Diversified chemicals solutions group, AECI, said it recorded strong results for the nine months to September 30 due to increases in mining explosives sales in Southern Africa, central Africa and Asia Pacific, a weaker exchange rate and new contracts.
Revenue and earnings before interest and tax (EBIT) were up compared with the prior period after solid growth in AECI Mining, the group said in a trading update yesterday.
There was improved profitability following the fulfilments of new contracts in Asia Pacific and the Rest of Africa.
Revenue in AECI Agri Health and AECI Water was higher than the prior period due to higher selling prices and moderately higher sales volumes. However, the lag in cost recovery affected margins, and was expected to correct in the last quarter of this year.
AECI Chemicals’ performance fell due to lower volumes and pricing, resulting from the economic downturn in South Africa and load shedding affecting customers.
AECI Much Asphalt continued its recovery with sales and EBIT above the prior period.
Group earnings before interest tax and amortisation (EBITDA) and EBIT margins at 10% and 7%, respectively, were in line with the prior period.
Net finance costs increased 92% to R425 million, significantly affecting earnings, due to debt related to AECI Schirm, which continued to be loss making; higher working capital levels and and higher interest rates.
The net gearing ratio of 45% was down from 47% at June 30, following improved working capital management, and containment of capital expenditure.
Capital expenditure came to R1.02bn, 4% lower as the normal maintenance program as well as the growth program linked to recently signed contracts continued.
In AECI Mining capex was invested in four projects in Asia Pacific, solar farms in Modderfontein and Sasolburg, as well as the Mobile Manufacturing Units replacement programme.
The emulsion plant destined for the Lihir project had been shipped from South Africa to Papua New Guinea with operations expected in the first half of 2024.
And EBIT loss at AECI Schirm Germany included R138m in turnaround project costs, which consisted of R86m in retrenchment costs and R52m in consulting and other fees.
The AECI Schirm Germany turnaround project was on track, but the trading environment had become even more strained and further impacted by high energy costs and a lack of chemical demand, and a recovery was unlikely in the short term.
Revenue at AECI Much Asphalt was up on the back of higher sales volumes; but EBIT was down impacted by cost recovery delays.
The withdrawal of the new preferential procurement policy by SANRAL was likely to impact the number of tenders awarded going forward, thereby affecting the performance outlook of this business.
The group said in the medium term, value would be unlocked through a new strategy that would introduce initiatives and programs aimed at driving earnings growth through a returns focused, streamlined and resilient portfolio.
AECI’s share price fell 0.14% to R94.88 yesterday afternoon, and the price was 16.8% higher than a year ago.