Our opinion on the current state of AECI(AFE)AECI (AFE) is a leading producer of chemicals and explosives in South Africa. It supplies products for the mining industry, water treatment, animal health, food and beverages, and the industrial sector. It has businesses in Australia, North America, Europe, Asia, and Africa and employs 7600 people in 22 countries. AECI also has a property division called "Acacia."
This company has successfully diversified away from its exposure to South Africa (40% of total revenue) and shown its ability to make acquisitions that boost turnover and profits.
In its results for the six months to 30th June 2024, the company reported revenue down 4% and headline earnings per share (HEPS) down 57%. The company said, "Sales volumes of mining chemicals are expected to improve on the back of an anticipated recovery in mining activity in South Africa."
In an update on the ten months to 31st October 2024, the company reported revenue down 4% and profit from operations down 29%. The company said, "While the Group faced challenges in the Mining segment, including declining domestic volumes and ammonia prices, our international contracts in Asia-Pacific have helped mitigate these pressures."
On a P:E of 11,62 and a dividend yield (DY) of 1,03%, we believe that the share may fall further. Technically, the share has been trending sideways for most of the last ten years and is now at a cycle low. It appears to be approaching the bottom of a downtrend and may be ready for some recovery.
The challenges in the mining segment have weighed heavily on its performance, but the company's geographical and sector diversification offer some resilience. Investors should closely monitor the anticipated recovery in South African mining activity and any updates on its international operations for signs of turnaround potential.
