AECI (JSE: AFE) is a proudly South African specialty chemicals and explosives company listed on the Johannesburg Stock Exchange (JSE), that focuses on providing products and services to a broad spectrum of customers in the mining, manufacturing and agricultural trades. It has a strong history of being a profitable share on the stock market, yielding good dividends for shareholders.
Today, its portfolio’s business interests are local, regional and international with key operations in Africa, South East Asia and Australia. The group also has business interests in Latin America.
Being a specialty product and services group of companies, AECI claims to provide “value-adding solutions to customers through science, technology and industry knowledge”. The company is mostly interested in serving the mining and manufacturing sectors.
When the company’s Dulux decorative coatings business was brushed aside in 2007, the unprofitable segments of the SANS Fibres business were also closed. AECI has embarked on a massive construction of five projects related mainly to the mining sector. These will have a capital expenditure of about R1.1 billion in total over the next two years.
The DetNet joint venture is responsible for the designing, producing and selling of electronic detonators. The company has also established its presence in Brazil for specialty chemicals.
AECI Shares Growth Driver
The biggest growth driver recently for AECI has been recovering demand from the mining and manufacturing sectors. Demand from the manufacturing sector in particular was greatly reduced by the economic downturn,but its return has boosted demand for AECI’s speciality chemicals division, and boosted performance.
This has been attributed as the biggest contributor to AECI’s revenues. The AECI has also widened its reach by investing in a number of capital projects for the expansion of capacity in both its specialty chemicals and mining explosives divisions. AECI has still not seen volumes return to pre-2008 levels. After a strong upward surge, stock charts show a dip in the share price since 2015.
This has been viewed as a short-term challenge. The expansion of its capacity has shown foresight and is tipped to become a competitive advantage for subsidiaries such as AEL and Chemserve going forward.
AECI has frequently invested in research and development in order to improve its products. There are many examples to support this growth. One of these is the development of an improved electronic delay detonation system and a new homogeniser for emulsion explosives in collaboration with Lake Technologies.
AECI Investor Tip
AECI announced that the sale of excess property in Somerset West (near Cape Town) had lifted headline earnings per share by 45 percent in the six months to June 2015. At the opening of the JSE on 22 February 2016, AECI share prices were down 2.29% to R85.01, valuing the company at about R10.7bn.
The company’s headline earnings per share came in at 565 cents, up from 390 cents, with the property sale contributing 230 cents. The explosives and specialty chemicals group had its revenue for the period increasing by 8 percent. This increased from R7 987 million to R8 629 million, with 36 percent of this generated outside SA, reflecting progress in the group’s strategy to diversify geographically.
The weak rand exchange rate also played a role contributing to this increase. Profit from operations was R991 million, 22 percent higher than the R814 million achieved in the prior corresponding period. This indicates that the company is on an upward curve, with those who purchase AECI shares likely to be rewarded in the long-term.
AECI Major Shareholders
Coronation Fund Managers, Public Investment Corporation, Kagiso Asset Management, Sanlam Investment Management and Allan Gray (Pty) Ltd.
How to buy AECI Shares
AECI : How to buy AECI Shares Online
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