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Standard Bank Group
AECI 13 March 2025

FY24 results - mixed but with tangible signs of promise. FY25E should be the year of delivery

#themes: new management team, cost optimisation, value creation

Event: FY24A was a difficult year for AECI and reflects the significant costs of implementing its turnaround strategy, one-off costs related to the extended closure of Mining’s Ammonia Nitrate facility, a depressed offshore chemicals market and a moribund local mining industry.

Results in more detail: Revenue declined by 3% to R36.5bn compared to our forecast of R37.6bn and reflects the depressed local mining industry and lower ammonia prices. Mining revenue declined by 3% to R19.1bn, Chemicals revenue declined by 2% to R9.9bn and Managed Businesses revenue declined by 4% to R7.3bn. Normalised EBITDA from continuing operations declined by 4% to R3.4bn, with EBITDA from Mining and Chemicals declining by 8% and increasing by 12% respectively. Normalised EBITDA from Managed Businesses, including Much Asphalt, increased by 36% to R500m. EBITDA from Much Asphalt increased by 28% to R267m. Losses from Schirm (Germany) exceeded expectations and, together with the underperformance of Mining and a higher rate of taxation, were the main reasons the HEPS of 716 cents (-37%) was below our forecast of 749 cents. DPS of 219 cents (flat on the previous year) reflects a pay-out based on a dividend yield of 2% to 5%. Net interest-bearing debt declined to R2.9bn from R3.5bn and is expected to fall to R590m in FY25E, helped by disposal proceeds of R1.2bn. The decline in free cash flow to R693m (R1,422m in FY23A) mainly reflects the decline in cash from operations and negative working capital due to declines in both receivables and payables. The R773m decrease in inventories is compatible with the optimisation programme recently implemented by management.

Catalysts: The successful implementation of AECI’s turnaround strategy, which includes the disposal of non-core operations will, in our view, ultimately result in the unlocking of shareholder value. In this result there is tangible evidence that this is gaining momentum with a transformation (TMO) uplift of R504m in FY24A. To satisfy its goal of doubling EBITDA between FY22A and FY26E/FY27E, the upliftment needs to be R800m p.a., so the achievement in FY24A is commendable. Management continues to pursue a measured approach to its asset divestment programme which, while taking longer than expected, aims to unlock maximum value for shareholders.

Forecasts and valuation: Our FY25E and FY26E HEPS forecasts have been increased by 2.4% and 4.4% respectively, while our DPS forecasts reflect assumed dividend cover of 2.5x. Based on residual income, DCF, intrinsic value and P/E (12-month forward of 8x) valuation methods, we determine a valuation range for the AECI share of between R110 and R120. We estimate an additional R32/share in value should management deliver on its turnaround strategy by FY26E/FY27E.


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