Diversified chemical solutions group AECI is not tempted to fire sale the four businesses it has held for sale, with CEO Holger Riemensperger saying the company will wait for the right offers.
The company put up several businesses: Much Asphalt, Animal Health, Schrim, Sans Fibers and Beverage up for sale as the group reshuffles its strategy focuses on its mining and chemicals businesses.
The group has found buyers for Much Asphalt and Animal Health but has struggled to get the right price for the other businesses it deems noncore.
“The businesses that we have not sold yet have not attracted the right prices. There is a lot of interest in the businesses, but not the right prices for our shareholders,” Riemensperger said, after the release of the group’s results for the year to end-December on Wednesday.
“The mergers and acquisitions market in 2024 was very soft globally, which made it difficult to get the right price for the assets. We are not going to fire sale the businesses. We continue talks with potential buyers.”
Riemensperger cited logistics challenges, a lack of digital innovation and a focus on cost-cutting rather than efficiency as key constraints to the local industry.
Mining demand
In the past year AECI has pinned its hopes on its mining unit, in which the group provides chemical solutions across the mining value chain from explosives to tailings treatment, as the key catalyst for its growth ambitions.
The company hopes that a growing need for efficient mining, fuelled by digital innovation and environmental mandates, will boost the demand for its integrated offering, providing access to new international markets.
While SA represents about 25% of AECI’s business, the country’s share is shrinking, partly because of AECI’s new internationalisation strategy and problems in the local industry, Riemensperger told Business Day earlier this month.
SA’s transport and logistics continue to face issues, with improvements in the rail network being offset by persistent problems at ports that must be resolved to help the industry grow its exports, he said.
“The other element is that there’s still a lot of cost focus in the SA mining industry rather than looking to efficiencies,” he said.
According to Riemensperger, SA miners tend to focus more on buying cheap products to cut costs at individual steps rather than looking at the cost efficiency of their overall value chains.
“We need to think more integrated. I believe that digital innovation and AI will enable that efficiency, and that must be the next step for the SA industry,” he said.
AECI’s focus on growing its presence in the mining industry comes after a challenging financial year for the group, with low commodity prices and a lack of growth in SA’s manufacturing and industrial sectors putting pressure on earnings.
R1.1bn impairment
Challenging market conditions in SA and declining ammonia prices stemming from the weak price of natural gas caused the group to report revenue at R36.5bn, down 2.7% from the previous year, while its operations were impaired by R1.1bn in the period under review.
The group’s chemicals division recorded R823m in profit from operations, up 30% year on year, while profit from operations in the mining business fell by nearly a quarter to R1.55m and the property services and corporate unit reported a loss of R1.33bn.
Investments associated with the group’s internationalisation strategy caused overall earnings before interest, tax, depreciation and amortisation (ebitda) to decline 10% year on year, driven primarily by R860m in one-off investment costs.
“While we made concessions that affected the group’s financial performance for the year, our progress and achievements to date in executing the strategy reinforce our confidence in our ability to meet our long-term strategic ambitions,” said Riemensperger.
The group aims to double the profitability of its core business by 2026 and take its global market position in mining to third place by 2030 by expanding its global footprint, particularly through the AECI mining chemicals business.
The group enhanced its presence in Australia last year while gaining access to Latin American markets through a strategic Peruvian land acquisition, which will enable the construction of new explosive manufacturing plants to supply Peru’s local mining sector directly.
The company reported its capital expenditure bill for the year at R973m, with AECI mining spending R619m on new contracts in Australia and maintenance during a planned plant shutdown.
The year 2024 was transformative for the group, with “significant progress made against our strategy execution programme”, said Riemensperger.
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