Chemicals and explosives group AECI is intensifying its push into international mining markets as challenges in the local sector continue to weigh on its SA operations.
The company flagged a slip in revenue for the five months to end-May as weak demand, falling prices and SA’s unstable power supply resulted in lost volumes for its domestic mining explosives and chemicals units.
Unplanned outages at the group’s Modderfontein facility and challenges with its lead azide supplier resulted in the SA mining explosives business unit declaring a force majeure for part of the first quarter.
Additionally, the company’s industrial chemicals business saw a major customer enter business rescue and grappled with low demand for sulphuric acid as SA’s manufacturing sector “continued to face challenges affecting pricing and demand”.
The group has a long history in the SA mining landscape, having begun servicing its gold and diamond industries in 1924, but the country’s shrinking mineral output and sluggish economy have seen it doubling down on diversification in recent years.
SA’s mining sector entered “technical recession” in March after two consecutive quarters of declining output, as elevated input costs, low metal prices and logistics bottlenecks continued to limit the sector’s export potential.
In a trading update on Monday, AECI said it had successfully been awarded four new contracts in Democratic Republic of Congo, Australia, Ghana and Botswana over the past six months.
The new contracts will allow AECI, SA’s largest explosives manufacturer, to expand its international presence at a time when opportunities in the local mining sector may be drying up.
In contrast to its SA operations, AECI mining’s international operations delivered encouraging results, with an improved margin performance in the Asia-Pacific region and improved profitability in Australia thanks to the conclusion of a new five-year contract for the importation of ammonium nitrate.
As a result, earnings before interest, taxation, depreciation and amortisation rose 12% year on year to R1.25bn, while profit from operations was up 17% at R800m.
“Overall, AECI Mining’s international operations recorded an improved performance, while the SA-based operations were impacted by challenging operating conditions and supplier headwinds,” said the company.
The group’s financial performance was further supported by a R1.1bn cash injection stemming from the disposal of Much Asphalt, which resulted in a 40% year on year reduction in net finance costs.
The group boasted a healthier balance sheet, with R2.58bn in cash and cash equivalents and a net debt position of R3.38bn at end-May, compared to R4.74bn one year prior.
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