Q2 2026 AECI Ltd Earnings Call

August 11, 2026

Speaker #2: Good morning, ladies and gentlemen, and welcome to AECI's interim results presentation for the period ended 30 June 2026. I'm Alan Dixon, the Group Chief Executive.

Alan Dickson: Good morning, ladies and gentlemen, and welcome to AECI's interim results presentation for the period ended 30 June 2026. I'm Alan Dickson, the Group Chief Executive. I recently joined the group on 1 July this year.

Speaker #2: I recently joined the group on the 1st of July this year. I'm extremely proud to be a member of the AECI team. AECI is one of South Africa's industrial giants.

Alan Dickson: I'm extremely proud to be a member of the AECI team. AECI is one of South Africa's industrial giants. Its legacy, its technology, its people, its manufacturing capability, and its customers position the group as a leader in the global Mining, Explosives, and Mining Chemicals market, as well as the regional chemical market. I look forward, together with the leadership team and the employees at AECI, to driving our performance along a positive trajectory commensurate with these attributes. I'm joined today by Ian Kramer, our Group CFO, and the two of us will be presenting our results today via this pre-recorded webcast with a live Q&A session immediately after the webcast, where we will be taking your questions.

Speaker #2: Its legacy, its technology, its people, its manufacturing capability, and its customers position the group as a leader in the global mining, explosives, and mining chemicals market, as well as the regional chemicals market.

Speaker #2: I look forward to, together with the leadership team and the employees at AECI, driving our performance along a positive trajectory commensurate with these attributes.

Speaker #2: I'm joined today by Ian Cramer, our Group CFO, and the two of us will be presenting our results today via this pre-recorded webcast, with a live Q&A session immediately after the webcast where we will be taking your questions.

Speaker #2: At the live Q&A, Ian and I will be joined by Stuart Miller, the EVP for our Mining business, and Dean Murray, the EVP for our Chemicals business, to engage with our shareholders.

Alan Dickson: At the live Q&A, Ian and I will be joined by Stuart Miller, the EVP for our Mining business, and Dean Murray, the EVP for our Chemicals business, to engage with our shareholders. Ladies and gents, we are pleased to report that the group has performed well in the H1 of the 2026 financial year. In February, at the year-end results, the group articulated its three key focus pillars, and these are firstly, leveraging the core strengths of the group, our Mining and Chemicals businesses. Secondly, prioritizing the resilience of the businesses. And finally, enhancing the quality of our earnings. Across all three of these pillars, the group has continued the good progress made in the 2025 financial year and delivered demonstrable progress against all three. The group grew EBITDA by 2% over the prior year to just over ZAR 1.6 billion.

Speaker #2: Ladies and gentlemen, we are pleased to report that the group has performed well in the first half of the 2026 financial year. In February, at the year-end results, the group articulated its three key focus pillars, and these are: firstly, leveraging the core strengths of the group—our mining and chemicals businesses; secondly, prioritizing the resilience of the businesses; and finally, enhancing the quality of our earnings.

Speaker #2: Across all three of these pillars, the Group has continued the good progress made in the 2025 financial year and delivered demonstrable progress against all three.

Speaker #2: The group grew EBITDA by 2% over the prior year, to just over $1.6 billion. This growth does, however, include the continued disappointing performance of SHRM Germany.

Alan Dickson: This growth does, however, include the continued disappointing performance of Schirm Germany. Schirm made operating losses in the period despite the restructuring of the prior year, which, coupled to the impairment of all the remaining goodwill and IP of ZAR 320 million, dragged the group result down. Ian will provide more detail on the Schirm impairment in his presentation. Outside of the Schirm challenges, however, the rest of the group's performances were extremely positive. The core group assets of AECI Mining and the chemicals core, which excludes Schirm, performed well. Mining increased EBITDA by 6%, and the chemicals core increased EBITDA by 14%. Importantly, the higher profitability was underpinned by improved margins and assisted in improving the group's quality of earnings, as measured by return on invested capital to 13%.

Speaker #2: SHRM made operating losses in the period despite the restructuring of the prior year, which, coupled with the impairment of all the remaining goodwill and IP of $320 million, dragged the group result down.

Speaker #2: Ian will provide more detail on the SHRM impairment in his presentation. Outside of the SHRM challenges, however, the rest of the group's performances were extremely positive.

Speaker #2: The core group assets of AECI Mining and the chemicals core, which excludes SHRM, performed well. Mining increased EBITDA by 6%, and the chemicals core increased EBITDA by 14%.

Speaker #2: Importantly, the higher profitability was underpinned by improved margins and assisted in improving the group's quality of earnings, as measured by return on invested capital, to 13%.

Speaker #2: While improved profitability and earnings quality are critical outcomes, ensuring that the Group delivered on its pillar of business resilience was of equal importance. In the first half of 2026, global geopolitical events increased the complexity of AECI's external operating environment materially.

Alan Dickson: Whilst improved profitability and earnings quality are critical outcomes, ensuring that the group delivered on its pillar of business resilience was of equal importance. In the H1 2026, the global geopolitical events increased the complexity of AECI's external operating environment materially. The supply of raw materials, specifically from the Middle East, became more complex, and raw material prices increased significantly across the board. Pleasingly, the group operated largely uninterrupted throughout the reporting period, despite this more volatile external environment. At an operational level, significant efforts were invested into proactively managing the supply chain, implementing alternative sourcing strategies, and securing critical raw materials. The capital investment into the core assets, specifically at our facilities across the country, resulted in steady and reliable operations across all of these facilities.

Speaker #2: The supply of raw materials, specifically from the Middle East, became more complex, and raw material prices increased significantly across the board. Pleasingly, the group operated largely uninterrupted throughout the reporting period, despite this more volatile external environment.

Speaker #2: At an operational level, significant efforts were invested in proactively managing the supply chain, implementing alternative sourcing strategies, and securing critical raw materials. The capital investment into the core assets, specifically at our facilities across the country, resulted in steady and reliable operations at all of these facilities.

Speaker #2: The investment into operational reliability is evidenced by the increase in the percentage of CAPEX when measured against the depreciation value of those assets. Importantly, the complex engineering required for the medium-term Modifantine optimization program progressed very well.

Alan Dickson: The investment into operational reliability is evidenced by the increase in the percentage of CapEx when measured against the depreciation value of those assets. Importantly, the complex engineering required for the medium-term Modderfontein optimization program progressed very well. These focused operational efforts did, however, contribute to a reduction in free cash flow in the H1 of the year. The group's working capital increased primarily due to the higher cost of raw materials, the intentional decision to invest into strategic raw material stockholding to offset those global supply chain risks, and the seasonal nature of the plant health business prior to the summer planting season. Importantly, the group continues to focus on the safety of all of our employees, and we were pleased to report no fatalities during this period. Our sustainability activities continued, which resulted in a decrease of 4% in our carbon footprint, despite the increased production volumes.

Speaker #2: These focused operational efforts did, however, contribute to a reduction in free cash flow in the first half of the year. The Group's working capital increased primarily due to the higher cost of raw materials, the intentional decision to invest in strategic raw material stockholding to offset global supply chain risks, and the seasonal nature of the plant health business prior to the summer planting season.

Speaker #2: Importantly, the group continues to focus on the safety of all of our employees, and we were pleased to report no fatalities during this period.

Speaker #2: Our sustainability activities continued, which resulted in a decrease of 4% in our carbon footprint, despite the increased production volumes. Importantly, the focused and intentional efforts on these three pillars delivered increased shareholder value, as earnings per share increased by 18% to $3.48 per share, and headline earnings per share increased by 8% to $6.53 per share.

Alan Dickson: Importantly, the focused and intentional efforts on these three pillars delivered increased shareholder value, as earnings per share increased by 18% to 348 cents per share, and headline earnings per share increased by 8% to 653 cents per share. The four-year CAGR of the share price is now 10% per annum, and the improved profitability during the period and the expectation of some working capital unlock in the H2 of the financial year enabled the group to increase its return to shareholders via dividends by 16% to 116 cents per share, which is in line with the lower limit of our dividend policy. I will now hand over to Ian to take us through the detailed financial performance of the group.

Speaker #2: The four-year CAGR of the share price is now 10% per annum, and the improved profitability during the period, as well as the expectation of some working capital unlock in the second half of the financial year, enabled the group to increase its return to shareholders via dividends by 16% to $116 per share.

Speaker #2: This is in line with the lower limit of our dividend policy. I'll now hand over to Ian to take us through the detailed financial performance of the group.

Speaker #3: Thank you, Alan, and good morning, everybody. As indicated during our 2025 financial year-end results presentation and following the completion of the sale of substantially all businesses earmarked for sale as part of the group's strategic portfolio optimization program, the AECI Managed Businesses segment has been incorporated into the AECI Chemicals segment.

Ian Kramer: Thank you, Alan, and good morning, everybody. As indicated during our 2025 financial year-end results presentation and following the completion of the sale of substantially all businesses earmarked for sale as part of the group's strategic portfolio optimization program, the AECI Managed Businesses segment has been incorporated into the AECI Chemicals segment. As a result, we will report on the following segments: AECI Mining, AECI Chemicals, and AECI Property Services and Corporate. The AECI Chemicals segment now consists of the previously reported AECI Chemicals segment, which was made up of the specialty chemicals, industrial chemicals, water and plant health businesses, now referred to as our Chemicals core businesses, and Schirm and other businesses consisting of Schirm Germany, Sans Fibres, and Animal Health. References to our chemicals portfolio relates to the specialty chemicals, industrial chemicals, and water businesses. However, it excludes the plant health business.

Speaker #3: As a result, we will report on the following segments: AECI Mining, AECI Chemicals, and AECI Property Services and Corporate. The AECI Chemicals segment now consists of the previously reported AECI Chemicals segment—which was made up of the specialty chemicals, industrial chemicals, water, and plant health businesses—now referred to as our chemicals core businesses; and SHRM and Other Businesses, consisting of SHRM Germany, SANS Fibers, and Animal Health.

Speaker #3: References to our chemicals portfolio relate to the specialty chemicals, industrial chemicals, and water businesses; however, it excludes the plant health business. Annexure 2 of the presentation provides a visual depiction of this.

Ian Kramer: Annexure 2 of the presentation provides a visual depiction of this. Comparative information has been restated in accordance with IFRS 8 operating segments to ensure comparability with the current reporting structure. Revenue from continued operations declined by 4% to ZAR 15.1 billion, compared to ZAR 15.7 billion for the comparative six months ended 30 June 2025. The comparative six months results included revenue of ZAR 1.1 billion from the food and beverage and Schirm USA businesses that were disposed of in the H2 2025. If comparative results are adjusted for this, group revenue reflects a period-on-period increase of 3%. Increases in ammonia prices over the period, mainly the result of the ongoing Middle East conflict, impacted revenue for the period favorably. However, was more than offset by unfavorable foreign exchange movements in the group results due to the strength of the rand relative to the comparative six months.

Speaker #3: Comparative information has been restated in accordance with IFRS 8 Operating Segments to ensure comparability with the current reporting structure. Revenue from continued operations declined by 4% to R15.1 billion, compared to R15.7 billion for the comparative six months ended 30 June 2025.

Speaker #3: The comparative six-month results included revenue of R1.1 billion from the Food and Beverage and SHRM USA businesses that were disposed of in the second half of 2025.

Speaker #3: If comparative results are adjusted for this, group revenue reflects a period-on-period increase of 3%. Increases in ammonia prices over the period, mainly the result of the ongoing Middle East conflict, impacted revenue for the period favorably; however, this was more than offset by unfavorable foreign exchange movements in the group results due to the strength of the rand relative to the comparative six months.

Speaker #3: The mining segment revenue contributed 62% of total revenue, with the increase in revenue mainly driven by higher volumes across most product categories. Within the chemicals segment, performance was mixed. The chemicals' core businesses recorded a marginal increase in revenue during the period; however, this was more than offset by lower revenue generated from SHRM, SANS Fibers, and Animal Health.

Ian Kramer: The Mining segment revenue contributed 62% of total revenue, with the increase in revenue mainly driven by higher volumes across most product categories. Within the Chemicals segment, performance was mixed. The Chemicals core businesses recorded a marginal increase in revenue during the period. However, this was more than offset by lower revenue generated from Schirm, Sans Fibres, and AECI Animal Health. Profit from continuing operations increased from ZAR 699 million in the prior six months to ZAR 837 million for the current period, driven by increased volumes, better operational efficiencies, product mix, and cost management, as well as the reduced depreciation and amortization charges, reflecting the benefits of our ongoing optimization initiatives and portfolio actions. Depreciation, amortization, and impairments decreased by 13% to ZAR 760 million, compared with ZAR 870 million for the comparative six months.

Speaker #3: Profit from continuing operations increased from R699 million in the prior six months to R837 million for the current period, driven by increased volumes, better operational efficiencies, product mix, and cost management, as well as reduced depreciation and amortization charges, reflecting the benefits of our ongoing optimization initiatives and portfolio actions.

Speaker #3: Depreciation, amortization, and impairments decreased by 13% to R760 million, compared with R870 million for the comparative six months. The reduction was primarily attributable to a decrease of R103 million in depreciation and amortization, with R65 million thereof relating to the food and beverage and SHRM USA businesses disposed of in the second half of 2025.

Ian Kramer: The reduction was primarily attributable to a decrease of ZAR 103 million in depreciation and amortization, with ZAR 65 million thereof relating to the food and beverage and Schirm USA businesses disposed of in the H2 2025. During the period, the group recorded an impairment charge of ZAR 330 million, mainly relating to an out-of-period goodwill impairment assessment at Schirm Germany. This led to the impairment of goodwill and intangible assets at Schirm Germany of ZAR 320 million. All remaining goodwill and capitalized IP costs relating to Schirm Germany have now been impaired. Net finance costs from continuing operations decreased by 23% to ZAR 140 million for the current six months, compared to ZAR 182 million. This reduction was primarily driven by lower debt levels.

Speaker #3: During the period, the group recorded an impairment charge of R330 million, mainly relating to an out-of-period goodwill impairment assessment at SHRM Germany. This led to the impairment of goodwill and intangible assets at SHRM Germany of R320 million. All remaining goodwill and capitalized IP costs relating to SHRM Germany have now been impaired.

Speaker #3: Net finance costs from continuing operations decreased by 23% to R140 million for the current six months, compared to R182 million. This reduction was primarily driven by lower debt levels.

Speaker #3: EBITDA from continuing operations increased by 2%, mainly supported by improved operational performance at AECI Mining and a strong performance by the chemicals portfolio, particularly the specialty industrial chemicals businesses, which bounced back from the comparative six-month impact of expected credit losses raised.

Ian Kramer: EBITDA from continuing operations increased by 2%, mainly supported by an improved operational performance at AECI Mining and a strong performance by the Chemicals portfolio, mainly the specialty industrial chemicals businesses, bouncing back from the comparative six months impact of expected credit losses raised. The impact of the business disposed of in the H2 2025 should be mentioned again. The comparative six months period's EBITDA included a contribution of ZAR 133 million from these disposed businesses. After adjusting for this, EBITDA increased by 11% period on period, reflecting our stronger underlying performance. The Schirm Germany negative EBITDA contribution of EUR -663,000 partially offset the group's overall progress. The tax expense for the six months was ZAR 333 million, reflecting an effective tax rate of 47%, compared to 41% from continuing operations for the prior period.

Speaker #3: The impact of the business disposed of in the second half of 2025 should be mentioned again. The comparative six-month period's EBITDA included a contribution of R133 million from these disposed businesses. After adjusting for this, EBITDA increased by 11% period-on-period, reflecting our stronger underlying performance.

Speaker #3: The SHRM Germany negative EBITDA contribution of €663,000 partially offset the group's overall progress. The tax expense for the six months was R333 million, reflecting an effective tax rate of 47%, compared to 41% from continuing operations for the prior period. The effective tax rate remained elevated mainly due to the impairments already mentioned, unutilized assessed losses, and foreign withholding taxes on dividends received from foreign subsidiaries.

Ian Kramer: The effective tax rate remained elevated, mainly due to the impairments already mentioned, unutilized assessed losses, and foreign withholding taxes on dividends received from foreign subsidiaries. Excluding the impact of impairments, the effective tax rate would have been 38%, in line with levels previously indicated to the market. We are continuing our longer term objective to implement the necessary structural changes to decrease the effective tax rates to levels below 35%. Pleasingly, basic earnings per share increased by 18% to 348 cents per share, compared to 294 cents per share for the comparative six months. This increase was driven by higher operating profitability in combination with lower net finance costs. Headline earnings per share rose by 8% to 653 cents per share from 604 cents per share for the comparative six months after the add back of the impairment charges of ZAR 350 million.

Speaker #3: Excluding the impact of impairments, the effective tax rate would have been 38%, in line with levels previously indicated to the market. We are continuing our longer-term objective to implement the necessary structural changes to decrease the effective tax rate to levels below 35%.

Speaker #3: Pleasingly, basic earnings per share increased by 18% to 348 cents per share, compared to 294 cents per share for the comparative six months. This increase was driven by higher operating profitability in combination with lower net finance costs.

Speaker #3: Headline earnings per share rose by 8% to 653 cents per share, from 604 cents per share for the comparative six months, after the add-back of the impairment charges of R330 million.

Speaker #3: Net working capital increased to 19% as a percentage of revenue, compared to 17% for the comparative six months. This is above the group's target range of 14% to 16%.

Ian Kramer: Net working capital increased to 19% as a percentage of revenue in comparison to 17% for the comparative six months above the group's target range of 14% to 16%. The increase was partly driven by a deliberate decision to hold additional buffer stock to mitigate supply chain risks and ongoing geopolitical uncertainty, in combination with a higher inventory valuation due to increases in raw material input costs. While this supports business continuity and customer service, we are continuing to carefully manage these heightened inventory levels. Capital expenditure for the six months was ZAR 417 million compared to ZAR 351 million for the comparative period. Of this amount, ZAR 295 million related to maintenance capital expenditure compared to ZAR 277 million for the comparative period, while ZAR 122 million was directed towards growth projects, up from ZAR 74 million.

Speaker #3: The increase was partly driven by a deliberate decision to hold additional buffer stock to mitigate supply chain risks and ongoing geopolitical uncertainty, in combination with a higher inventory valuation due to increases in raw material input costs.

Speaker #3: While this supports business continuity and customer service, we are continuing to carefully manage these heightened inventory levels. Capital expenditure for the six months was $417 million rands, compared to $351 million rands for the comparative period, off this amount $295 million rands related to maintenance capital expenditure compared to $277 million rands for the comparative period, while $122 million rands was directed towards growth projects, up from $74 million rands.

Speaker #3: Maintenance and optimization capital expenditure equated to 0.8 times the depreciation and amortization charge for the six months, which is within our guided range of 0.8 to 1.2 times. Return on invested capital increased during the period, driven by our efforts to improve the quality of earnings in combination with a lower invested capital base following disposals of non-core businesses and impairments recognized.

Ian Kramer: Maintenance and optimization capital expenditure equated to 0.8 times of the depreciation and amortization charge for the six months, which is within our guided range of 0.8 times to 1.2 times. Return on invested capital increased during the period, driven by our efforts to improve the quality of earnings in combination with a lower invested capital base following disposals of non-core businesses and impairments recognized. The group maintained its balance sheet strength during the period. Cash and cash equivalents increased by 14% to ZAR 2.5 billion, while net debt reduced significantly to ZAR 1.7 billion, compared with ZAR 2.9 billion as at 30 June 2025. As a result, gearing improved to 15%. Although the gearing level has increased from 31 December 2025, it remains below our guided range of 20% to 40%.

Speaker #3: The group maintained its balance sheet strength during the period. Cash and cash equivalents increased by 14% to R2.5 billion, while net debt reduced significantly to R1.7 billion, compared with R2.9 billion as at 30 June 2025.

Speaker #3: As a result, gearing improved to 15%. Although the gearing level has increased from 31 December 2025, it remains below our guided range of 20% to 40%.

Speaker #3: When compared with 31 December 2025, net debt increased during the six months, primarily due to the utilization of internal cash resources to fund higher working capital requirements.

Ian Kramer: When compared with 31 December 2025, net debt increased during the six months, primarily due to the utilization of internal cash resources to fund higher working capital requirements. Higher levels of working capital lockups resulted from a combination of cyclical trends repeating, especially in plant health, as well as elevated levels of inventories due to an increase in critical raw materials inventory, and higher raw material input costs, as already mentioned. Movements in receivables and payables largely offset each other. This also impacted free cash flow, resulting in a free cash outflow of ZAR 952 million. Despite this, given the strength of the group's financial position, available cash resources, our projected cash generation in the H2 2026 and our overall balance sheet capacity, the board resolved to declare an interim dividend of 116 cents per share.

Speaker #3: Higher levels of working capital lock-ups resulted from a combination of cyclical trends repeating, especially in Plant Health, as well as elevated levels of inventories due to an increase in critical raw materials inventory and higher raw material input costs, as already mentioned.

Speaker #3: Movements in receivables and payables largely offset each other. This also impacted free cash flow, resulting in a free cash outflow of R952 million.

Speaker #3: Despite this, given the strength of the group's financial position, available cash resources, our projected cash generation in the second half of 2026, and our overall balance sheet capacity, the board resolved to declare an interim dividend of 116 cents per share.

Speaker #3: At a dividend cover of 3 times, this dividend payout level falls within our guided range of 1.5 times to 3 times and effectively mirrors the increase in earnings per share achieved.

Ian Kramer: At a dividend cover of 3 times, this dividend payout level falls within our guided range of 1.5 times to 3 times and effectively mirrors the increase in earnings per share achieved. Our level of total dividend payouts for the full financial year will be informed by our level of working capital release in H2. The level of working capital release in H2 will be dependent on the status of continued supply chain disruptions resulting from the Middle East conflict, as well as any adverse impacts on our plant health business due to the super El Niño cycle that has taken hold. Thank you. I will now hand back to Alan.

Speaker #3: Our level of total dividend payouts for the full financial year will be informed by our level of working capital release in the second half of the year.

Speaker #3: The level of working capital release in the second half of the year will be dependent on the status of continued supply chain disruptions resulting from the Middle East conflict, as well as any adverse impacts on our plant health business due to the Super El Niño cycle that has taken hold.

Speaker #3: Thank you. I will now hand back to Alan.

Speaker #1: Thank you, Ian. We will now present a deeper analysis of the segmental reviews and provide insight into the group’s prospects for the rest of the financial year.

Alan Dickson: Thank you, Ian. We will now present a deeper analysis into the segmental reviews and provide insight into the group prospects for the rest of the financial year. The Mining segment delivered an excellent performance, with revenue increasing by 6% to ZAR 9.3 billion. Importantly, this increase in revenue was driven by higher volumes across almost all of our key product ranges. The segment's EBITDA rose by 6% to just over ZAR 1.4 billion, driven by strong operational execution in Asia Pacific and Southern Africa, ongoing operational efficiencies, and an improved product mix. Pleasingly, the EBITDA margin remained steady and within the group's target range at 15%. Working capital as a percentage of revenue remained stable at 16%, despite the higher ammonia and other input costs, reflecting the strong focus on disciplined execution by the mining teams.

Speaker #1: The mining segment delivered an excellent performance, with revenue increasing by 6% to R9.3 billion. Importantly, this increase in revenue was driven by higher volumes across almost all of our key product ranges.

Speaker #1: The segment's EBITDA rose by 6% to just over R1.4 billion, driven by strong operational execution in Asia-Pacific and Southern Africa, ongoing operational efficiencies, and an improved product mix.

Speaker #1: Pleasingly, the EBITDA margin remained steady and within the Group's target range at 15%. Working capital as a percentage of revenue remained stable at 16%, despite the higher ammonia and other input costs, reflecting the strong focus on disciplined execution by the mining teams.

Speaker #1: Free cash flow decreased by 30%, to R273 million, which was primarily due to the movements in working capital driven by the higher input costs that I've just described.

Alan Dickson: Free cash flow decreased by 30% to ZAR 273 million, which was primarily due to the movements on the working capital, driven by the higher input costs that I have just described. The segment continued to generate strong returns, with return on invested capital remaining at healthy levels and was supported by the improved profitability of the segment. The Southern African region delivered a resilient performance despite slightly softer demand across certain customer segments. Growth in bulk explosives and emulsifier volumes was partially offset by lower shock tube and metallurgy sales, which reflected a competitive market condition and the customer maintenance activities in certain areas. Pleasingly, the region delivered strong EBITDA growth through operational efficiencies, disciplined cost management, and improved product mix. Progress on the Modderfontein optimization initiatives remained on track.

Speaker #1: The segment continued to generate strong returns, with return on invested capital remaining at healthy levels, and was supported by the improved profitability of the segment.

Speaker #1: The Southern African region delivered a resilient performance, despite slightly softer demand across certain customer segments. Growth in bulk explosives and emulsifier volumes was partially offset by lower shock tube and metallurgy sales, which reflected competitive market conditions and customer maintenance activities in certain areas.

Speaker #1: Pleasingly, the region delivered strong EBITDA growth through operational efficiencies, disciplined cost management, and improved product mix. Progress on the Modifantine optimization initiatives remained on track.

Speaker #1: The investment into the existing assets increased, thereby improving reliability and efficiency in the period that passed, while the complex engineering work—which is a precursor to the larger CAPEX projects—progressed well.

Alan Dickson: The investment into the existing assets increased, thereby improving reliability and efficiency in the period that passed, while the complex engineering work, which is a precursor to the larger CapEx projects, progressed well. The Asia Pacific region delivered a very strong performance, underpinned by robust volume improvements and stable operations across its key markets. Profitability was driven by higher bulk explosives volumes, together with a once-off benefit of competitively priced ammonium nitrate in Australia. EBITDA growth was further supported by operational efficiencies and disciplined execution. Although margins improved in the period, they were impacted by the timing of cost recoveries on the pass-through model, which we expect to be recovered in H2.

Speaker #1: The Asia-Pacific region delivered a very strong performance. Underpinned by robust volume improvements and stable operations across its key markets, profitability was driven by higher bulk explosives volumes, together with a one-off benefit of competitively priced ammonium nitrate in Australia.

Speaker #1: EBITDA growth was further supported by operational efficiencies and disciplined execution. Although margins improved in the period, they were impacted by the timing of cost recoveries on the pass-through model, which we expect to be recovered in the second half of the financial year.

Speaker #1: The rest of the Africa and the world region operated in a more challenging environment during this period, with earnings impacted by slightly lower volumes across the region and margin pressure caused by higher operating costs.

Alan Dickson: The rest of the Africa and the world region operated in a more challenging environment during this period, with earnings impacted by slightly lower volumes across the region and margin pressure caused by higher operating costs. Across this segment, however, we continue to see a robust pipeline of contract opportunities, providing a strong foundation for sustainable growth and long-term value creation. If we look forward, the prospects for the Mining segment remain very positive. The predicted volume growth is underpinned by the safe and successful ramp-up of recently secured contracts across both Africa and Asia Pacific. Importantly, supporting future recovery and growth, the segment secured new contract wins in Mali, Zambia, Burkina Faso, and South Africa, while successfully renewing key contracts throughout the continent. These achievements underscore the segment's strong client relationships, competitive service offering, and the consistent ability to deliver value across a diverse portfolio of operations.

Speaker #1: Across the segment, however, we continue to see a robust pipeline of contract opportunities, providing a strong foundation for sustainable growth and long-term value creation.

Speaker #1: If we look forward, the prospects for the mining segment remain very positive. The predicted volume growth is underpinned by the safe and successful ramp-up of recently secured contracts across both Africa and Asia-Pacific.

Speaker #1: Importantly, supporting future recovery and growth, the segment secured new contract wins in Mali, Zambia, Burkina Faso, and South Africa, while successively renewing key contracts throughout the continent.

Speaker #1: These achievements underscore the segment's strong client relationships, competitive service offering, and consistent ability to deliver value across a diverse portfolio of operations. In the second half of the year, we also expect our margins to improve, as cost recovery mechanisms normalize and the timing effects experienced in the first half of the year unwind.

Alan Dickson: In the H2 of the year, we also expect our margins to improve as cost recovery mechanisms normalize and the timing effects experienced in the H1 of the year unwind. We will continue to drive our cost and margin optimization initiatives with a clear focus on further improving earnings quality and strengthening profitability across the Mining segment. The Chemicals segment delivered a resilient performance in what remained a challenging operating environment. As Ian pointed out in the financial review, it is important to note that the year-on-year comparison is significantly impacted by the disposal of certain businesses during 2025 and the negative performance of Schirm, which together resulted in revenue for the period decreasing to ZAR 5.6 billion. The segment EBITDA declined to ZAR 407 million, but despite these lower earnings, the segment maintained an EBITDA margin of 7%, reflecting the benefits of disciplined cost management.

Speaker #1: And finally, we will continue to drive our cost and margin optimization initiatives, with a clear focus on further improving earnings quality and strengthening profitability across the mining segment.

Speaker #1: The chemical segment delivered a resilient performance in what remained a challenging operating environment. As Ian pointed out in the financial review, it is important to note that the year-on-year comparison is significantly impacted by the disposal of certain businesses during 2025 and the negative performance of SHRM, which together resulted in revenue for the period decreasing to R5.6 billion.

Speaker #1: The segment EBITDA declined to $407 million, but despite these lower earnings, the segment maintained an EBITDA margin of 7%, reflecting the benefits of disciplined cost management.

Speaker #1: Importantly, the Chemicals core delivered a very pleasing improvement in performance during the period, with both revenue and EBITDA increasing. Revenue increased by 1%, and EBITDA increased by 14%.

Alan Dickson: Importantly, the Chemicals core delivered a very pleasing improvement in performance during the period, with both revenue and EBITDA increasing. Revenue increased by 1% and EBITDA increased by 14%. Industrial and specialty chemicals delivered an excellent result, supported by favorable commodity product pricing, improved market conditions, and the non-repeat of expected credit losses that were recognized in the prior period. The water and plant health businesses delivered stable performances, although demand, specifically within the public water business, was subdued and weighed down somewhat on the growth for these two businesses. Pleasingly, the Chemicals core team were also able to maintain continuity of supply to our customers through effective sourcing strategies and the buildup of strategic stock levels on critical raw materials. As a result, working capital was negatively impacted by these business resilient actions, which were further amplified by the seasonal buildup of stock for the agricultural sector.

Speaker #1: Industrial and specialty chemicals delivered an excellent result, supported by favorable commodity product pricing, improved market conditions, and the non-repeat of expected credit losses that were recognized in the prior period.

Speaker #1: The water and plant health businesses delivered stable performances, although demand, specifically within the public water business, was subdued and weighed down somewhat on the growth for these two businesses.

Speaker #1: Pleasingly, the Chemicals core team were also able to maintain continuity of supply to our customers through effective sourcing strategies and the build-up of strategic stock levels on critical raw materials.

Speaker #1: As a result, working capital was negatively impacted by these business-resilient actions, which were further amplified by the seasonal build-up of stock for the agricultural sector.

Speaker #1: We do expect these to unwind over the second half, although the rainfall patterns related to El Niño and the global geopolitical situation may have an impact on the exact extent of that unwind in the second half.

Alan Dickson: We do expect these to unwind over the H2, although the rainfall patterns related to El Niño and the global geopolitical situation may have an impact on the exact extent of that unwind in the H2. The full year prospects for the Chemicals core remain positive. We expect the continued benefit of strong demand for our sulfur product derivatives for the full H2, which should provide ongoing support to both revenue and for earnings. Performance is also expected to be supported by improved demand from key customers and growth within our export markets, specifically within water and specialty chemicals businesses. In the plant health business, the upcoming planting season is expected to support an improvement in performance as customer activity increases in line with normal seasonal patterns.

Speaker #1: The full-year prospects for the Chemicals core remain positive. We expect a continued benefit from strong demand for our sulfur product derivatives throughout the second half, which should provide ongoing support to both revenue and earnings.

Speaker #1: Performance is also expected to be supported by improved demand from key customers, and growth within our export markets—specifically within water and specialty chemicals businesses.

Speaker #1: In the plant health business, the upcoming planting season is expected to support an improvement in performance as customer activity increases in line with normal seasonal patterns. Although, as mentioned before, there is some uncertainty about the extent of the predicted El Niño impact on rainfall, which may inject some uncertainty into the timing of volumes towards the back end of this financial year.

Alan Dickson: Although, as mentioned before, there is some uncertainty about the extent of the predicted El Niño impact on rainfall, which may inject some uncertainty into the timing of volumes towards the back end of this financial year. From a cash flow point of view, we anticipate a gradual unwinding of working capital, which will contribute to an improved free cash flow, not only in the segment but across the group. We remain focused on addressing the challenges within Schirm and implementing the necessary actions to improve performance. Overall, the segment remains focused on executing its operational priorities, strengthening profitability, and delivering sustainable value creation. Ladies and gentlemen, to recap on the H1's performance, I would like to highlight the following. Firstly, our core businesses continue to deliver growth while maintaining the execution discipline required to maintain margins and improve quality of earnings.

Speaker #1: From a cash flow point of view, we anticipate a gradual unwinding of working capital, which will contribute to improved free cash flow not only in the segment, but across the group.

Speaker #1: We remain focused on addressing the challenges within SHRM and implementing the necessary actions to improve performance. Overall, the segment remains focused on executing its operational priorities, strengthening profitability, and delivering sustainable value creation.

Speaker #1: Ladies and gentlemen, to recap on the first half’s performance, I would like to highlight the following. Firstly, our core businesses continue to deliver growth while maintaining the execution discipline required to protect margins and improve the quality of earnings.

Speaker #1: We expect this to continue going forward and it will remain a key management focus. We have seen volume growth across our operating regions, further demonstrating the strength, relevance, and sustainability of our businesses.

Alan Dickson: We expect this to continue going forward and will remain a key management focus. We have seen volume growth across our operating regions, further demonstrating the strength, the relevance, and the sustainability of our businesses. Secondly, we focused on enhancing the resilience of our business, which has enabled us to adapt to a changing external environment and to respond effectively to that operating environment. We do not expect external volatility to decrease materially, and hence these actions will continue to serve us well in the H2. Finally, we have focused intently on improving quality of earnings, and this has led to improved returns and stable margins. The metrics on the slide reflect the positive developments across most of our drivers and are a testament to the efforts of the AECI team on achieving execution excellence and to deliver on our market commitments.

Speaker #1: Secondly, we focused on enhancing the resilience of our business, which has enabled us to adapt to a changing external environment and to respond effectively to that operating environment.

Speaker #1: We do not expect external volatility to decrease materially, and hence, these actions will continue to serve us well in the second half. Finally, we have focused intently on improving the quality of earnings, and this has led to improved returns and stable margins.

Speaker #1: The metrics on the slide reflect the positive developments across most of our drivers and are a testament to the efforts of the AECI team in achieving execution excellence and delivering on our market commitments.

Speaker #1: As we look forward, the prospects for the group remain positive, and we expect the improvement in profitability that was achieved in the first half of the year to continue through to year-end.

Alan Dickson: As we look forward, the prospects for the group remain positive, and we expect the improvement in profitability that was achieved in the H1 of the year to continue to the year-end. This improvement in profitability will be driven by our core businesses. In AECI Mining, we expect the growth to continue, underpinned by improving volumes, the successful ramp-up of recently secured contracts, and disciplined execution across our operations. This segment continues to strengthen its position in key markets and remains focused on delivering operational excellence and consistent value to customers. Within our chemicals core, we expect growth to be supported by the upcoming planting season in plant health, sustained demand for our products in our industrial chemicals business, and the continued steady growth across our other chemicals core business.

Speaker #1: This improvement in profitability will be driven by our core businesses. In AECI Mining, we expect the growth to continue, underpinned by improving volumes, the successful ramp-up of recently secured contracts, and disciplined execution across our operations.

Speaker #1: This segment continues to strengthen its position in key markets and remains focused on delivering operational excellence and consistent value to customers. Within our chemicals core, we expect growth to be supported by the upcoming planting season and plant health, sustained demand for our products in our industrial chemicals business, and continued steady growth across our other chemicals core business.

Speaker #1: We also anticipate an improvement in free cash flow generation during the second half of the financial year, as some of the working capital unwinds.

Alan Dickson: We also anticipate an improvement in free cash flow generation during the H2 of the financial year as some of the working capital unwinds. This improved cash generation will support our disciplined capital allocation framework, enabling the group to continue investing in strategic growth and maintaining business resilience projects while maintaining sustainable dividend payments to our shareholders. In closing, ladies and gentlemen, we have made meaningful progress in strengthening the group's portfolio, enhancing operational performance, and improving the business fundamentals. These efforts position AECI positively to deliver steady and predictable growth in profitability and quality of earnings. Thank you for your attention, and we will now move into the question and answer session. Good morning, ladies and gentlemen, and welcome to the AECI half year presentation of our results that ended on 30 June. We appreciate you joining us today from a very chilly Johannesburg.

Speaker #1: This improved cash generation will support our disciplined capital allocation framework, enabling the Group to continue investing in strategic growth and maintaining business resilience projects, while sustaining dividend payments to our shareholders.

Speaker #1: In closing, ladies and gentlemen, we have made meaningful progress in strengthening the Group's portfolio, enhancing operational performance, and improving the business fundamentals. These efforts position AECI positively to deliver steady and predictable growth in profitability and quality of earnings.

Speaker #1: Thank you for your attention, and we'll now move into the question-and-answer session.

Speaker #2: Good morning, ladies and gentlemen, and welcome to the AECI half-year presentation of our results that ended on the 30th of June. We appreciate you joining us today from a very chilly Johannesburg. I'd like to start out today just by introducing you to the two team members that weren't part of the pre-recorded set of results.

Alan Dickson: I would like to start out today just by introducing you to the two team members that were not part of the pre-recorded set of results. On my right-hand side, we have Stuart Miller, who is our EVP in charge of our Mining business, and over on the far left-hand side is Dean Murray, who is in charge of our Chemicals business. By way of process, I will be reading out each question and then passing it over to the relative member of the team or respective member of the team, who will then answer that question for us. I will start out just on the first question. The first three questions, in fact, come from Avior Capital Markets. I will deal with them one by one. The first of those is: Which countries outside South Africa are showing the most promising growth in volumes for Mining?

Speaker #2: On my right-hand side, we have Stuart Miller, who is our EVP in charge of our mining business, and over on the far left-hand side is Dean Murray, who's in charge of our chemicals business.

Speaker #2: By way of process, I will be reading out each question, and then passing it over to the relative member of the team or respective member of the team who will then answer that question for us.

Alan Dickson: By way of process, I will be reading out each question and then passing it over to the relative member of the team or respective member of the team, who will then answer that question for us. I will start out just on the first question. The first three questions, in fact, come from Avior Capital Markets. I will deal with them one by one. The first of those is: Which countries outside South Africa are showing the most promising growth in volumes for Mining? Stuart will deal with that one, please.

Speaker #2: So I'll start out with the first question. In fact, the first three questions come from Evior Capital Markets, so I'll deal with them one by one.

Speaker #2: The first of those is: Which countries outside South Africa are showing the most promising growth in volumes for mining? And Stuart will deal with that one, please.

Alan Dickson: Stuart will deal with that one, please.

Speaker #3: Thanks, Alan. Thanks for the question. I think, in general, across the business, we saw a 14% increase in our bulk explosives demand for the half.

Stuart Miller: Thanks, Alan. Thanks for the question. I think, in general, across the business we saw a 14% increase in our bulk explosives demand for the H1, which is extremely promising. Coming with that is the pull-through of some of our value-added products like electronic detonators. Outside of South Africa, which did perform very strongly, the key contributors were Francophone West Africa, and in particular Mali, followed by Asia Pacific, in excess of 10% growth year-on-year driven by a strong performance in Australia. Thanks, Alan.

Speaker #3: Which is extremely promising, and coming with that is the pull-through of some of our value-added products, like electronic detonators. Outside of South Africa, which did perform very strongly, the key contributors were Francophone West Africa—and in particular, Mali—followed by Asia Pacific, with in excess of 10% growth year on year, driven by a strong performance in Australia.

Speaker #3: Thanks, Alan.

Speaker #2: Thanks, Stuart. The second question is: Please explain how a super El Niño affects the business. Does it create a problem for pricing or for volumes?

Alan Dickson: Thanks, Stuart. The second question is: Please explain how a super El Niño affects the business. Does it create a problem for pricing or for volumes? Dean will take that one for us, please.

Speaker #2: And Dean will take that one for us, please.

Speaker #4: Thank you. So, I think at the moment there's a lot of talk about the El Niño that is expected to hit South Africa in the latter part of the year and early next year.

Dean Murray: Thank you. I think at the moment there's a lot of talk about the El Niño that is expected to hit South Africa in the latter part of the year, early next year. This could have an impact on volumes and effectively your cash unwind in your plant health business. It's something that we monitor very closely, and I think at this stage, we've still got good full dams and we'll wait to see as we go into the planting season. I think there's more of a concern about thinking about it in the new year.

Speaker #4: So, obviously, this could have an impact on volumes and, effectively, your cash unwind and your plant health business. But it's something that we monitor very closely, and I think at this stage we’ve still got good, full dams, and we'll wait to see as we go into the planting season.

Speaker #4: But I think there's more of a concern about considering it in the new year.

Speaker #2: Thanks, Dean. The third question: please remind us where AECI supplies ammonia from. What changes did AECI have to undergo for sourcing ammonia since the start of the Iran conflict?

Alan Dickson: Thanks, Dean. The third question: Please remind us where AECI supplies ammonia from. What changes did AECI have to undergo for sourcing ammonia since the start of the Iran conflict? Stuart will take that question for us, please.

Speaker #2: And again, Stuart will take that question for us, please.

Speaker #3: Great, thanks, Alan. Obviously, ammonia is a key raw material that we use in the production of our explosives products. We prioritize sourcing from African-made sources, and we've continued to do so.

Stuart Miller: Great. Thanks, Alan. Ammonia is the key raw material that we use in the production of our explosives products. We prioritize sourcing from African-made sources, and we've continued to do so. About 90% of our total demand comes from domestic sources. Whilst we have been investing in supply chain resilience and the capacity to import more, that share at this stage hasn't changed. So 90% out of South Africa with the balancing 10% of our demand coming from imported ammonia.

Speaker #3: About 90% of our total demand comes from domestic sources. Whilst we have been investing in supply chain resilience and the capacity to import more, that, Shandy, at this stage hasn't changed.

Speaker #3: So, 90% out of South Africa, with the balancing 10% of our demand coming from imported ammonia.

Speaker #2: Thanks, Stuart. The next question comes from Lorium Capital. Good day, AECI team. Well done on your results. Please provide us with some color on your revenue growth of 6%.

Alan Dickson: Thanks, Stuart. The next question comes from Laurium Capital. Good day, AECI team. Well done on your results. Please provide us with some color on your revenue growth of 6%. I would have thought that higher ammonia prices passed on to customers and the expansion of offshore would have resulted in materially higher sales numbers. Stuart can explain the dynamic that we faced in the H1.

Speaker #2: I would have thought that higher ammonia prices passed on to customers, and the expansion of offshore, would have resulted in materially higher sales numbers.

Speaker #2: And again, Stuart can explain the dynamic that we faced in the first half.

Speaker #3: Sure. Thanks, Alan. Primarily, yes, the underlying assumption is correct. As the ammonia price increases, we should see our revenue follow suit. What we've seen, however, is a strengthening rand, and that has impacted our revenue on the downside as well.

Stuart Miller: Sure. Thanks, Alan. Primarily, yes, the underlying assumption is correct. As the ammonia price increases, which it did, our revenue will follow suit. What we have seen, however, is a strengthening rand, and that has impacted our revenue on the downside as well, effectively seeing ammonia and FX negating each other. In addition to that, we started seeing ammonia increasing in Q2 this year. A large part of our business is linked to quarterly rise and fall. Therefore, some of these increases we are expecting to see come through in H2.

Speaker #3: We're effectively seeing ammonia and FX negating each other. In addition to that, we started seeing ammonia increasing in Q2 this year. A large part of our business is linked to quarterly rises and falls.

Speaker #3: Therefore, some of these increases we're expecting to see come through in H2.

Speaker #2: Thanks, Stuart. The next question comes from Titanium Capital. Please can you provide some clarity on the regulatory changes and how these impacted plant health?

Alan Dickson: Thanks, Stuart. The next question comes from Titanium Capital. Please, can you provide some clarity on the regulatory changes and how these impacted plant health? Dean, can you take that for us, please?

Speaker #2: Dean, can you take that for us, please?

Speaker #4: Thank you, Alan. Yeah, so I think it's been coming for quite a number of years now. And what's really happened in the industry is there's been a shift from the harsher chemical products that are used in crop protection to the more softer, greener products.

Dean Murray: Okay, Alan. I think it has been coming for quite a number of years here now. What has really happened in the industry, there has been the shift from the harsher chemical products that are used in crop protection to the more softer, greener products, and we have started to see that. I must say, though, that our plant health business is in a good position in terms of the, let us say, the technical development work that has been done in this regard. Of course, it takes a little bit of time to get these products approved and get them into the field, which we have been busy with now for the past couple of years. At the end of the day, we will have to see how long that will take as we are working with the various regulatory bodies in South Africa.

Speaker #4: And we started to see that. I must say, though, that our Plant Health business is in a good position in terms of the, let's say, the technical development work that has been done in this regard.

Speaker #4: But, of course, it takes a little bit of time to get these products approved and get them into the field, which we've been busy with now for the past couple of years.

Speaker #4: So, at the end of the day, we'll have to see how long that will take as we're working with the various regulatory bodies in South Africa.

Speaker #2: Thanks, Dean. Next question is again from Evior Capital Markets. You mentioned that one of the reasons for the increase in working capital is due to strategic inventory holdings aimed at safeguarding business continuity.

Alan Dickson: Thanks, Dean. Next question is again from Avior Capital Markets. You mentioned that one of the reasons for the increase in working capital is due to strategic inventory holdings aimed at safeguarding business continuity. Can you please add some color to this? Does this mean you are holding higher inventory levels? I will deal with this one. There are three primary reasons for the inventory holdings that we have at the moment. The first of those is due to inflated raw material prices that are caused by the geopolitical situation that we find, particularly in the Middle East. The second is to the strategic decision to build up some working capital to offset the supply chain risks that we have. The third is due to the seasonal impact of the plant health business, where we build up stockholding in anticipation of the summer season.

Speaker #2: Can you please add some color to this? Does this mean you are holding higher inventory levels? I'll deal with this one. So, there are three primary reasons for the inventory holdings that we have at the moment.

Speaker #2: The first of those is due to inflated raw material prices that are caused by the geopolitical situation that we find, particularly in the Middle East.

Speaker #2: The second is the strategic decision to build up some working capital to offset the supply chain risks that we have. And the third is due to the seasonal impact of the plant health business, where we build up stock holding in anticipation of the summer season.

Speaker #2: So those are the three reasons for it. If we look across those three reasons, there is some slightly inflated stock holding because of the strategic decision to hold some critical raw materials in stock, and because of the plant health seasonal environment on it.

Alan Dickson: So those are the three reasons for it. If we look across those three reasons, there is some slightly inflated stockholding because of the strategic decision to hold some critical raw materials in stock and because of the plant health seasonal environment on it. If we look across the business in terms of that, in the mining side, our days are more or less the same, so it is primarily only to the higher cost of raw materials. In our Chemicals business, we do have slightly more from a critical stock holding point of view and from a seasonal point of view in plant health. The next question comes from Rozendal Partners. The question is: the return on invested capital for Mining is at 23%, but the group level is at 13%. How do we close this gap, meaningfully reducing central costs and/or selling the chemical segment?

Speaker #2: And if we look across the business in terms of that, on the mining side, our days are more or less the same. So it's primarily only due to the higher cost of raw materials.

Speaker #2: In our chemicals business, we do have slightly more from a critical stock holding point of view, and from a seasonal point of view, in plant health.

Speaker #2: The next question comes from Rosendal Partners. The question is, the return on invested capital for mining is at 23%, but the group level is at 13%.

Alan Dickson: The next question comes from Rozendal Partners. The question is: the return on invested capital for Mining is at 23%, but the group level is at 13%. How do we close this gap, meaningfully reducing central costs and/or selling the chemical segment? Why has the board not been more aggressive in unlocking this value? I am going to ask Ian to deal particularly with the first part of that question.

Speaker #2: How do we close this gap meaningfully—reducing central costs and/or selling the chemical segment? And why has the Board not been more aggressive in unlocking this value?

Alan Dickson: Why has the board not been more aggressive in unlocking this value? I am going to ask Ian to deal particularly with the first part of that question.

Speaker #2: I'm going to ask Ian to deal particularly with the first part of that question.

Speaker #3: So thanks, Alan. Just with regards to Rorick, I think we are very pleased with the performance of the mining segment. In terms of the group performance, we did see a significant increase from a 10% level in the comparative six months to 13%.

Ian Kramer: Thanks, Alan. Just with regards to ROIC, I think we are very pleased with the performance of the Mining segment. In terms of the group performance, we did see a significant increase from a 10% level, the comparative six months to 13%. Again, a sizable step up. 13% for group is slightly below the guided range that we have for the market, and we are continuing to focus on our efforts in reducing central costs, through a dedicated plan in doing so to unlock further of that value. I think everybody needs to continue to understand that we have a very diverse portfolio, and that includes the strategic property division that we have that comes of a much lower ROIC base.

Speaker #3: So, again, a sizable step up. Thirteen percent for Group is slightly below the guided range that we have for the market, and we're continuing to focus on our efforts in reducing central costs through a dedicated plan, doing so to unlock further of that value.

Speaker #3: I think everybody needs to continue to understand that we have a very diverse portfolio, and that includes the Strategic Property division that we have, which comes off a much lower ROIC base.

Speaker #2: Thanks. And the second part of that question is why the board has not been more aggressive. I think the right way to think about that is the fact that, within our third strategic pillar—which we highlighted throughout this results presentation—the improvement of our quality of earnings remains a core board and management focus area.

Alan Dickson: Thanks. The second part of that question is why the board has not been more aggressive. I think the right way to think about that is the fact that within our third strategic pillar, which we highlighted throughout this results presentation, the improvement of our quality of earnings remains a core board and management focus area, and we will be actively and intentionally managing that up positively over the next number of reporting periods. Next question comes from Perspective Investment Management. The question is: how would you assess the group's performance in proactively managing the supply chain risks on an absolute basis and compared to previous times of heightened geopolitical risks? I think the answer to that is really, I think about the level of intentionality that has gone into the management of the supply chain.

Speaker #2: And we will be actively and intentionally managing that up positively over the next number of reporting periods. Next question comes from Perspective Investment Management.

Speaker #2: The question is: How would you assess the group's performance in proactively managing the supply chain risks, both on an absolute basis and compared to previous periods of heightened geopolitical risks?

Speaker #2: I think the answer to that is really, I think, about the level of intentionality that has gone into the management of the supply chain.

Speaker #2: When we talk around, we've actively reduced that and driven towards business resilience. So, I think generally the business has done particularly well around that, and I think even more so in light of the fact that the geopolitical events we're seeing, particularly in the Middle East at the moment, are of such a nature that they have very much higher risk attached to them.

Alan Dickson: When we talk around how we have actively reduced that and driven towards business resilience. I think generally, the business has done particularly well around that, and I think even more so in light of the fact of the geopolitical events that we are seeing, particularly in the Middle East at the moment, are of such a nature that they have very much higher risk attached to them. I think the actions that are put to it by the management and the team has been very good if I look back at a comparative basis. The next question comes, and it is a very detailed question from SBG Securities. I am going to read it and then offer a bit of a view first. Mining has delivered a 12.1% operating margin despite FX headwinds, cost-recovery timing issues, and weakness in parts of the rest of Africa.

Speaker #2: So I think the actions that have been put in place by the management and the team have been very good if I look back on a comparative basis.

Speaker #2: The next question comes, and it's a very detailed question from SBG Securities. I'm going to read it and then offer a bit of a view first.

Speaker #2: But mining has delivered a 12.1% operating margin despite forex headwinds, cost recovery timing issues, and weakness in parts of the rest of Africa. Can you please unpack how much of the margin improvement was structural—that is, mix, efficiencies, and contract discipline—versus systemic benefits, particularly the benefit from cheaper ammonium nitrate in Australia?

Alan Dickson: Can you please unpack how much of the margin improvement was structural, i.e., mix efficiencies and contract discipline? Temporary benefits, particularly the once-off benefit from cheaper ammonium nitrate in Australia. As cost recoveries come through in H2, should we expect the margin to move higher? I am going to ask Stuart, first of all, to deal with that question, and then I might sum up at the end of it.

Speaker #2: And as cost recoveries come through in H2, should we expect the margin to move higher? I'm going to ask Stuart, first of all, to deal with that question, and then I might sum up at the end of it.

Speaker #3: Sure. Thanks, Alan. So, I think one of the things the mining team is extremely proud of is the ability to protect margins through this volatile period.

Stuart Miller: Sure. Thanks, Alan. I think one of the things the Mining team is extremely proud of is the ability to protect margins through this volatile period. We did have some sourcing benefits come through in Australia. But in reality, this is a rounding item compared to the amount of product we purchase in the rest of the business. I would say it is very negligible, John, that impact. What has really driven the performance of Mining in H1 is operating leverage. We indicated to the market late last year that we were investing in asset integrity at Modderfontein, and I am very pleased to see that we are starting to see that asset integrity come through. That really has given us the margin protection we are looking for, particularly in these volatile times.

Speaker #3: We did have some sourcing benefits come through in Australia, but in reality, this is a rounding item compared to the amount of product we purchase in the rest of the business.

Speaker #3: So I'd say it's very negligible, John, that impact. What's really driven the performance of Mining in H1 is operating leverage. We indicated to the market late last year that we were investing in asset integrity at Modderfontein, and I'm very pleased to see that we're starting to see that asset integrity come through.

Speaker #3: And that really has given us the margin protection we're looking for, particularly in these volatile times.

Speaker #2: Thanks, Stuart. The next question is from Fairtree. For mining, can you please provide some color on the breakdown in revenue and EBITDA between South Africa and international mining, as well as a difference in margins?

Alan Dickson: Thanks, Stuart. The next question is from Fairtree. For Mining, can you please provide some color in the breakdown in revenue and EBITDA between South Africa and international Mining, as well as the difference in margins? Within international Mining, can you again break down between Africa, Australia, and other markets and highlight differences in margin and timeline for ramp-ups in capital spend in Mining for modular manufacturing facilities? Again, perhaps on that one, it is a very detailed question. The level of information that we provide to the market does not drop down to the level in which we will split up revenue margins, capital allocation per region. Over time, we may well improve that disclosure, but right now we are primarily focusing at the segment level.

Speaker #2: Within international mining, could you again break that down between Africa, Australia, and other markets, and highlight the differences in margin and timeline for ramp-ups in capital spend in mining for modular manufacturing facilities?

Speaker #2: Again, perhaps on that one, it's a very detailed question. The level of information that we provide to the market doesn't drop down to the level at which we will split up revenue, margins, or capital allocation per region.

Speaker #2: Over time, we may well improve that disclosure, but right now, we're primarily focusing at the segment level. What we can share is that the timeline for the ramp-up in the capital spent in the mining for modular manufacturing facilities—I think Stuart can give us a sense of that, both in Australia specifically.

Alan Dickson: What we can share is that the timeline for the ramp-up in the capital spend in the mining for modular manufacturing facilities, I think Stuart can give us a sense of that both in Australia specifically.

Speaker #3: Yes. So, we have been accelerating our investment into modular manufacturing assets. We're not quite in a position to disclose the specifics of that just yet, but we are getting close to that.

Stuart Miller: Yes. We have been accelerating our investment into modular manufacturing assets. We are not quite in a position to disclose the specifics of that just yet, but we are getting close to that. The capital being spent on the manufacturing equipment is well advanced. We are ready to deploy those facilities across Asia Pacific and Africa in the near term.

Speaker #3: And the capital being spent on the manufacturing equipment is well advanced. So, we are ready to deploy those facilities across Asia-Pacific and Africa in the near term.

Speaker #2: Thank you. The next question is from Steyn Capital Management, which is: What is the target size of the share buyback program, and will the acquired shares be canceled or held in treasury?

Alan Dickson: Thank you. The next question is from Steyn Capital Management, which says, what is the target size of the share buyback program, and will the acquired shares be canceled or held in treasury? Again, on that question, we have not made mention of a share buyback. At the moment, the intention is not to buy back shares, and we do not have a share buyback program that is in place. The next question, I skipped one, comes from Ashburton Investments. It says, as a new set of experienced eyes looking at the status quo of the group's various businesses, please can you give us your view on the current state of Schirm asset and what actions you intend to take to ensure that the continuous operating losses from this asset are curtailed going forward.

Speaker #2: Again, on that question, we haven't made mention of a share buyback. So, at the moment, the intention is not to buy back shares, and we do not have a share buyback program that's in place.

Speaker #2: The next question—I skipped one—comes from Ashburton Investments. It says: As a new set of experienced eyes looking at the status quo of the group's various businesses, please can you give us your view on the current state of SHIRM Asset and what actions you intend to take to ensure that the continuous operating losses from this asset are curtailed going forward?

Speaker #2: So, in terms of that, Charlotte, I think if we look at the various elements of it from a cost point of view, a large portion of the cost rationalization has been completed.

Alan Dickson: So in terms of that, Charles, I think if we look at the various elements of it, at a cost point of view, I think a large portion of the cost rationalization has been completed. The real key focus we need to get into that Schirm in the short term is volume through the plant and good priced volume through the plant. We are focusing very heavily on bringing confidence back to the business in terms of ensuring that those two elements take place, whilst at the same time maintaining the asset base that it can deliver on the market expectation that we have seen. So that will be the key focus of Schirm in the very short term point of view, and we will have a more thorough review of that over the next four or five months.

Speaker #2: The real key focus we need to get into that SHIRM, in the short term, is volume through the plant, and good-priced volume through the plant.

Speaker #2: So we are focusing very heavily on bringing confidence back to the business, in terms of ensuring that those two elements take place, while at the same time maintaining the asset base, so that it can deliver on the market expectation that we've seen.

Speaker #2: So that'll be the key focus of SHIRM in the very short term, point of view, and we'll have a more thorough review of that over the next four or five months.

Speaker #2: The next question comes from Secodex, and it says: Hello, what are the difficulties in setting up a production unit in another country, like the DRC, to reduce transport costs and even have more influence over the mines?

Alan Dickson: The next question comes from SECDEX, and it says, "Hello, what are the difficulties in setting up a production unit in another country like the DRC to reduce transport costs and even have more influence over the mines?" I am going to add the second one into that. What strategies should be adopted in light of the Chinese influence in the production of explosives? Again, Stuart, if you can take those.

Speaker #2: And I'm going to add the second one to that. What strategies should be adopted in light of the Chinese influence in the production of explosives?

Speaker #2: Again, Stuart, if you can take those.

Speaker #3: Sure, and look, I'll try and answer this very, very succinctly. We are adopting a modular, low-capital strategy on how we support our customers, and that's around putting manufacturing assets closer to our customer demand centers.

Stuart Miller: Sure. Look, I will try and answer this very succinctly. We are adopting a modular low capital strategy on how we support our customers, and that is around putting manufacturing assets closer to our customer demand centers. So we are continuously scanning that. One of the things that is abundantly evident as you go through these volatile times is the importance of a strong and robust manufacturing and supply chain. I think this is one area, particularly across Africa, that has been acknowledged by our customers, and they are seeing value in that manufacturing base, particularly in SA, to be able to support the broader Africa region. So just to sum up, we are continuously looking at modular manufacturing, and the DRC is an extremely important region for us, so it is definitely on the agenda. Thank you.

Speaker #3: So we're continuously scanning that. One of the things that's abundantly evident as you go through these volatile times is the importance of a strong and robust manufacturing and supply chain.

Speaker #3: And I think this is one area, particularly across Africa, that's been acknowledged by our customers. They're seeing value in that manufacturing base, particularly in South Africa, to be able to support the broader Africa region.

Speaker #3: So, just to sum up, we're continuously looking at modular manufacturing, and the DRC as an extremely important region for us, so it's definitely on the agenda.

Speaker #3: Thank you.

Speaker #2: Thank you, Stuart. The next question comes from Centure Asset Management. Can you please provide clarity on your forward-looking dividend cover policy, assuming impairments are now in the base?

Alan Dickson: Thank you, Stuart. The next question comes from Sentio Capital Management. Can you please provide clarity on your forward-looking dividend cover policy, assuming impairments are now in the base? I am going to ask Ian to field that one for us, please.

Speaker #2: And I'm going to ask Ian to field that one for us, please.

Speaker #4: So thanks, Alan. With regards to the dividend cover policy, I think it was clearly articulated to the market before that we have introduced our dividend cover policy on a payout cover of between 1.5 times to 3 times.

Ian Kramer: So thanks, Alan. With regards to the dividend cover policy, I think it was clearly articulated to the market before that we have introduced our dividend cover policy on a payout cover of between 1.5 times to 3 times. The payout that you have seen now is at that 3 times level. It is based on our earnings per share number, and we continue with that policy. It is part of our analysis that will go into Alan's journey on terms of strategic refresh for consideration. But for now, that is the policy.

Speaker #4: The payout that you've seen now is at a three-times level. It is based on our earnings per share number, and we continue with that policy.

Speaker #4: It is part of our analysis that will go into Alan's journey in terms of strategic refresh for consideration, but for now, that is the policy.

Speaker #2: Thanks, Ian. The next question comes from Fairtree. Thank you for breaking down the mining product volumes into their various elements. Can you please give a view on which product areas you see the most upside in volumes over the next one to two years, with the respective regions?

Alan Dickson: Thanks, Ian. The next question comes from Fairtree. Thank you for breaking down the mining product volumes into their various elements. Can you please give a view which product areas you see the most upside in volumes over the next 1 to 2 years with the respective regions? Stuart, can I ask you to field that, please?

Speaker #2: Stuart, can I ask you to field that, please?

Speaker #3: Sure. I think, broadly, across our existing portfolio, we're expecting strong growth. The operating leverage across Southern Africa, in particular, is encouraging. We're seeing contract wins across Southern Africa and the rest of Africa, which will drive volume growth.

Stuart Miller: Sure. I think broadly across our existing portfolio, we are expecting strong growth. The operating leverage across Southern Africa in particular is encouraging. We are seeing contract wins across Southern Africa and rest of Africa, which will drive volume growth. A lot of our modular manufacturing assets are looking to be deployed into Australia. They will be looking at things like boosters and electronic detonators, which will support our underlying business there, and also continue to see our bulk volumes grow. I think it is broad based, and our real focus is Asia Pacific and Africa at this point in time.

Speaker #3: A lot of our modular manufacturing assets are looking to be deployed into Australia. They will be looking at things like boosters and electronic detonators, which will support our underlying business there.

Speaker #3: And also continue to see our bulk volumes grow. So I think it's broad-based. Our real focus is Asia-Pacific and Africa at this point in time.

Speaker #2: Thanks, Stuart. The next question comes from Coronation. SHIRM was quite disappointing. Why has it moved from profit-making back into operational losses? With the assets now written off there, can we expect no more impairments for the rest of this financial year?

Alan Dickson: Thanks, Stuart. The next question comes from Coronation. Schirm was quite disappointing. Why has it moved from profit-making back into operational losses? With the assets now written off there, can we expect no more impairments for the rest of this financial year? On the 47% tax rate, what is the current guidance for FY26? Correct, Schirm was disappointing. The primary reason of the move back from operating profit into losses centered around a number of operational issues that we had in January and February of this year, in which the plant did not run at the required volume through it. We incurred a number of operating losses through that period, which we were unable to trade out of by the end of the H1.

Speaker #2: On the 47% tax rate, what is the current guidance for FY26? So, correct, SHIRM was disappointing. The primary reason for the move back from operating profit into losses centered around a number of operational issues that we had in January and February of this year, in which the plant did not run at the required volume through it.

Speaker #2: We incurred a number of operating losses through that period, which we were unable to trade out of by the end of the half-year.

Speaker #2: Pleasingly, over the last number of months, there has been a much better and more consistent performance by SHIRM. We're looking forward to a more positive performance as we look toward the rest of the year.

Alan Dickson: Pleasingly, over the last number of months, there has been a much better and more consistent performance by Schirm, and we are looking forward to a more positive performance as we look towards the rest of the year. But it remains a tough environment with still a few operational issues that we need to solve for. The next question comes from Oyster Catcher Investments. What supply chain risks are you referring to, and why the high inventory levels on a strategic level if only 10% of ammonia is acquired from international markets? Or are you concerned around the local ammonia supply? I am going to hand this over to Dean in just a moment. But clearly, ammonia, whilst it being a key part of our supply chain, we have a broad supply chain that extends outside of ammonia.

Speaker #2: But it remains a tough environment, with still a few operational issues that we need to solve for. The next question comes from Oystercatcher Investments.

Alan Dickson: The next question comes from Oyster Catcher Investments. What supply chain risks are you referring to, and why the high inventory levels on a strategic level if only 10% of ammonia is acquired from international markets? Or are you concerned around the local ammonia supply? I am going to hand this over to Dean in just a moment. But clearly, ammonia, whilst it being a key part of our supply chain, we have a broad supply chain that extends outside of ammonia. I am going to ask Dean if you could offer your views on some of the buildup, particularly within the chemical side.

Speaker #2: What supply chain risks are you referring to, and why the high inventory levels on a strategic level, if only 10% of ammonia is acquired from international markets?

Speaker #2: Or are you concerned about the local ammonia supply? So, I'm going to hand this over to Dean in just a moment. But clearly, ammonia, while it is a key part of our supply chain, we have a broad supply chain that extends outside of ammonia.

Speaker #2: And I'm going to ask Dean if you could offer your views on some of the build-up, particularly within the chemical side.

Alan Dickson: I am going to ask Dean if you could offer your views on some of the buildup, particularly within the chemical side.

Speaker #5: Thank you, Alan. So, I think firstly, when we look at our plant health business, we did start to buy a little bit earlier than normal.

Dean Murray: Thank you, Alan. I think firstly, when we look at our plant health business, we did start to buy a little bit earlier than normal. The main reason for that being is that we were concerned about getting suppliers out of China, but the impact of the Middle East as well. I think that was the one area that we beefed up on. If I look at some of our chemical businesses, if we look at sulfur, some of the products that we use in our sulfonic acids, as well as in our foundry and timber business, we took a strategic decision to make sure that we have sufficient stock.

Speaker #5: And the main reason for that is that we were concerned about getting suppliers out of—well, most of our product comes out of China, but there is also the impact of the Middle East as well.

Speaker #5: So, I think that was the one area that we beefed up on. And then, if I look at some of our chemical businesses—if we look at sulfur, some of the products that we use in our sulfonic acids as well as in our foundry and timber business—we took a strategic decision to make sure that we've got sufficient stock so that we can supply that market.

Alan Dickson: So that we can supply that market. What we have seen over the last couple of months is, we have seen a lot of old customers that have come back to us as well. I think that was really the focus in terms of inventory. What did impact the chemicals business in the H1 was some late payments from some of our customers, but fortunately, all of that has come through now. We are sitting with some slightly elevated levels of raw material in our water business, but it is nothing that I do not believe we cannot manage before the year ends. Thank you, Dean. The second to last question comes from Fairtree. It says, regarding Modderfontein, what is the total timeline and CapEx required to fully restore operational excellence? I am going to ask Ian to comment on that.

Dean Murray: So that we can supply that market. What we have seen over the last couple of months is, we have seen a lot of old customers that have come back to us as well. I think that was really the focus in terms of inventory. What did impact the chemicals business in the H1 was some late payments from some of our customers, but fortunately, all of that has come through now. We are sitting with some slightly elevated levels of raw material in our water business, but it is nothing that I do not believe we cannot manage before the year ends.

Speaker #5: And what we have seen over the last couple of months is we've seen a lot of old customers that have come back to us as well.

Speaker #5: So, I think that was really the focus in terms of inventory. What did impact the chemicals business in the half year was some late payments from some of our customers.

Speaker #5: But fortunately, all of that has come through now. We are sitting with some slightly elevated levels of raw material in our water business, but it's nothing that I don't believe we can't manage before the year ends.

Speaker #2: Thank you, Dean. The second-to-last question comes from Fairtree. It's regarding Modifantine. What is the total timeline and CAPEX required to fully restore operational excellence?

Alan Dickson: Thank you, Dean. The second to last question comes from Fairtree. It says, regarding Modderfontein, what is the total timeline and CapEx required to fully restore operational excellence? I am going to ask Ian to comment on that. I know from previous guidance, we will refer back to the levels that we have given historically, and perhaps you can share that.

Speaker #2: I'm going to ask Ian to comment on that. I know from previous guidance that we will refer back to the levels we've given historically.

Alan Dickson: I know from previous guidance, we will refer back to the levels that we have given historically, and perhaps you can share that.

Speaker #2: And perhaps you can share that.

Speaker #4: So we are continuing with the Modifantine optimization project, and continuing with that journey. As we have indicated to the market before, we're looking at a capital expenditure—still to be fully quantified—but in the region or ranges of R700 million to R900 million, over a period of three to four years.

Ian Kramer: We are continuing with the Modderfontein optimization project and continuing with that journey. As we have indicated to the market before, we are looking at a CapEx, still to be fully quantified, but in the regional ranges of ZAR 700 million to ZAR 900 million over a period of three to four years. That journey continues, and we will firm up on that as it becomes more clear.

Speaker #4: That journey continues, and we'll firm up on that as it becomes clearer.

Speaker #2: Thanks, Ian. And then the last question for today comes from MergerMarket. Can you speak to the appetite for acquisitions, and what markets or geographies could be of interest?

Alan Dickson: Thanks, Ian. The last question for today comes from Mergermarket. Can you speak to the appetite for acquisitions and what markets or geographies could be of interest? I think to that one, Peter, it is quite early days in how we are looking at it the moment. There would be an appetite for capital allocation to the extent that it improves our competitive position and drives the key strategic part of our business. At this stage, I think it is appropriate to indicate that the three pillars that we spoke about at the beginning of the presentation remain the core focus of this management team and is fully aligned with the board, and we would not be looking to move or consider acquisitions outside of those areas. They are more likely to be of a complementary bolt-on nature at this stage.

Speaker #2: So I think, to that one, Peter, it's quite early days in how we are looking at it at the moment. There would be an appetite for capital allocation to the extent that it improves our competitive position and drives the key strategic part of our business.

Speaker #2: At this stage, I think it's appropriate to indicate that the three pillars we spoke about at the beginning of the presentation remain the core focus of this management team, and are fully aligned with the board.

Speaker #2: And we would not be looking to move or consider acquisitions outside of those areas. They're more likely to be of a complementary, bolt-on nature at this stage.

Speaker #2: And certainly, we will be applying very strict capital allocation in terms of any decisions that we make around how we pursue our strategic initiatives.

Alan Dickson: And certainly, we will be applying very strict capital allocation in terms of any decisions that we make around how we pursue our strategic initiatives, how we pursue our investment into the existing assets for our business resilience. Our view is, when we look at our capital allocation and our cash generation, that we will continue to be able to do both of those while still paying dividends to shareholders. Ladies and gents, that brings us to the end of the Q&A for today. Thank you very much for your time. There was quite a few questions, so to the extent we missed any out on the readout, please do send those to us. We will make sure we answer them and get back to you. We look forward to seeing many of you on the one-on-ones on the roadshow over the next number of days.

Speaker #2: How we pursue our investment into the existing assets for our business resilience. And our view is, when we look at our capital allocation and our cash generation, that we will continue to be able to do both of those while still paying dividends to shareholders.

Speaker #2: Ladies and gentlemen, that brings us to the end of the Q&A for today. Thank you very much for your time. There were quite a few questions.

Alan Dickson: Ladies and gents, that brings us to the end of the Q&A for today. Thank you very much for your time. There was quite a few questions, so to the extent we missed any out on the readout, please do send those to us. We will make sure we answer them and get back to you. We look forward to seeing many of you on the one-on-ones on the roadshow over the next number of days.Ladies and gentlemen, thank you so much for your attention again. We look forward to seeing you soon. Thank you and goodbye.

Speaker #2: So, to the extent we missed any out on the readout, please do send those to us. We will make sure we answer them and get them back to you.

Speaker #2: And we look forward to seeing many of you in the one-on-ones and during the roadshow over the next few days. Ladies and gentlemen, thank you so much for your attention again.

Alan Dickson: Ladies and gentlemen, thank you so much for your attention again. We look forward to seeing you soon. Thank you and goodbye.

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Q2 2026 AECI Ltd Earnings Call

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