AECI Ltd · JSE:AFE
AECI — H1 2004 Earnings Presentation
23 slides from AECI's earnings presentation, Jul 28, 2004
Slide 1: AECI Limited Presentation to Investors and Media
AECI Limited Presentation to Investors and Media 27 and 28 July 2004
Slide 2: Summary
Summary ¾ Solid performance against background of strengthening rand, weak local manufacturing sector and decline in gold mining ¾ Improved trading profit from all businesses in portfolio, except specialty fibres ¾ Volumes, in aggregate, increased by 6% ¾ Pressure on selling prices ¾ Excellent resul
Slide 3: External environment
External environment ¾ Dominated by the strengthening rand R vs US$ - Monthly Average 9.0 8.5 8.0 2003 Rands 2004 7.5 2003 Avg 7.0 2004 Avg 6.5 6.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Months
Slide 4: External environment
External environment ¾ Favourable commodity prices, lower interest rates and strong retail demand stimulated growth in real GDP ¾ Manufacturing volumes rose on account of domestic demand; export volumes receded ¾ Competition from China and eastern region ¾ Consumer confidence improved
Slide 5: External environment
External environment ¾ Global economy gained momentum since mid- 2003, stimulated by growth in China and Asia ¾ Upward trend in crude oil price, supported by growth and geopolitical tensions ¾ High fuel prices and supply/demand imbalances caused fluctuations in certain raw materials ¾ This continued
Slide 6: Results for 2004 H1
Results for 2004 H1 ¾ HEPS +5% Headline earnings ¾ Volumes +6% per share: cents – Acquisitions and PET 160 ¾ TP margin declined by 0.4 percentage points – Much influenced by SANS 150 ¾ Revenue +3% – Domestic revenue +5% 140 ¾ Foreign sales -4% in rand 2003 H1 2004 H1 but +16% in dollars
Slide 7: Rand impact on 2004 H1
Rand impact on 2004 H1 ¾ Well managed on average; Group benefits from lower input costs; contribution margins maintained; deflationary prices ¾ Strong rand has negative impact on Group, particularly export revenues and margins (SANS Fibres) and African businesses (AEL and Dulux) ¾ Import threats inc
Slide 8: Solid performance
Solid performance ¾Maintained earnings in EPS in cents spite of large currency effect, particularly in 400 SANS 350 300 250 200 150 100 50 0 '00 '01 '02 '03 '04
Slide 9: Balance sheet
Balance sheet ¾ Net borrowings R1 034m, gearing 41% Borr Gearing ¾ Capital expenditure 1200 50 R116m 1000 40 ¾ WC 15% 800 30 ¾ Cash interest cover 600 improved further to 6.7 20 times 400 200 10 ¾ Tiso transaction effective 1 July 0 0 '00 '01 '02 '03 '04 H1
Slide 10: Share price
Share price • Graph adjusted for R6 special dividend, November 1999 • Declined relative to industrial index Rand per share 35 30 25 20 15 10 5 0 '98 '99 '00 '01 '02 '03 '04 Jun
Slide 11: Segmental trading profit
Segmental trading profit 200 150 100 50 0 -50 Min Sol Sp Chem Sp Fibres D&P Coat Property Corp 2003 H1 2004 H1
Slide 12: Group EVA (Rm)
® Group EVA (Rm) 50 0 -50 -100 -150 -200 Calculated CalculatedatatWACC WACCof of 15% for ’98 to ’03 and 15% for ’98 to ’03 and -250 14% 14%forfor’04 ’04 -300 '98 '99 '00 '01 '02 '03 '04
Slide 13: EVA by business (Rm)
® EVA by business (Rm) 2003 2004 H1 75 50 25 0 -25 -50 -75 Includes Includes -100 goodwill goodwillat atcost cost -125 -150 Min Sol Sp Chem Sp Fibres D&P Coat Other
Slide 14: Mining solutions
Mining solutions ¾ Revenue R1 045m (+6%); TP R101m (+7%) ¾ Margin 9.7% (9.5%) ¾ Further growth in local platinum partly offset decline in gold mining and currency effects ¾ African markets stable except Zimbabwe ¾ Imports of state-subsidised initiators from China: Response – Aggressive cost reductio
Slide 15: Mining solutions
Mining solutions ¾ Restructuring: R11m charge recognised in period and a possible additional R20m expected over next 18 months ¾ EE update ¾ DetNet progress – Technology development on track – Joint venture and approvals – Launch of international product planned for Q4 2004
Slide 16: Specialty chemicals
Specialty chemicals ¾ Revenue R1 615m (+5%); TP R169m (+3%) ¾ Margin 10.5% (10.7%) ¾ Pressure on rand prices; gross margins maintained ¾ Intensified imported competition ¾ AECI Coatings update and future strategy ¾ Mining chemical cluster; merged Senmin and Pelichem, service package development and
Slide 17: Specialty chemicals
Specialty chemicals ¾ Continue with exploratory phase for EE opportunities ¾ Operational options; restructuring, plant relocations and/or selective closure ¾ Active working platform for acquisition growth
Slide 18: Specialty fibres
Specialty fibres ¾ Revenue R810m (-13%); TP R1m (-98%) ¾ Margin 0.1% (4.8%) ¾ Overriding factor remains currency strength against dollar(R8.02 in H1 2003 compared to R6.65 in H1 2004) ¾ In dollar terms revenue increased by 8% and gross margin by 1%. (Mix effect; larger growth in PET than yarn) ¾ Res
Slide 19: Specialty fibres
Specialty fibres ¾ Break-even at Stoneville compared to R6m loss in H1 2003: improved volumes, prices ¾ Future strategy ¾ Product development to fill LDI plants on track ¾ Improved margin on HDI yarns by moving into more specialised end uses; market short ¾ Further debottlenecking on PET to meet gro
Slide 20: Specialty fibres
Specialty fibres ¾ Strengthening of rand could put further pressure on profitability at SANS ¾ Invited to visit on 3 September for detailed discussion on actions, strategy, product development and plant tour
Slide 21: Decorative & packaging coatings
Decorative & packaging coatings ¾ Revenue R301m (+3%); TP R12m (+9%) ¾ Margin 4.0% (3.8%) ¾ Seasonal business ¾ Strong performance in South Africa, volume growth
Slide 22: Property
Property ¾ Revenue R168m (+100%); TP R37m (+164%) ¾ Healthy demand continues in low interest rate environment and improved business confidence ¾ Good long-term prospects at Modderfontein and Somerset West, depending on demand, remediation and other issues eg. Gautrain
Slide 23: In conclusion
In conclusion ¾ Currency strength had significant impact on results ¾ Portfolio performed well on balance; property activities compensated for reduction in fibres ¾ Several cost control measures introduced and ongoing ¾ EE deal announced for AEL