Diversified explosives and chemicals group AECI has proceeded with a more than R500m final dividend, expressing confidence its ability to take advantage of a global economic recovery from Covid-19.
The group’s interests range from explosives used in the mining industry, to asphalt, water treatment and agriculture, and took a R1bn revenue hit in 2020 as road construction ground to a halt and the pandemic shuttered factories.
The group, however, saw a recovery in its second half and expects sustained demand for most of its products in 2021, with AECI CEO Mark Dytor saying on Wednesday that the group upped its final dividend in light of a healthy cash position, and to demonstrate to the market that the business was in control.
The group raised its final dividend 13.5% to 470c — a more than R500m payout — while its total dividend for 2020 was unchanged year on year at 570c. Net debt fell about 40% to R2.38bn.
AECI estimates that Covid-19 cost it R1.09bn in revenue, and R527m in profit from operations, with its chemicals and mining businesses most affected. Group revenue fell 3% to R24.11bn, with a revenue hit offset by a weaker rand, as AECI generates 44% of revenue offshore, mostly in euros and dollars.
Profit from operations more than halved to R917m in the group’s year to end-December 2020, while profit slumped 88% to R160m.
Dytor said the group’s cash flow was “exceptional” during the year, with the group carefully managing inventory and cutting back on unnecessary capital expenditure.
The group also wrote down its businesses by R890m, the majority of this to its Much Asphalt business, which is within its chemicals pillar and which generates about a fifth of group revenue.
It also consolidated some business in this pillar, cutting about 200 jobs. AECI employs about 7,000 people and operates on six continents.
Goodwill has now more than halved at Much Asphalt, with Dytor saying management believed this was a prudent decision, given that the government’s promises of increased infrastructure may take time to materialise.
“Things really do look a bit more upbeat, but there is uncertainty about the pace,” said Dytor.
AECI announced the acquisition of Much Asphalt, Southern Africa’s largest supplier of hot and cold asphalt products, for R2.3bn in cash in 2017.
The group also saw volumes return in the manufacturing sector, said Dytor, but there had been Covid-19 casualties and the sector has not returned to pre-pandemic levels.
Some major players had, however, returned to full operation, he said, while activity in SA’s mining sector was robust, which had linkages with manufacturing. Load-shedding and a spike in electricity costs from April are major headwinds, Dytor said.
In morning trade on Wednesday, AECI’s share was up 1.87% to R98.81, having recovered 12.28% over the past six months, but having fallen 3.13% over the past 12.
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