Download - AECI Limited
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AECI LimitedAECI Limited
Presentation to Investors and Media
22 and 23 February 2005
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SummarySummary Solid performance of portfolio against background of
relatively strong commodity prices and strengthening rand exchange rate, accompanied by low inflation and interest rates
Headline earnings increased by 10 per cent to new record of 392 cents per share
Headline earnings include restructuring charges equivalent to 27 cents per share
Sound balance sheet; excellent working capital management and prudent capital expenditure continues
Volumes, in aggregate, higher but selling prices marginally lower
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SummarySummary
Outstanding performance from property activities
Trading margin at 9.4% the best in recent history
Encouraging response to strong rand environment; actions across Group
Implemented economic empowerment transaction in AEL
DetNet joint venture now operational
CSL back on acquisition trail
SANS’ recovery strategy on track
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SHE performanceSHE performance
2004 Total Recordable Incident Rate
0.00
0.50
1.00
1.50
2.00
2.50
3.00
TR
IR
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Business environmentBusiness environment Low inflation and interest rate environment prevailed
This resulted in strong consumer-driven demand, such as retail, housing and automotive
Commodity prices including oil remained high, but strong currency restricted inflationary pressures
The local manufacturing industry is progressively addressing the global competitive environment through productivity measures, cost cutting, aggressive purchasing policies and product rationalisation
Opportunities for sales price adjustments ahead of cost increases diminished
Certain raw materials became scarce and prices fluctuated and increased sharply
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Chemical industryChemical industry
Global industry no benchmark for AECI; we are portfolio of customer focused specialty product and service solutions businesses, operating in global and regional niche markets
Global industry remains in better shape with improved demand and commodity prices
Prolonged high cost of natural gas and roller coaster crude oil prices and supply and demand imbalances play havoc with results
China is an increasing factor in demand and supply for a vast range of products, and an investment base for multinationals
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Results for 200Results for 20044
HEPS +10%
Volumes +4%
TP Margin 9.4% (9.0%)
TP increased by 8%
Exports +2% in rand but +19% in dollars
Headline earnings
per share: cents
310
330
350
370
390
410
2002 2003 2004
7
8
9
1 0
2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4
Trading margin: per
cent
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Solid results due to:Solid results due to:
Robust portfolio: specialised, value add, customer focus, diversified (contribution margins stable)
Volumes maintained: local economy sound
Quality properties available when demand improved
SANS stemmed the rand strength effect
Excellent balance sheet management
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FinancialFinancial Net borrowings R633m, gearing
24%
Capital expenditure R277m
WC 12% at year-end
Cash interest cover improved to 7 times
Exceptional charge R23m; includes impairment in Botash and closure of resin plant offset by sale of IP to DetNet
Finance charges include R13m mark-to-market adjustments
0
200
400
600
800
1000
1200
1400
1600
'98 '99 '00 '01 '02 '03 '040
10
20
30
40
50
60
Borr Gearing
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Share priceShare price
AECI share pricerelative to JSE IND index
0
100
200
300
400
500
'98 '99 '00 '01 '02 '03 '04
Relative rating to industrials (at year end) declined from recent trend; but has improved in January
Graph adjusted for R6 special dividend (November 1999)
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Economic empowermentEconomic empowerment
The R1.6billion AEL/Tiso transaction now operational. Tiso participates at strategic level. AEL community trust established
Selective investigation in CSL continues, and good progress with first empowered transaction at subsidiary level
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Segmental trading profit (Rm)Segmental trading profit (Rm)
-50
0
50
100
150
200
250
300
350
400
Min Sol Sp Chem Sp Fibres D&P Coat Property Corp
2003 2004
Includes R33m
restructuring
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Group EVA (Rm)Group EVA (Rm)
-300
-250
-200
-150
-100
-50
0
50
'97 '98 '99 '00 '01 '02 '03 '04
Calculated at WACC of 15% for ’97 to ’03
and 14% for ’04
Calculated at WACC of 15% for ’97 to ’03
and 14% for ’04
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EVA by business (Rm)EVA by business (Rm)
- 1 2 5
- 1 0 0
- 7 5
- 5 0
- 2 5
0
2 5
5 0
7 5
M in S o l S p C h em S p F ibres D &P C oa t O th er
2 0 0 3 2 0 0 4
Includes goodwill at cost
Includes goodwill at cost
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Mining solutionsMining solutions
Revenue R2 140m (+3%); TP R212m (-12%)
Margin 9.9% (11.5%)
Trading profit before restructuring charge is R245m (+2%) and margin unchanged at 11.5%
Restructuring: R33m charge recognised in period and 130 people retrenched
Significant progress made in restructuring the business and footprint reduction nearly complete. Also, new investments in packaged Anfex and bulk explosives plants brought on line in Modderfontein. Automation programme on track.
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Mining solutionsMining solutions Volumes down due to decline in gold mining,
importation of Chinese Shocktube and industrial action on platinum mines in H2, somewhat offset by growth in West Africa
Imports of state-subsidised initiators from China continues although penetration in to South Africa slower than anticipated
African markets stable, except Zimbabwe where competitor attack destroyed value
Opportunity for PPAN exports to Australia
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Mining solutionsMining solutions DetNet progress
– Joint venture approved and in operation
– Development and testing of first new product (HotShot) completed
– First HotShot product has now in USA and is undergoing proving trials
Presentation on mining solutions and property activities on Friday, 15 April at Modderfontein
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First shipment ofHotShot to USA
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Specialty chemicalsSpecialty chemicals
Revenue R3 302m (+3%); TP R380m (+2%)
Margin 11.5% (11.6%)
Maintained high trading margin trend, to validate robust specialty chemical model
Company performances in portfolio ranged from pedestrian to brilliant
Rand strength put pressure on prices and export-driven customers
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Specialty chemicalsSpecialty chemicals
Mining chemical cluster established, with high service package and local production key initiatives
AECI Coatings returns improved; alternative broad supplier technology strategy implemented, resin manufacturing closed
Acquisitions: First Chemicals (chemical trading) from August, UAP (distributor of specialty agro-chemicals) in January 2005 and Chemiphos (producer of food-grade phosphates) subject to regulatory approvals
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Group Sales by Industry Segmentation 2004
17%
11%
8%
8%
7%7%
6%
6%
4%
4%
4%
3%
3%
3%
2%
2%
1% 3%
Mining
Paper and packaging
Automotive
Chemical Industry
Detergents
Agriculture
Plastics & Rubber
Coatings Ink & Adh.
Food & Beverage
Toiletries, cosmetics and Pharmaceuticals
Engineering and foundry
Construction
Appliances and furniture
Oil and refining
Textiles and tanning
Explosives
Steel & metal
Other
Specialty chemicals
Diversified portfolio
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5
6
7
8
9
1 0
1 1
1 2
9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 0 3 0 4
C S L T rad in g p ro fi t m arg in %
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Specialty fibresSpecialty fibres Revenue R1 595m (-7%); TP R3m
Trading profit includes cost of R6m for ongoing restructuring of business, now essentially complete
In dollar terms revenue increased; volume up 5%
Restructuring resulted in R60m reduction in annualised fixed costs
USA JV approaching break-even; good volume growth
Continued good demand for PET
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Specialty fibresSpecialty fibres Future strategy
– Product development strategy to fill LDI plants on track, particularly airbag for automotive
– HDI yarn margin focus by selective growth in specialised markets
– Costs, efficiencies, yields
– Debottlenecking PET
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Specialty fibresSpecialty fibres
Overriding factor remains currency strength against dollar
P ro fit an d exch an g e ra te
-40
-20
0
20
40
60
80
100
120
1 H '0 2 2 H '0 2 1 H '0 3 2 H '0 3 1 H '0 4 2 h '0 4
Rm
6 .0
7 .0
8 .0
9 .0
10 .0
11 .0
12 .0
R/$
P B IT R /$
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Decorative & packaging coatingsDecorative & packaging coatings
Revenue R671m (+2%)
TP R59m (+13%); Margin 8.8% (7.9%)
Best margin in recent history
Exceptional performance in South Africa, in contrast to unfavourable market conditions and currency issues elsewhere
Thrusts include broader exposure to specialist building suppliers and hardware stores and new product lines
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PropertyProperty
Revenue R352m (+70%); TP R130m (+233%)
Healthy demand continued in all areas for commercial, residential and retail sectors
Outstanding net cash flow of R270m
1 100ha of the original 3 700ha excess land available has been sold (including 350ha in 2004)
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OutlookOutlook
Progressive benefits of actions taken to emerge more fully in 2005; particularly cost reductions, acquisitions, property pipeline and innovative growth
Expect relatively strong commodity prices and rand exchange rate accompanied by low inflation and interest rate environment to continue