AECI CEO Mark Dytor. Picture: MARTIN RHODES
AECI CEO Mark Dytor. Picture: MARTIN RHODES

SA’s agricultural sector needs to adapt quickly to climate change, which is already having a noticeable effect on the country’s weather patterns, says Mark Dytor, CEO of explosives and chemicals group AECI.

“Rainfall patterns are definitely changing – the seasons are shifting,” Dytor said on Tuesday.

In Gauteng, the rainy season had been pushed back, meaning farmers were planting less maize and more sunflowers, for instance. And the Western Cape still had irrigation restrictions in place.

“If you’re relying only on rainfall to produce agriculture, that’s short-sighted because climate change is here to stay, and it’s now about how we use technology to get around that.

“For example, we should be taking waste water, cleaning that up and using that in agriculture. At the moment, we’re putting it into rivers and dams and contaminating them,” Dytor said.

Farmers also needed to use technology to monitor rainfall patterns, soil moisture and crop health in order to reduce irrigation. AECI had partnered with an Isreali company to offer these technologies in SA.

Dytor said “there are great opportunities” for AECI’s water treatment and agricultural businesses, which accounted for about 12% of profits in the year to December. “We need to leverage that now,” he said.

AECI’s group profit from operations rose 27% to R2bn in the year to December as revenues grew 26% to R23.3bn. This was thanks to higher commodity prices, the weak rand, and the recent acquisitions of Germany-based Schirm and SA’s Much Asphalt.

The company generated 40% of its revenues outside of SA, from 34% in 2017.

Dytor said revenue from mining had been buoyant except in SA. AECI provides explosives, initiating systems and other related products to the mining sector.

“The company delivered a solid set of results given tough trading conditions,” said PSG Wealth portfolio manager Schalk Louw, who added that the numbers caught the market off-guard.

AECI’s shares closed 6% higher at R94.79 on Tuesday, the best level in about three months.

Louw said the Schirm and Much Asphalt deals had raised AECI’s debt levels “significantly”, though the Schirm business in particular could boost future earnings and ultimately reduce debt.

“AECI is well positioned to benefit from a recovery in the manufacturing and mining sector,” Louw said.

The stock, now trading on a price-to-earnings ratio of 9 and a dividend yield of 5%, “appears to be offering value” relative to its previous levels and to its peers, he added.

Dytor said the group was looking for further strategic acquisitions in its home market and abroad. “The banks are supportive,” he added.