AECI can make further inroads

Johannesburg - Business research analysts Frost and Sullivan said on Monday that AECI, which today reported good full year results, was positioned to take advantage of further growth opportunities.

Commenting on the South African specialty and services group's 39% rise in operating profit to R1.035bn, Frost & Sullivan said: "While the AECI group will inevitably feel the impact of the economic downturn there are still opportunities the company is well positioned to exploit.

"Growth in the coal mining industry in the region in particular will continue to drive demand for its mining solutions."

Frost & Sullivan chemicals analyst Kholofelo Maele said: "Revenue growth was driven by the performance of the speciality chemicals and mining solutions divisions and, to a smaller extent, specialty fibres.

"Chemical Services has embarked on a number of capital projects in order to increase the company's capacity for manufacturing mining chemicals and there is also room for growth in the overall specialty chemicals sector."

Frost & Sullivan said that in the mining chemicals sector, AECI's ability to provide value-added services, including distribution and technical support, had been vital in gaining market share.

"Growth in regional exploration and mining activity, especially in Central and West Africa, is a driver for the mining solutions sector of the company," said Maele. "It has positioned itself well to serve this growing market."

Frost & Sullivan said that an important component of AECI's strategy was African Explosives Limited's (AEL's) "Factory of the Future', which is planned for completion in 2010.

"This will be a more automated and modern manufacturing plant. AEL aims to make it a globally competitive plant for manufacturing world-class quality shock-tubes at competitive prices, it said.

According to recent Frost & Sullivan analysis, the South African market for mineral and mining chemicals is expected to be worth $900m by 2014, from around $550m in 2007.

Explosives make up around 80% of this market. AEL is the largest manufacturer of explosives in the country.

"Completion of the 'factory of the future' and mining chemicals expansion projects will increase capacity to service a growing industry," said Maele. "This will increase the company's competitiveness, on both price and quality, locally and globally."

Maele also suggests that AECI may look at acquisitions in the speciality chemicals division - both locally and internationally - to strengthen its position in a competitive market.

- I-Net Bridge