Specialty chemicals and explosives manufacturer AECI on Tuesday reported higher revenue, but lower earnings a share for the six months ended June 30.
Headline earnings per share (HEPS) fell 48% year-on-year to 293c, while earnings a share (EPS) decreased 50% year-on-year to 292c.
CEO Mark Dytor attributed the decreases to the company incurring a R136-million noncash settlement cost of the post-retirement medical aid subsidy liability for current employees.
“There was also no boost from a property sale. In June 2015, the bulk sale of AECI’s surplus property assets at Somerset West contributed R294-million to profit from operations and 230c a share to HEPS and EPS respectively. After adjustments for these transactions, HEPS would have improved by 15%,” he noted.
Meanwhile, the group’s revenue increased 5% year-on-year to R9.07-billion in the six months under review, while profit from operations was down 42% to R571-million.
AECI’s explosives business recorded a 5% year-on-year increase in revenue to R4.15-billion and a 3.8% year-on-year increase in profit from operations to R220-million.
The specialty chemicals portfolio increased its revenue by 13.4% year-on-year to R4.98-billion and profit from operations by 7.7% year-on-year to R573-million.
The combined profit from operations was 6.6% higher year-on-year at R793-million.
An interim cash dividend of 135c per ordinary share was declared, an increase of 8% from the prior corresponding period.
Dytor attributed the group’s positive performance to new contracts gained by AEL Mining Services, the contributions of recent acquisitions, market share gains and the benefits of a diversified portfolio and extensive geographic footprint.
He pointed out that the global resources sector was under pressure and that the growth rate in South Africa’s manufacturing sector was insignificant, adding that the agricultural sector continued to be hampered by the effects of the drought.
“During the period under review, AEL secured two new openpit contracts. It retained the majority of its business in retendering processes in the second half of last year and there were some market share gains,” he said.
The explosives businesses in North and West Africa performed well, while volumes in Australia and Indonesia grew by 7.4% overall. Additional products were also approved for use in the Australian market.
Senmin, a supplier of mining chemicals and related services, increased its volumes by 6.3% as exports into the rest of Africa, Eastern Europe and Australia grew.
“Water treatment solutions provider ImproChem achieved solid results in most sectors. Advances in servicing the public water sector in the rest of Africa were particularly encouraging,” said Dytor.
He added that agrochemicals supplier Nulandis performed in line with expectations and benefitted from the contribution of Farmers Organisation in Malawi, which was acquired on June 1, 2015.
“The inclusion of Southern Canned Products, which was acquired on August 1, 2015, contributed to the results of the food additives and ingredients strategic pillar,” he said.
Looking ahead, Dytor said the focus on the careful management of costs, working capital and capital expenditure will be maintained to ensure the most effective cost base.
“In this regard, group-wide collaboration, innovation and strategic sourcing initiatives are in place to enhance efficiencies and savings. A group strategic sourcing office has been established and Deloitte Monitor has been appointed to drive innovation. The weak rand also presents many opportunities for exports and import replacements,” he said.