AECI profits jump as demand slowly returns to pre-pandemic levels

Diversified explosives and chemicals group AECI says the global boom in demand for many commodities helped profit from operations more than double in its half-year to end-December, with a sustained increase in prices likely to lead to the reopening or expansion of more mines.

“We’ve definitely seen a pick up in activity in mining in the second half of the year,” AECI CEO Mark Dytor told Business Day.

“The challenges though have been the big rainfall in the last quarter, especially on opencast mines.”

AECI was listed on the JSE in 1966 and its business spans six continents, though it generates almost 60% of its revenue in SA.

The diversified explosives and chemicals supplier was registered in 1924 due to the gold boom in SA. AECI’s mining business provides a mine-to-mineral solution to the international mining sector, including commercial explosives, initiating systems, blasting services and surfactants for explosives manufacture, right through the value chain to chemicals for ore beneficiation and tailings treatment.

The group has benefited from a buoyant mining sector that has been bolstered by favourable commodity prices. Yet supply chain problems, rising costs and port issues continue to pummel operations.

“It’s a pity that in the commodity pricing where it is now, we not taking full advantage of this ... our mining industry can’t thrive now due to constraints that we can’t get the coal or the oil exported,” Dytor said.

Group revenue rose 8% to R26bn in the six months to end-December, with profit from operations jumping 124% to R2.05bn, slightly above pre-pandemic levels. The group’s chemicals division also benefited from some recovery in asphalt volumes for road infrastructure projects

Also assisting was a level of overall improvement in SA’s manufacturing, infrastructure and general industrial sectors, albeit, from a low base, the group said.

It said the hefty R1bn insurance claim lodged in a bid to claw back lost revenue due to Covid-19 was still being processed.

Valued at R11.9bn on the JSE, the group has interests ranging from the explosives used in the mining industry, to asphalt, water treatment and agriculture.

AECI said on Wednesday that it was encouraging that demand for its products and services in key markets was returning to pre-Covid-19 levels, though this was not uniform.

The effect of the conflict in Ukraine was not fully understood and could influence global growth and commodity prices, AECI said, while raw material shortages, high prices and slow but expensive shipments are likely to continue in 2022.

A large chunk of the global supply of ammonium nitrate, which is used as a fertiliser or explosive base, comes out of Russia.

Dytor said that in the reporting period, the company had built up stock levels of ammonia, which affected the working capital, but would assist in ensuring the stability of supply for customers.

“We are quite fortunate that there is ammonia supply out of Europe, North Africa and China ... We are watching the developments quite closely,” Dytor said, adding that AECI customers who exported into Ukraine had been hit by stoppages.

AECI upped its final dividend 7.4% to R5.05 per share, a R532m payout to shareholders.

gernetzkyk@businesslive.co.za