JSE-listed AECI, which is undergoing far-reaching restructuring to re-focus on its core mining and chemicals businesses and reduce debt, reports strong initial interest in the six noncore companies that it plans to dispose of over the coming 18 months for combined proceeds of about R2.5-billion.

CEO Holger Riemensperger insists that there will be “no fire sale” and reports that a comprehensive disinvestment roadmap has been finalised for Much Asphalt, Animal Health, Schirm, Sans Fibers, Beverages and Public Water.

The roadmap is being implemented by a newly assembled mergers and acquisitions team that is currently overseeing a staged and structured sale process with the support of advisers and investment banks.

The proceeds will be used to pay down debt, which stood at R4.3-billion at the end of December, down from R5.3-billion in the previous financial year. Gearing also fell from 45% in 2022 but remained elevated at 35%.

However, Riemensperger stresses that the restructuring is governed primarily by the group’s strategic goals of doubling the profitability of the core mining and chemicals units by 2026 and positioning the mining business as a top-three global supplier of explosives, detonators, and mining chemicals.

The strategy relies heavily on the accelerated internationalisation of the mining business, which was developed over the last century primarily to support the South African resources industry, which still accounts for 30% of the mining unit’s revenue.

The group intends sustaining its markets share in South Africa but is targeting to continue to expand aggressively in Australia, while increasing its market share in several South American markets, as well as in the US and Canada.

Riemensperger reports that these markets have been selected largely because of their increasing exposure to the energy transition minerals, also known as critical minerals, such as lithium, copper and cobalt. Demand for these minerals is also seen as underpinning AECI’s growth into the rest of Africa, with sales to the copper- and cobalt-rich Democratic Republic of Congo already growing strongly.

By 2026, South Africa’s revenue contribution within AECI’s enlarged mining business could be about 10%, while Australia’s revenue contribution is likely to have grown to a similar level.

Riemensperger says the group has adopted an asset-light approach to its internationalisation, which is typically facilitated by a small acquisition in the target market to provide AECI with a licence to operate that could otherwise take several years to secure.

The international businesses are not backward integrated into feedstocks such as ammonia or ammonia nitrate, which together with the company’s mobile emulsion plants, offers them greater flexibility.

In fact, Riemensperger argues that backward integration into ammonia is no longer a competitive advantage for explosives firms, particularly in a context where some clients are willing to pay a premium for products based on green ammonia.

Nevertheless, security of ammonia supply remains a key business imperative for AECI’s Modderfontein facility, in Gauteng, which has experienced disruptions in recent years as a result of the deterioration in Transnet Freight Rail’s (TFR’s) service.

The group, thus, welcomed news of a five-year partnership between Sasol and TFR for a dedicated fleet of 128 ammonia tankers, which should materially improve the reliability of supply between Secunda and Modderfontein.

However, AECI will continue to pursue a “hybrid” ammonia supply model, having recently imported the feedstock through the Port or Richards Bay.