AECI, set for its best share price performance this year in almost two decades, is benefiting from a shift away from its reliance on South Africa’s mining industry, said chief executive Mark Dytor.
AECI is banking on higher-margin products offsetting a South African mining industry that’s being challenged by labour unrest, a slump in commodity prices, and rising production costs. AECI is cutting staff, mechanising plants and offering more efficient explosives to miners.
The African mining industry will be worth about $1.57-billion in explosives sales in the five years through 2017, with gold and coal production accounting for 54%. "AECI is now positioning itself to focus on core businesses" comprising of mining and specialties such as water treatment chemicals and food additives, Dytor said.
"We are getting more shareholder interest." AECI shares have surged 51% this year, valuing the company at R15.4-billion, compared with a 15% gain in the 165-member FTSE/JSE Africa All Share Index. AECI’s stock gained 67% in 1994 and was unchanged as of 9.38am on Thursday in Johannesburg at R120.20.
Land sales
The Johannesburg-based company sold 1 600 hectares of land and buildings to Hong Long-listed Shanghai Zendai Property for R1.06-billion, according to a November 4 filing.
It also plans to sell 720 hectares of land near Cape Town, the chief executive said. Proceeds from land sales should be available by July, and spending the money will "be a matter for discussion by the full AECI board," he said.
Focusing on the mining and chemical industries is opening avenues for the company to expand into other emerging market countries and in other African countries. ""ECI has a pipeline of five to six acquisition targets in Africa and South Africa," said Dytor, with each valued at between R500-million to R1-billion. – Bloomberg