February 23, 2005

By Ingrid Salgado

Cape Town - The property portfolio of AECI helped the speciality chemicals company report a strengthened balance sheet yesterday and a double-digit increase in headline earnings for the year to December.

Schalk Engelbrecht, the chief executive, cited the sale of excess property to developers as the single biggest cause of a 10 percent increase in headline earnings to R3.92 a share.

AECI beat the I-Net consensus forecast of R3.57 a share.

The cash generated from property sales pushed AECI's gearing down to 24 percent from 40 percent at the year-end.

Because of reduced borrowings, the company would ask shareholders at a May annual general meeting to approve a general repurchase of 10 percent of shares.

Engelbrecht said a share buy-back could enhance earnings at the share level. The company traded at a discount relative to the industrial index on the JSE Securities Exchange, and he believed the gap could be narrowed.

AECI shares lost 65c to end the day at R41.05 yesterday, while the chemicals sector fell 0.75 percent.

Engelbrecht expected property activities to remain a significant cash generator in years to come. The group still had 2 600ha of excess land available for sale, predominantly in Modderfontein and Somerset West.

AECI declared a final dividend of 94c a share, leaving the total dividend 15 percent higher at R1.38. This was ahead of the I-Net consensus forecast of R1.29c.

For the year under review, AECI's bottom line was enhanced through efficiencies achieved. Top-line growth was muted as revenue grew 3 percent to R7.9 billion due to the low inflationary environment.

The chemical services division, comprising 19 niche small to medium-sized businesses, experienced mixed trading conditions, with lower selling prices in some markets.

Measures to improve the performance of some businesses were expected to flow through in 2005.