AECI Ltd · JSE:AFE
AECI — H1 2002 Earnings Presentation
24 slides from AECI's earnings presentation, Jul 30, 2002
Slide 1: AECI Limited Results Presentation
AECI Limited Results Presentation 30 and 31 July 2002
Slide 2: Summary
Summary ¾ 1H02 results most pleasing ¾ Strategy validated: post-transformation AECI no longer a true chemical business ¾ Trading conditions satisfactory ¾ Outlook for the Group continues to be positive
Slide 3: Business Environment
Business Environment ¾ Regional demand satisfactory. Domestic manufacturing output helped by export led businesses: weak Rand ¾ Little improvement in world markets ¾ The Rand firms: benefits diminish but SA benefits ¾ Energy costs up, raw material prices mixed ¾ Domestic interest rates, inflation re
Slide 4: The Buy-Back
The Buy-Back ¾ A success: AECI acquired 40% of itself at R14.50 per share ¾ R206m agterskot (incl STC) paid in Jan/Feb 2002
Slide 5: Results for 1H02
Results for 1H02 ¾ Revenue up 19%, cps Trading Profit +64% 160 ¾ Headline EPS up 53% (10% in US$) 120 ¾ Trading Margin 8.5% 80 (6.2%) 40 0 2001 2002
Slide 6: Improved results due to:
Improved results due to: ¾ Fruits of transformation: strong portfolio ¾ Materially increased volumes: weaker Rand boosted direct and indirect exports ¾ Significant turnarounds of AECI Coatings, Dulux and Heartland ¾ Elimination of Fine Chemicals development ¾ Weak Rand effect: SANS and AEL positivel
Slide 7: Track Record is Extended
Track Record is Extended ¾ Comparable basis: EPS in cents adjusted for special 300 dividend in 1998 and 1999 250 200 ¾ >35% compound earnings growth 150 achieved since 1998 100 50 0 1998 1999 2000 2001 '1H02
Slide 8: Contribution to Trading Profit
Contribution to Trading Profit 160 140 120 100 80 60 2001 40 2002 20 0 -20 -40 AEL CSL SANS Props Other Corp
Slide 9: Group EVA History
Group EVA History 50 0 -50 -100 RM -150 -200 -250 -300 '97 '98 '99 '00 '01 '02
Slide 10: Balance Sheet
Balance Sheet ¾ Borrowings R1050m Borr Gearing (R206m agterskot) 1600 60 ¾ Capex/Investments 1400 50 limited to R93m 1200 40 1000 800 30 ¾ WC 17.3% 600 (ratio down 1%), up 20 400 only R74m on June ‘01 200 10 0 0 ¾ Cash interest cover 5.3 1998 1999 2000 2001 Jun- 02
Slide 11: Balance Sheet cont.
Balance Sheet cont. ¾ 65% of borrowings Borr Gearing offshore, fully hedged 1600 60 ¾ Translation gains on 1400 50 foreign entities taken 1200 40 to Reserves 1000 800 30 600 ¾ “Quality” earnings 20 400 10 200 ¾ Further reduction in 0 0 borrowings a Dec 02 1998 1999 2000 2001 Jun- target 02
Slide 12: Other Salient Information
Other Salient Information ¾ Interim dividend of 40 cents, up 25% on 2001. Dividend cover of around 3.0 is target ¾ Annualized ROIC* is 15% for 1H02 (10% for 1H01), now close to WACC ¾ ROSE is 13% (8% for 1H01) ¾ Zero exceptional charge in 1H02 (other than amortisation of goodwill) * Excl land revalu
Slide 13: Non-Core Disposals
Non-Core Disposals ¾ Kynoch Feeds and Tioxide: completed, proceeds from Tioxide received ¾ Botash, AAFC: preliminary discussions under way
Slide 14: Share Price
Share Price Year-end in Rand 25 ¾ Rating relative to 20 Industrials now exceeds May 1998 Sasol bid peak 15 ¾ Graph adjusted for R6 10 special dividend (‘98) 5 0 1998 1999 2000 2001 Jul-02
Slide 15: Group Strategy
Group Strategy ¾ Five businesses - including Dulux and Heartland ¾ Specialty product and service solutions, based on chemistry, for global and regional niche markets ¾ Active portfolio management, profitable growth, global alliances ¾ Chemserve minorities take-out still on hold ¾ Best practice trans
Slide 16: Growth
Growth ¾ (Superior ROIC is prime pursuit!) ¾ Whilst transforming, the Group has invested R500m on growth projects (+R140m*) ¾ Buy-back itself was a major acquisition ¾ The above two are still being digested and optimised, hence consolidation period ¾ Controlled growth strategies are being pursued by
Slide 17: African Explosives
African Explosives ¾ R83m Trading Profit (+38%); Margin 9.1% ¾ Strong volumes: direct and indirect exports, platinum buoyant ¾ Ammonia cost up in Rand, but managed ¾ Electronic detonator development: steady progress ¾ Growth will come from eDets, Africa, selected exports, and fixed cost reduction
Slide 18: Specialty Chemicals
Specialty Chemicals ¾ R149m Trading Profit (+48%) ; Margin 10.1% ¾ Good volume growth in improved manufacturing climate ¾ AECI Coatings turned around ¾ Excellent margin and cost management ¾ Dow/Sentrachem mining/alkylate business acquired subject to due diligence. Evaluating further projects
Slide 19: Specialty Fibres
Specialty Fibres ¾ R91m Trading Profit (+17%) ; Margin 8.8% ¾ Domestic demand strong, weak globally ¾ Much improved Bellville plant efficiencies ¾ Excellent PET contribution ¾ Stoneville nylon project commissioned, good customer support, but still incurring losses in a challenging environment
Slide 20: Dulux
Dulux ¾ Much improved performance ¾ Africa continues to contribute well ¾ Transformation complete (simplification, prime brand focus, outsourcing of intermediates, team and cultural changes, mini disposals) ¾ Looking at further expansion in Africa
Slide 21: Heartland
Heartland ¾ R10m Trading Profit (2001: R3m) - excellent cash flow ¾ Demand much improved in industrial sector, residential remains brisk ¾ Earnings contribution likely to be uneven ¾ Development pipeline long and cash hungry … ¾ … strategy emphasis shifting to bulk land sales
Slide 22: 2002 Outlook
2002 Outlook ¾ Tough year for global economies, much uncertainty ¾ Domestic outlook steady ¾ Benefits from transformation to continue ¾ Weaker rand will continue to favour Group ¾ Borrowings, gearing to decrease
Slide 23: In Conclusion
In Conclusion ¾ AECI’s re-invention validated ¾ Provides “specialty product and service solutions” based on chemistry ¾ Earnings track record established ¾ Well positioned for long-term earnings growth
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