AECI profit halves

Johannesburg - Specialty chemical group AECI on Tuesday reported diluted headline earnings for the six months to end-June 2009 of 104 cents, representing a 67.8% fall from the 323 cents reported for the first half of last year.

The company's first-half profit halved to R115m from R338m in the first half of last year.

An interim dividend of 28 cents was declared. This compares to last year's interim dividend of 90 cents.

It is proposed that the dividend be declared as scrip with a cash alternative.

AECI warned in February that trading conditions in respect of the current financial year would be challenging for the group's businesses as a consequence of the global recession.

But it acknowledged that the "challenges have been more severe than expected" and the magnitude of the recession's impact is reflected in the group's results for the half-year.

Furthermore, R141m in respect of fair value, net realisable value adjustments and restructuring costs impacted on earnings. Profit from continuing operations of R328m declined by 41% from R552m in the first half of 2008.

Revenue from continuing operations decreased by 9% to R5.26bn with this decrease is largely attributable to significant volume declines experienced by the group's customers in the mining and manufacturing sectors.

The strengthening of the rand in the period required fair value adjustments and recognition of exchange differences of R46m and lower commodity prices resulted in net realisable value adjustments to inventory of R65m.

AECI has begun restructuring programmes in areas where it believes that markets will remain under pressure in the medium- to long-term.

To date, R30m has been incurred in restructuring costs.

The Group invested R675m in capital expenditure, of which R542m related to growth projects in AEL and Chemserve.

Capital expenditure for the full financial year is expected to amount to R1.2bn.

Looking ahead, AECI said depressed market conditions are expected to continue for the remainder of the year.

In the first six months, the group incurred fair value and exchange difference adjustments of R111m but based on current commodity prices and currency exchange rates, it is not expected that these charges will recur.

Management expects an improved performance in the second half-year and thus does not expect headline earnings per share for the full financial year to be considerably lower than the 412 cents achieved in 2008.

- I-Net Bridge