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

Speaking at the company’s results presentation on Tuesday, CEO Mark Dytor highlighted the group’s interest in increasing the foreign revenue and moving into additional geographies.

The group’s revenue for the year increased by 9% to R18.4-billion, including 34%, or R6.4-billion, in foreign revenue, while 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, comprising R554-million related to land sales.

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

The group still had 216 ha of surplus land for operations in Modderfontein, Gauteng.

EXPLOSIVES
Meanwhile, revenue from explosives was up 14% at R8.2-billion, while profit from these operations increased by 12% to R418-million. Trading margins were 5.1%, similar to 2014 margins.

Overall volume sales for the explosives division increased by 13% and sales of initiating systems increased by 34%. AEL MD Edwin Ludick attributed the increase in the initiating system volumes to the platinum mining industry’s recovery, and new business in the gold mining sector, while AEL’s Isap plant achieved full capacity production. Ludick noted that plans were afoot to debottleneck the Isap plant in future.

Ludick 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. He attributed this increase to positive volume growth in the Democratic Republic of Congo, favourable product mixes and a positive performance from the West African gold sector.

SPECIALTY CHEMICALS
Despite challenges facing the manufacturing sector, Dytor noted that AECI’s specialty chemicals revenue increased by 6% to R9.8-billion, presenting a pleasing performance. He added that profit from operations increased by 12% to R1.12-billion.

Overall volumes for traded and manufactured specialty chemicals increased by 4.9%, moving up on the back of the Southern Canned Products acquisition.

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

Further, Dytor noted that while AECI saw the benefits of acquiring water specialist Improchem and agrochemicals company Nulands, the negative impacts of the drought on these divisions resulted in losses exceeding R40-million.

Nevertheless, the group’s food additives and ingredients pillar saw a revenue of R814-million.

Dytor reported that the group would retain its focus on its strategic pillars for 2016, 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.

In terms of sales, AEL and Senmin were the biggest contributors.

STRATEGIC OBJECTIVES
“The way . . . to survive in these difficult circumstances, environmental conditions and the current commodity cycle, is to bring innovation to customers,” said Dytor, stressing the group’s relentless focus on innovation and investment in terms of staff, processes and customer offerings.

AECI’s objectives for 2016 included a continued reshaping and refocusing of the business model “in a changing environment”.

Dytor noted that AECI would expand and leverage its geographic footprint further, with a focus on Africa. He said the company would pursue additional acquisitions in South Africa, the rest of Africa and internationally, as well as export and import replacement. It would also aim to limit fixed capital spend and drive cost control and working capital management.

Dytor concluded that the group would enhance groupwide collaboration initiatives to enhance cost-base competitiveness.