AECI Plans Brazil Acquisition to Tap Growth in South America

AECI Ltd., South Africa’s biggest explosives and chemicals manufacturer by market value, plans to expand into South America as it seeks to diversify away from slower growth in its home market.

AECI is seeking to agree an acquisition in Brazil by the end of this year or early next year, Chief Executive Officer Mark Dytor said in a phone interview from Johannesburg today. “It’s an emerging market. It has a big population, a sophisticated population. They consume a lot of products that take our chemicals.”

AECI is pursuing expansion to increase revenue from outside South Africa, it’s main market. A presence in Brazil will create opportunities in surrounding countries such as Argentina and Chile, Dytor said.

“Pedestrian” growth in South Africa “doesn’t excite us,” he said. “To get the return for our shareholders, we have to expand our footprint.”

AECI plans to spend as much as 1 billion rand ($103 million) a year to finance expansion and for the year ending December it is targeting as many as three deals, Dytor said.

Mining Services

AECI reported today an increase in net income to 398 million rand for the six months ended June 30 compared with 134 million rand a year earlier, led by improved sales at its mining services unit. Net income a year earlier was affected by a one-time charge of 138 million rand associated with the establishment of a development trust.

First-half revenue climbed to 7.22 billion rand, compared with a restated 6.41 billion rand a year earlier.

“We are still apprehensive about labor unrest in the mining industry which will impact on sales,” Dytor said.

AECI is the seventh-best performing stock in the FTSE/JSE Africa All Shares Index this year, after advancing 48 percent. The stock fell 1.5 percent to 118 rand at the close in Johannesburg today, valuing the company at 15.1 billion rand.

The company increased its interim dividend by 35 percent to 105 cents a share.

(Updates with closing share price in 9th paragraph.)
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