DURBAN - Chemicals and explosives group AECI rose slightly on the JSE yesterday despite the group flagging that its profits would likely take a hit on two recently completed projects that had pushed earnings down by R156million.
The shares rose 1.08percent to close at R91.60, in spite of the group saying that it expected its headline earnings per share (Heps) and earnings per share (Eps) to decline at least 22percent for the six months to end June.
The two projects were initiated in the fourth quarter of 2018 by its subsidiaries, AEL Intelligent Blasting in the mining solutions segment and ImproChem in the water and process unit.
The group said the projects cost the company R204m, while non-recurring costs amounted to R156m, with an estimated 100cents impact on both Heps and Eps during the period.
It said with the projects completed in June, it anticipated that benefits accrued would offset the costs incurred with an annualised pre-tax benefit of R300m a year for a number of years to come.
However, AECI said the costs would decrease its Heps by 18percent and Eps by 22percent.
It said the Heps and Eps were now forecast to be between 357c and 376c a share, which is down from the 458c recorded during the comparative period last year.
AECI said its results would also be negatively impacted by a change in significant accounting policies adopted at the beginning of the year.
“The group adopted this standard using the modified retrospective approach, under which the cumulative effect of initial application was recognised in retained earnings as at January 1, 2019.
"As a consequence of the adoption of IFRS 16, an estimated 12c negative impact on both Heps and Eps was calculated for the period,” the group said.
AECI businesses consist of five pillars: mining solutions, water and process, plant and animal health, food and beverage as well as chemicals.
The group has large footprints across the globe, with operations on six continents.
AECI has two joint ventures in Crest Chemicals and Specialty Minerals South Africa.
In the AEL business, which is housed in the mining solutions segment, AECI said that the unit reviewed its product and service offerings and structures mainly for South Africa, to narrow the reef mining market, which had been declining over several years.
“AEL’s realignment will ensure that it remains a sustainable and responsible local supplier to the South African mining industry,” the group said.
AECI will release its half-year results next Wednesday.