South American companies and we will be looking at leveraging our technologies into the continent," said Edwards.

AECI's recent expansions of its explosives and chemicals businesses had also given it capacity to increase exports. "Foreign sales for the reporting period were up 17,7%, and there is still a lot of room to grow internationally, especially in our chemicals business which has not yet seen much expansion outside of South African borders."

Over the past three years, AECI has spent around R2-billion on a number of big projects, and Edwards noted that the company was now positioned to start cashing in on these projects. "We expect big things for the company, depending on the ramp-up of our new plants and market conditions."

AECI is now equipped with a new ISAP automated shock-tube plant, which is also the only one of its kind in the world, plus a new CS2 plant and a polyacrylamide plant.

But Edwards acknowledged that conditions remained challenging for the company's property business, which would seek to take advantage of any upturn in the market.

"The recovery in global markets had a positive impact on our market volumes and on commodity prices and was of substantial benefit to the group.

"However, going forward, the strong rand remains a challenge for AECI's mining and manufacturing customers, and hence could impact on profitability across all businesses. Recent global reports highlight the potential for a financial slowdown, and AECI does not expect to see the same level of volume improvement in the second half-year as it did in the first half," said Edwards.

Nevertheless, he emphasised that even with markets remaining relatively flat or showing some lacklustre growth, the company still expected an improvement in its results for the second half of the year, owing to the benefit of its new projects that would filter through to the company's bottom line.

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