The restructuring of explosives and chemicals group AECI has yet to resonate with the markets, with the company’s share price down 2% since the beginning of the year.
The lull on the bourse comes as AECI has embarked on a restructuring and simultaneous divestiture from seven acquired businesses. This is as it works towards achieving its strategic ambition to double the profitability of its core business by 2026.
After the appointments of Rochelle Gabriels as its new CFO in October and Holger Riemensperger as its new group CEO in February last year, the board of AECI announced in November that it would undergo a 18-month restructuring that would see a return to the group’s core mining and chemical businesses.
Until December 2023, AECI’s operating businesses were structured into four key segments: AECI Mining, AECI Water, AECI Agri Health, and AECI Chemicals. In alignment with the new strategy, it now focuses on mining and chemicals.
The overhaul has been accompanied by the introduction of four new roles including chief transformation officer, which is now occupied by former acting CFO Rafael Fernandes who will be responsible for overseeing the rollout of the strategy across all businesses; and group COO was taken up by Denvor Govender who is now in charge of operational and manufacturing optimisation.
The company with a R11.3bn market capitalisation on the JSE said the improved management structure would allow it to be more aligned to a corporate business and enabled the delivery of its strategic ambition to double the profitability of its core business over the next two years.
Part of the new strategy for the group which has operations in SA, Australia and Asia Pacific, entails looking towards growth in Asia-Pacific, South America and North America as it drives its ambition to be among the top three on a global scale by 2030, according to the CEO.
However, AECI has made progress in divesting from noncore assets.
Earlier this month the group announced it had signed a sale and purchase agreement with global livestock company, Nutreco International for the sale of its animal health business.
It said the strategic disposal, which awaits regulatory approvals, aligned with its recently announced strategy to streamline operations and focus on core competencies, ensuring continuous growth and value creation for stakeholders.
“We are pleased to have found a partner that shares our vision and values in Nutreco,” said Riemensperger. “This transaction represents a significant milestone in our journey, and we are confident that the animal health business will thrive under Nutreco’s leadership.”
According to AECI, the acquisition allowed it to focus its efforts and resources to realise its goals.
The company has outlined its ambitious targets despite its full-year profit slipping 12%, due to high finance costs coupled with short-term finance needed to accommodate higher working capital levels throughout the year to sustain revenue growth.
However, its core mining and chemical businesses — which it is banking on for future growth — fared reasonably well against the commodity market slump, which forced several mining houses to review their cost structures.
AECI Mining’s revenue rose 8.4% to R19.6bn in the year to December, with record earnings before interest and taxes of just more than R2bn up 18% year on year. New international contracts drove the improved performance in the mining business.
The group said it remained cash-generative and sufficiently capitalised, giving it a solid foundation on which to implement the new plan.
AECI was founded in 1896 to serve the expanding SA gold and diamond mining industry. It was listed on the JSE in 1966, sharing a listing category with Omnia and Sasol.
AECI’s interim results are expected on July 30. Its shares closed 0.28% higher at R107.72 on Tuesday.
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