AECI's interim headline earnings surge but second-half outlook is more cautious

AECI’s strong 132% increase in headline earnings a share to 604 cents in the six months to June 30 is unlikely to be repeated in the second half due to slightly slower progress on a strategy to optimise the global mining, chemicals, and agri-health business.

Revenue from continuing operations fell 2% to R15.69 billion, while earnings before interest, tax, depreciation, and amortisation (EBITDA) from continuing operations increased by 24% to R1.58bn. A 100 cent a share dividend was declared - no dividend was paid out at the same time last year.

“Despite some setbacks in strategy execution, particularly under the value unlock pillar, our strategy remains intact, with clear progress against key milestones in the period. Going into the second half, I look forward to continuing our international growth while navigating the structural and supplier challenges impacting our business in South Africa, as well as addressing delays in our strategy execution program," CEO Holger Riemensperger said.

He said the group expected to report another positive performance in the second half of 2025, supported by a solid performance from its core businesses. However, the results were expected “to be behind aspirations as a result of delays in the EBITDA run rate.”

During the interim period, profit from operations was down 6% to R699m. Net debt of R2.92bn was well down from R5.1bn at the same time last year. Gearing of 25% (June 30, 2024: 41%) was also well within the guided range of 20% - 40%.

The group strategy rests on four pillars. The directors said that during the interim period, on the first, “people and culture” pillar, a high-performance culture continued to be built. On the second, portfolio optimisation pillar, R2.4bn in disposal proceeds had been received.

Much Asphalt and Baar-Ebenhausen had been sold, and agreements had been signed for the disposal of Schirm USA and the Food & Beverage businesses.

 The sale of Animal Health to Nutreco International B.V. was mutually terminated on May 19, 2025.  The sale of Public Water is underway with continuous discussions with prospective buyers. On July 17, 2025, an agreement for the sale of Schirm USA was reach.

On the third pillar, to unlock value internally, the cumulative EBITDA run rate in terms of the Transformation Management Office initiative increased by R400 million to R1.2bn. The consolidation of three head offices into a single location marked a significant milestone in the efficiency drive. The headcount optimisation plan was delayed.

On the fourth pillar, internationalisation, the EBITDA margin in the international business improved. There were also four new contract wins within Asia-Pacific and Africa.

"I am encouraged by the growth of our international operations and the continued resilience of our core business, particularly in the face of South Africa’s challenging operating environment, which had an adverse effect on our reported results,” said Riemensperger.

The operational results were mixed. AECI Mining's international operations improved, despite the South African-based operations being affected by challenging operating conditions and supplier headwinds.

The AECI Mining segment recorded a 14% improvement in EBITDA of R1.33bn on the back of growth in the international business, coupled with better cost management, partly offset by the South African business being impacted by operational challenges at the Modderfontein facility and the Lead Azide supply. The prior period was impacted by R204m in statutory shutdown costs.

AECI Chemicals’ EBITDA fell to R319m from R467m following demand and pricing pressures that were exacerbated by expected credit losses and foreign exchange losses.

The businesses in the AECI Managed Businesses segment were identified for divestment. EBITDA for the segment increased to R139m from R101m. The restructuring process at AECI Schirm Germany was yielding positive results.

The AECI Property Services and Corporate segment reported a R189m loss compared to a R458m loss at the same time last year. The prior period was impacted by once-off expenditure related to strategy execution.

The 70% rise in earnings per share from continuing operations was primarily driven by an improved EBITDA, lower net finance costs, and a reduced effective tax rate, partially offset by costs associated with the group divestment strategy.

Riemensperger said they expected full-year EBITDA to be supported by a recovery of volumes in the Asia-Pacific region, the further realisation of value unlock initiatives, and ongoing internal efficiency programmes.

Although progress on the targeted EBITDA run rate was continuing, some delays were anticipated in achieving the run rate target due to unrecoverable lost production volumes at the Modderfontein facility during the first half of 2025.

This had resulted in more than usual management focus, which in turn affected efforts relating to head count efficiency initiatives and delivery on growth capital projects.

BUSINESS REPORT