AECI interim HEPS up 5%

Diversified chemicals group AECI has reported a robust revenue growth of 19 per cent, despite facing challenging economic conditions, with earnings increasing by 5 per cent. The company's performance was marked by a loss in the AECI Agri Health division, while mining revenue saw a significant increase of 29 per cent. Holger Riemen-Sperger, the Group Chief Executive Officer of AECI, joined CNBC Africa to discuss the company's financial results and strategies for the future. During the interview, Riemen-Sperger addressed questions about the company's decision to cut dividends by 48 per cent. He explained that the dividend cut was part of a broader strategy to reduce the company's current gearing, which, while not a cause for concern, was being addressed to minimize financing costs and prepare for future growth. In addition to the dividend reduction, AECI is implementing various measures related to working capital and capital expenditures to optimize financial performance. Speaking about the company's gearing, which currently stands at 47 per cent, Riemen-Sperger acknowledged that the existing guidance range of 40 to 60 per cent might not be appropriate given the current economic environment. He indicated that AECI is aiming for a significantly lower gearing level and that this adjustment is being driven by interventions across different areas, including working capital and capital expenditures. AECI's performance in the period under review was characterized by strong revenue growth but more modest earnings growth. Riemen-Sperger attributed this variance to the diverse nature of the markets in which AECI operates. The mining business, particularly in regions like Central Africa and Australasia, experienced strong growth, while the water business showed promising developments, especially in the industrial and mining sectors. However, the local chemicals business faced challenges due to macroeconomic conditions in South Africa, impacting industrial activity and consumer spending. When asked about the impact of local macroeconomic conditions on the company, Riemen-Sperger highlighted the decline in industrial activity and consumer spending as significant factors. He also mentioned the challenges posed by issues such as load shedding and emphasized the company's focus on enhancing self-sufficiency in energy and water supplies to mitigate these challenges. Riemen-Sperger also discussed AECI's capital expenditure plans, noting that while the company is currently looking to decrease capital expenditures to address gearing concerns, it remains committed to maintaining essential investments to support business operations. Additionally, he underscored the importance of selecting growth-oriented capital expenditures that deliver the highest returns above the weighted average cost of capital. The interview also shed light on AECI's agri-health division, where the company is implementing a turnaround strategy for its German operations acquired in 2018. Despite challenges in the German chemicals industry, AECI is confident in the turnaround plan's progress, albeit with a focus on long-term results. Short-term measures have also been introduced to drive immediate improvements in the division. Looking ahead, AECI's focus will remain on leveraging the growth potential of its mining, water, and local agri-health businesses. The company anticipates continued strong performance in these areas, while acknowledging potential challenges in the local chemicals business due to South Africa's industrial development trajectory. In conclusion, AECI's resilience amidst economic headwinds, strategic financial decisions, and focused growth strategies position the company for continued success in the future.