AECI will pay interim dividend despite uncertainty over manufacturing sector
The group had deferred a R448m dividend due to Covid-19 but expects cash generation to pick up in the second half of 2020
Chemicals and explosives group AECI is proceeding with a R110m interim dividend payment, albeit a “conservative one”, as it braces for further fallout from the Covid-19 pandemic for SA’s manufacturing and mining sectors.
AECI remains deeply concerned about the outlook for SA’s economy, CEO Mark Dytor said on Wednesday, but the group is pleased with how it has managed its cash over the past six months.
“We have never not paid a dividend, and we are expecting cash generation to pick up in the second half of the year,” he said. Prospects for SA’s mining and manufacturing sectors are somewhat bleak, but activity is picking up elsewhere, for example mining in central Africa, he said.
The group, which employs 7,600 staff, generated just more than half of its R11.26bn in interim revenue in SA, and operates on all continents except Antarctica. Its businesses cover a range of sectors, including chemicals for water treatment, explosives for mining, asphalt, fertiliser, and animal food, as well coating materials for paper and packaging.
The group trimmed its interim dividend for the six months to end-June by about a third, and will pay it in September. AECI had deferred its R448m final dividend payment for its year to end-December 2019, which the group expects to be paid by the end of 2020.
SA’s underground mining sector may only recover in the second quarter of 2021, said Dytor, while SA’s manufacturing sector may never fully recover from the pandemic.
“We are uncertain about what manufacturing sector comes back, and in what guise and form it comes back,” said Dytor. “We have seen the coating and paints sector completely decimated over the past three to four months.” SA’s construction sector remains under pressure, he said, but there are bright spots, and agriculture is faring better, especially given recent rainfall in the Western Cape, which produces higher-margin crops that require a lot of chemicals and fertilisers.
Headline earnings per share fell 34% to 240c in the group’s six months to end-June, with profit falling 36% to R260m, as the pandemic shuttered mines and factories.
The group saw writedowns of goodwill, property, plant and equipment amounting to R69m during the first half of 2020, as well as restructuring costs. This was partly offset by the receipt of R108m in profit on the sale of its paper chemicals unit.
The group sustained restructuring costs of R64m, cutting some 240 staff as it combined its food and beverages business with its chemicals business. The company expects this restructuring to improve annual profits by about R100m.
The group has opted to declare a 100c per share interim dividend, from 156c previously.
AECI’s share price jumped 6.4% to R84.07, giving the group a market capitalisation of R9.2bn. AECI’s share price has fallen by 21.43% in the year to date.
Correction: July 29 2020
An earlier version of this story incorrectly said AECI employed more than 2,700 staff, but this is in fact 7,600.
Update: July 29 2020
This article has been updated with new information throughout.
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