Explosives and speciality chemicals company AECI generated 56% of its revenue for 2015 from the global mining industry, of which explosives contributed 44% and mining extraction and chemicals 12%.

Speaking at the company’s results presentation for the year ended December 31 last week, CEO Mark Dytor noted that the group’s revenue for the year increased by 9% to R18.4-billion, including 34%, or R6.4-billion, in foreign currency.

In terms of sales, explosives specialist AEL and mining chemicals manufacturer and supplier Senmin were the biggest contributors.

Despite pressurised global growth for the foreseeable future, a bearish commodity pricing outlook and large-scale changes in the mining industry, including South Africa’s poor business confidence and weak investment, AECI is to retain its focus on strategic divisions for 2016, Dytor said.

“The way . . . to survive in these difficult circumstances . . . is to bring innovation to clients,” he said, stressing the group’s relentless focus on innovation and investment in terms of staff, processes and customer offerings.

With innovations and new solutions enjoying high priority in the explosives and chemicals sectors, focus areas for AECI remain its subsidiary AEL’s Initiating Systems Automated Plant (Isap), which has reached full-capacity production.

AEL MD Edwin Ludick noted that plans were afoot to consider debottlenecking the Isap plant; the company also established a new explosives facility in Mozambique and was awaiting final approval for a licence to start manufacturing.

Additionally, the group’s mining chemicals specialist, Senmin, completed construction of its R100-million research and development facility in Sasolburg, in the Free State.

The company services South Africa, Namibia, Zimbabwe, Zambia, the Democratic Republic of Congo (DRC) and Botswana, and is branching out into Morocco, Ghana, Tanzania and Madagascar.

Underlining significant activity in the mining industry in the past year, which included mining customer and supplier base changes, divestments, impairments and closures, Dytor said AECI would also drive its total mining solution offering, which it launched at the Investing in African Mining Indaba, held in Cape Town, last month.

AECI has created a mine-to-metal value wheel through which the group can add value, supply resources, chemistry and technology throughout the mine plan and process.
The group has also enhanced its food additives and ingredients division – such as adding a manu- facturing facility, quality and efficiencies – at its Lake foods plant, in Cape Town. The facility forms part of Southern Canned Products (SCP), which was acquired by AECI in 2015.

Dytor highlighted significant opportunities for its food additives and ingredients division, noting that, on the back of the SCP acquisition, this division achieved revenue of R814-million in the past five months. AECI further predicts more than R1.2-billion in sales in food additives and ingredients in 2016.

Financial Performance
AECI’s headline earnings per share (HEPS) rose 6% to 894c for the year ended December 31, 2015, owing to benefits gained from the company’s bulk property sale in Somerset West in June 2015, which contributed 230c to HEPS.

The group’s operating profits increased by 7% to R1.7-billion, with R1.4-billion returned to shareholders in 2015.

AECI CFO Mark Kathan noted that the company’s property revenue was R922-million, with land sales comprising R554-million.

Transfer processes in terms of the Somerset West bulk land sale were almost complete by year-end and the remaining transfers will be effected in the first quarter of this year.

Revenue from explosives was up 14% at R8.2-billion, while profit from these operations increased by 12% to R418-million.

Overall volume sales for the explosives division increased by 13% and sales of initiating systems increased by 34%. Ludick attributed the latter increase to the platinum mining industry’s recovery and new business in the gold mining sector.

He added that South African explosives volumes were up 6%, but not without sacrifice, as the group forfeited a R150-million margin.

Overall volume sales in Africa “told a good story”, with sales increasing by 14%, said Ludick, which he attributed to positive volume growth in the DRC, favourable product mixes and a positive performance from the West African gold sector.

Speciality Chemicals
Despite challenges in the manufacturing sector, Dytor noted that AECI’s speciality chemicals delivered a pleasing performance, with revenue having increased by 6% to R9.8-billion. He added that profit from operations increased by 12% to R1.12-billion.

While AECI reaped the benefits of acquiring water specialist Improchem and agrochemicals company Nulands in 2015, the negative impact of the drought on these divisions resulted in losses exceeding R40-million for 2015. A slowdown in the steel industry and reduced activity in the African oil industry also impacted on the division.

Nevertheless, Dytor maintained that there was significant opportunity for the water solutions division, with aims to progress the use of the group’s containerised, mobile water treatment solutions in mines and towns in Africa.

AECI aims to continue reshaping and refocusing its business model “in a changing environment” in 2016.

Dytor noted that AECI would expand and leverage its geographic footprint further, with a focus on Africa; it would also pursue additional acquisitions in South Africa, the rest of Africa and internationally, as well as export and import replacements.

Additional focus areas included the enhancement of groupwide collaboration initiatives to enhance cost-base competitiveness, Dytor concluded.