AECI CEO Says Diversity Pushes Stock to Best Gain in 19 Years
AECI Ltd. (AFE), 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 Officer Mark Dytor.
AECI is banking on higher-margin products offsetting a South African mining industry that’s being challenged by labor unrest, a slump in commodity prices, and rising production costs. AECI is cutting staff, mechanizing 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 percent.
“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 percent this year, valuing the company at 15.4 billion rand ($1.49 billion), compared with a 14 percent gain in the 165-member FTSE/JSE Africa All Share Index. The 20-member FTSE/JSE Africa Mining Index fell 7.1 percent in the same period, data compiled by Bloomberg show. The stock gained 67 percent in 1994.
The Johannesburg-based company sold 1,600 hectares (3,956 acres) of land and buildings to Hong Long-listed Shanghai Zendai Property Ltd. (755) for 1.06 billion rand, according to a Nov. 4 filing. It also plans to sell 720 hectares of land near Cape Town, the CEO 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.
“AECI has a pipeline of five to six acquisition targets in Africa and South Africa,” said Dytor, with each valued at between 500 million rand to 1 billion rand.
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