AECI reports improved performance in spite of challenges in the local market

AECI’s international industrial and chemicals operations reported an improved performance for the five months to May 31, while its South African-based business was impacted by weak power challenges and supplier headwinds.

The group, which provides mining solutions, water treatment, agricultural health, and specialty chemicals products, said in an update on Monday that revenue was slightly lower than the same time last year. Conversely, earnings before interest, tax, depreciation, and amortisation (EBITDA) and profit from operations were higher.

There was a cut in strategy implementation costs in AECI Property and Corporate Services, and continued conversion of the EBITDA run rate relating to the Transformation Management Office (TMO) initiatives into profit and loss, albeit lower than expected.

This was partially offset by the impact of the South African-based operations, in both AECI Mining and AECI Chemicals, which were facing challenges.

Group profit from operations for the period increased 17% to R800 million. Net finance costs improved by 40% due to lower debt, mainly resulting from the proceeds received for the R1.1 billion Much Asphalt divestment concluded in the first quarter of 2025.

Net debt as at May 31 was R3.38bn (May 31, 2024: R4.74bn), lowering gearing to 28% from 38%, well within the guidance of 20% - 40%. Available cash increased to R2.58bn (R1.79bn).

The South African mining explosives business experienced poor power supply at the Modderfontein facility (a national key point), leading to outages. The unit also declared force majeure for part of the first quarter of 2025 due to a lead azide supply issue, which affected the manufacturing of detonators.

These issues resulted in lost volumes, with third-party buy-ins of ammonium nitrate to support demand. Management is engaging with both suppliers to resolve the issues and has seconded a team to assist in resolving the lead azide challenges experienced by the supplier, the group said.

The mining chemicals business, also linked to the South African mining industry performance, was performing to expectations, particularly in the metallurgy segment.

The Asia-Pacific business unit sales volumes were impacted by inclement weather in the first quarter of 2025, but the business was recovering.

Headwinds in the fourth quarter of 2024 in the sourcing of raw materials in Australia were addressed and the conclusion of an ammonia nitrate import contract contributed to improved profitability.

AECI Mining had been awarded four new contracts in the Democratic Republic of Congo, Australia, Ghana, and Botswana.

In the AECI Chemicals segment, South Africa's manufacturing sector continued to face pricing and demand pressure. The industrial chemicals business was impacted by low demand for sulphuric acid, and an expected credit loss due to a major customer entering business rescue.

The water business results were in line with expectations, but faced challenges recovering funds from a supplier that entered business rescue after failing to deliver pre-paid raw materials.

The plant health business underperformed slightly due to excessive rainfall affecting pre-harvest sprays, while the specialty chemicals business unit lagged due to reduced orders from a key customer.

Internal initiatives in AECI Chemicals were being implemented to boost performance. The restructuring at AECI Schirm Germany was progressing.

The previously announced sale of Animal Health had been terminated via a mutual agreement due to non-fulfilment of certain conditions precedent. Other interested parties for the business were being engaged with. 

AECI's share price nuidged up 0.56% to R105.70 on the JSE on Monday morning.

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