Having incurred investment spend of R755-million in the ten months ended October 31, explosives and mining chemicals group AECI is on track to achieve its strategic ambition and unlock value across the group.

The company has been focused on implementing a new operating model, establishing a new executive leadership team, optimising its portfolio, stabilising ammonia supply, increasing investment in maintenance and expanding sales volumes globally.

The one-off net investment spent in the year includes R409-million in transformation project costs, R110-million in divesture costs, R204-million for statutory shutdowns and R32-million turnaround spend for the Schirm business.

Taking into account this investment, AECI’s earnings before interest, taxes, depreciation and amortisation (Ebitda) totalled R2.51-billion in the period under review, while profit from operations totalled R1.53-billion.

This compares with Ebitda of R3.07-billion and profit from operations of R2.15-billion in the comparable ten-month period of 2023.

The group’s Ebitda and profit from operations declined by 18% and 29%, respectively.

Normalised Ebitda amounted to R3.2-billion, which is similar to that of the prior comparable period.

In the period under review, AECI recorded positive free cash flow of R82-million after taking into account softer business performance, timing on working capital outflows to support operational requirements and strategy execution.

While these factors impact on cash flow in the short term, they are essential to positioning the business for sustained future performance, the company states.

“The ten months under review has been a transformative period for AECI marked by significant progress in executing our strategy and reshaping our organisation to meet evolving market demands.

“These changes have strengthened our management structure, improved efficiencies and positioned us well to achieve our strategic ambitions,“ comments group CEO Holger Riemensperger.

While the group faced challenges in the mining segment, including declining domestic volumes and ammonia price pressure, its international contracts in Asia-Pacific have helped mitigate these pressures.

“With the value delivery from our strategic initiatives on track and a clear vision for the future, I am confident in our ability to deliver lasting value and to seize new opportunities,” Riemensperger says.

AECI anticipates that the company’s underlying performance for the full-year will be in line with that of the prior year.

MINING PERFORMANCE

While there was a notable decline in ammonia prices in the first half of this year, the market has shown signs of recovery in the fourth quarter, with prices rebounding owing to supply constraints and other market dynamics.

The addition of new Transnet rail wagons has greatly improved AECI’s Richards Bay's storage-to-rail ammonia supply to its Modderfontein, Gauteng, site, which has enhanced supply security and boosted operational efficiency.

Revenue in AECI’s mining segment decreased by 5% in the ten months under review, reflecting lower ammonia prices and lower sales volumes in the South African market following a drop in mining production volumes in gold, platinum group metals and iron-ore.

Profit from operations for the period, adjusted for the investment spend, was 11% lower than the prior period in the mining segment.

Despite the challenging operating conditions, normalised profit from operations margins at 10% were slightly lower than the prior comparable period’s 11%.

“Our business continues to grow globally, with new contracts in Asia Pacific, where bulk explosives volumes were up 24% and electronics grew by 44%. We also continue growing in Central Africa, where robust mining activity drives growth,” AECI states.

CHEMICALS

The chemical segment’s revenue for the period decreased by 4% compared with the prior corresponding ten months owing to persistent challenges in the South African manufacturing and industrial sectors, coupled with an oversupply of key products which exerted pressure on pricing and demand.

Despite these headwinds, the segment delivered a substantial increase of 10% in profit from operations, driven by disciplined cost management and enhanced operational efficiencies.

This disciplined approach contributed to an improved operating margin of 9%, which AECI says underscores its strategy to enhance profitability even amid revenue constraints.

AECI remains focused on concluding disposals of its Much Asphalt and AECI Animal Health businesses, among the group’s six targeted divestments.

“We remain committed to a disciplined approach, prioritising long-term value creation as we navigate the divestment process in these conditions,” the company says.