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IOL News
30-06-2025
- Business
- IOL News
AECI reports improved performance in spite of challenges in the local market
File image An AECI manufacturing facility in the Umbogintwini Industrial Complex, a major industrial hub located in Amanzimtoti, about 20km south of eThekwini. The group has had to address headwinds faced in its South Africa mining and industrial chemical businesses during the 5 months to May 31. Image: Supplied AECI's international industrial and chemicals operations reported an improved performance for the five months to May 31, while its South African-based business was impacted by weak power challenges and supplier headwinds. The group, which provides mining solutions, water treatment, agricultural health, and specialty chemicals products, said in an update on Monday that revenue was slightly lower than the same time last year. Conversely, earnings before interest, tax, depreciation, and amortisation (EBITDA) and profit from operations were higher. There was a cut in strategy implementation costs in AECI Property and Corporate Services, and continued conversion of the EBITDA run rate relating to the Transformation Management Office (TMO) initiatives into profit and loss, albeit lower than expected. This was partially offset by the impact of the South African-based operations, in both AECI Mining and AECI Chemicals, which were facing challenges. Group profit from operations for the period increased 17% to R800 million. Net finance costs improved by 40% due to lower debt, mainly resulting from the proceeds received for the R1.1 billion Much Asphalt divestment concluded in the first quarter of 2025. Net debt as at May 31 was R3.38bn (May 31, 2024: R4.74bn), lowering gearing to 28% from 38%, well within the guidance of 20% - 40%. Available cash increased to R2.58bn (R1.79bn). The South African mining explosives business experienced poor power supply at the Modderfontein facility (a national key point), leading to outages. The unit also declared force majeure for part of the first quarter of 2025 due to a lead azide supply issue, which affected the manufacturing of detonators. These issues resulted in lost volumes, with third-party buy-ins of ammonium nitrate to support demand. Management is engaging with both suppliers to resolve the issues and has seconded a team to assist in resolving the lead azide challenges experienced by the supplier, the group said. The mining chemicals business, also linked to the South African mining industry performance, was performing to expectations, particularly in the metallurgy segment. The Asia-Pacific business unit sales volumes were impacted by inclement weather in the first quarter of 2025, but the business was recovering. Headwinds in the fourth quarter of 2024 in the sourcing of raw materials in Australia were addressed and the conclusion of an ammonia nitrate import contract contributed to improved profitability. AECI Mining had been awarded four new contracts in the Democratic Republic of Congo, Australia, Ghana, and Botswana. In the AECI Chemicals segment, South Africa's manufacturing sector continued to face pricing and demand pressure. The industrial chemicals business was impacted by low demand for sulphuric acid, and an expected credit loss due to a major customer entering business rescue. The water business results were in line with expectations, but faced challenges recovering funds from a supplier that entered business rescue after failing to deliver pre-paid raw materials. The plant health business underperformed slightly due to excessive rainfall affecting pre-harvest sprays, while the specialty chemicals business unit lagged due to reduced orders from a key customer. Internal initiatives in AECI Chemicals were being implemented to boost performance. The restructuring at AECI Schirm Germany was progressing. The previously announced sale of Animal Health had been terminated via a mutual agreement due to non-fulfilment of certain conditions precedent. Other interested parties for the business were being engaged with. AECI's share price nuidged up 0.56% to R105.70 on the JSE on Monday morning. Visit:
Yahoo
04-03-2025
- Business
- Yahoo
AECI (JSE:AFE) Is Paying Out A Larger Dividend Than Last Year
AECI Ltd's (JSE:AFE) dividend will be increasing from last year's payment of the same period to ZAR2.19 on 14th of April. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry. See our latest analysis for AECI We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, AECI was paying out 83% of earnings, but a comparatively small 25% of free cash flows. This leaves plenty of cash for reinvestment into the business. Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 20%, which is in a comfortable range for us. The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ZAR3.25 in 2015, and the most recent fiscal year payment was ZAR2.19. This works out to be a decline of approximately 3.9% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for. Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. AECI's EPS has fallen by approximately 26% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend. In summary, while it's always good to see the dividend being raised, we don't think AECI's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment. Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for AECI that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
