AECI supported by diversification strategy


AECI supported by diversification strategy


Published Date: 2021-02-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

AECI supported by diversification strategy

The chemicals, fertiliser and explosives group has maintained its 2020 dividend due to its solid financial position.

AECI says its strategy to diversify geographically and in terms of the markets it operates in has made it more resilient and agile in responding to changing market conditions. So, while its 2020 earnings are down, it said the impact of Covid-19 would have been much more severe without those advantages.

The chemicals, fertiliser and explosives group reported a 3% decline in revenue to R24.1 billion for the year to end-December, largely due to its Mining and Chemicals segments. It said 44% of group revenue was earned outside SA so the weaker rand helped to limit the revenue decline. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 15% to R2.94 billion while profit from operations was 55% lower at R917 million, impacted by impairments totalling R890 million - mostly related to its Much Asphalt business which was affected by the lack of road infrastructure projects last year.

AECI said the disposal of three businesses, including its pulp and paper chemicals unit, had a positive impact on earnings for the year. The benefits of strategic realignment projects undertaken in AECI Mining Explosives and AECI Water in 2019 were in line with expectations overall. The structural realignment of its AECI Chemicals business was undertaken in the first half of 2020. It said associated costs were offset by the project's benefits in the second six months and annualised savings of R100 million were still anticipated.

Profit for the year dropped 88% to R160 million, weighed down by the impairments. Stripping those out, headline earnings per share came in 23% lower at 880c. Due to its solid financial position, it declared a final dividend of 470c per share, taking its total dividend for the year to 570c. That's unchanged from 2019. It reduced its gearing to 22% from 36% at the end of 2019.

AECI's shares rose 3.4% to R100.26 yesterday.


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