Industrial chemicals and explosives manufacturer AECI would work “furiously” to pursue acquisitions in the rest of Africa and South America, CEO Mark Dytor said on Wednesday.

The JSE-listed group, which was currently in talks for four or five undisclosed potential acquisitions, noted that about 35% of group revenue during the six months to June 30 was generated outside of South Africa.

The explosives sector, which delivered the “best first-half” in terms of performance during the interim period under review, was “strategically” grown to ensure that almost 50% of current revenue was generated outside South Africa.

This comes as the local manufacturing and mining sector growth slowed amid challenging business environments.

AECI would enhance its African footprint in sectors such as mining services; food additives; agriculture, personal and homecare; and the water, oil, energy and gas industries, he commented.

AECI was currently awaiting Competition Commission approval for the acquisition of animal health and nutrition firm SA Premix, which was expected to be concluded by September 1.

Dytor believed the acquisition would contribute about R200-million to R250-million in turnover and about R20-million to R25-million in profit a year.

Further, AECI had set its sights on another “interesting” acquisition in Brazil, after a promising deal with an undisclosed individual for a Brazil-based company fell through after 18 months of negotiations.

The South African company was also evaluating other alternatives in South America.

PROJECTS
Meanwhile, subsidiary company AEL Mining Services (AEL) was successfully progressing several projects in Africa, as it geared up to deliver the first explosives to an Exxaro mine site in the Democratic Republic of Congo (DRC) in August.

AEL was mobilising its human resources and had delivered container magazines and a mobile manufacturing unit to enable the issuing of explosives permits to the mine.

Next month would see the “official” commissioning of the plant at the Kansuki site, in the DRC.

Further, a licence to produce and use explosives at a Burkina Faso bulk emulsion explosives manufacturing plant was expected to be awarded by government within two weeks, with commissioning expected to start in August.

In addition, AEL has completed work to assist in an expansion project at Centamin’s Sukari gold mine, in Egypt.

Significant progress had also been made with the KPC project, in Indonesia, where AEL’s contract had been extended until 2018.

Ammonium nitrate supply to KPC was expected to start in the fourth quarter of 2013, as the commissioning of the nitric acid plant and an ammonium nitrate solution plant in Bontang kicks off.

The AECI subsidiary entered the Indonesian market in 2009 and, last year, bought a 42% stake in Black Bear Resources Indonesia (BBRI), which is building the plant, for $23-million.

PROPERTY DISPOSAL
Dytor said the potential sale of the larger-than-usual section of subsidiary Heartland’s Modderfontein properties would be either concluded or shelved by the fourth quarter of this year.

AECI earlier this month entered into talks with an undisclosed buyer to sell the bulk of its surplus property assets in Modderfontein, which were managed by AECI’s property arm Heartland.

Heartland owns 2 300 ha in Modderfontein and 780 ha of property in Somerset West, near Cape Town.

Dytor told Engineering News Online that the Modderfontein properties combined were valued at about R2-billion, of which AEL currently made use of property to the value of R600-million.

The excess property valued at R1.4-billion, which was deemed as surplus to operational requirements, could potentially be for sale; however, he emphasised that not all this land would be disposed of or discussed during these negotiations.

He declined to provide the hectares or sizes of the properties that were for sale, saying the deal was still at too sensitive a stage to disclose.

The Western Cape properties did not form part of the discussions.

AECI had made significant progress in installing infrastructure at Modderfontein and continued to evaluate ways of accelerating the sale of land.

The group entered the next infrastructure stage for Longlake, in Modderfontein, with the construction of a 45 MVA substation to power the region having started last week.

Phases A and B, which were currently under way, comprised the development of basic services infrastructure to 64 ha and 84 ha respectively. Phases C and D, comprising 86 ha, would be connected as demand required.

Of the land sales concluded in the half-year, most were in Longlake Extensions 1 and 12 and were predominantly for industrial end-use developments.

Longlake Extension 1 would sell out during the second half of 2013, while the group’s Westlake properties, also in Modderfontein and comprising 16.9 ha commercial sites and 12.4 ha residential sites, would go up for sale during the same period.

AECI had injected property development expenditure of R29-million, primarily for Longlake and Westlake, during the first half of 2013.

Operating profit within the property sector, which was noncore to AECI, increased by 138% to R50-million during the six months to June, compared with the R21-million reported in the corresponding period in the prior year.

The leasing and services businesses contributed R82-million to the segments revenue.

The group was currently in preplanning for beachfront residential units for its properties in Somerset West. About 100 single residential units and 350 apartment-type units were being considered.

Heartland was planning the development of 18 ha of industrial land in three phases and a mixed-use development would follow in phases, as the currently flat regional market demand improved.