Johannesburg - Chemicals and explosives company AECI yesterday reported a 42 percent decline in operating profit to R571 million for the six months to end June, which was dominated by a constrained environment in South Africa and abroad.
The amount was lower than the R991m reported in the last period. The company, which has operations in more than 20 countries, said both its core businesses of mining and agriculture had undergone a lean spell during the period.
But it said the results contrasted the fall in commodity prices and a drought that had crippled the agricultural sector in southern Africa.
The chief executive, Mark Dytor, said the growth in local revenue was curtailed by prevailing conditions in the coal and iron ore mining sectors.
“The global resources sector was under pressure, while the growth rate in South Africa’s manufacturing sector was insignificant and the agricultural sector in a number of southern African countries continued to be hampered by the effects of the drought,” Dytor said.
Revenue
AECI operates in five different areas, which are mining operations, water solutions, agrochemicals, food additives and ingredients, and explosive and speciality chemicals.
Its largest shareholder is Coronation Asset Management with a 26.63 percent stake followed by the Public Investment Corporation (PIC) and Kagiso Asset Management with 14.43 percent and 13.13 percent respectively.
The company said its revenue shot up 5 percent to R9.1 billion for the period compared with R8.6bn last year.
It said profit attributable to ordinary shareholders tumbled to R309m from R658m, while headline earnings per share declined 48.14 percent to 293c per share, from 565c per share.
Dytor said even though mining volumes were down as a result of the commodity glut, the company continued to gain a significant market share.
“We are gaining contracts in places like Namibia, the gold and platinum prices are picking up again so the outlook is positive,” he said.
The drought was another area that negatively affected the business and Dytor said the drought cost the company between R30m and R40m.
Dytor said the drought also disturbed mining in Zambia and Democratic Republic of Congo where copper was mined. “We couldn’t blast because of the rain in open-pit mining in those areas so the production fell.”
Percy Takunda, an analyst at Momentum SP Reid Securities, said companies such as BHP Billiton had also experienced decline in total copper production to end June. Billiton’s copper production was down by 8 percent for the year.
Despite the decline in profits, profit from explosives and specialty chemicals operations went up 6.6 percent to R793m.
The board declared a gross interim cash dividend of 135c per share for the period, payable at the beginning of September. The group said conditions in the global and local trading environment were likely to remain difficult.
AECI shares rose 3.36 percent yesterday to R91.75 to value the company at R11.18bn.
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