AECI Sells Off Land to Beef Up Balance Sheet

Posted On Tuesday, 13 June 2006 02:00 Published by
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CHEMICALS and explosives maker AECI's share price rose almost 6% yesterday afternoon after the company said a property sale would help earnings rise as much as 106%.

Carli Lourens
Johannesburg

CHEMICALS and explosives maker AECI's share price rose almost 6% yesterday afternoon after the company said a property sale would help earnings rise as much as 106%.

The estimated first half gain of 88% to 106% translated into between 365c and 400c per share in headline and attributable earnings, the group said in a notice to the JSE.

The boost came from the conclusion of an unconditional agreement to dispose of 61ha of industrial land in Western Cape for R260m.

AECI said it would realise a "substantial gain" from the disposal.

The company did not comment on its performance but it was unlikely to have improved significantly. Compared with the I-Net consensus for the 2006 financial year for diluted headline earnings of 493,5c a share, and the 2007 financial year forecast of 553,5c, the surprise was theoretically "large but positive", said Imara SP Reid analyst Warwick Lucas in a note to clients.

The capital gains tax rate that would apply was uncertain, since long-held properties had a pro-rata rate applied, he said.

Lucas said AECI's underlying earnings may have fallen slightly, given higher feedstock prices and a strong rand.

AECI expects to make further substantial gains from property sales. It owns more than 2400ha of unused land around Cape Town, Durban and Johannesburg.

The explosives company also plans to launch a mixed-use development project with an estimated value of R1,6bn and spanning 1,85-million square metres -- an area roughly the size of Cape Town's central business district -- around Somerset West in Western Cape.

The mooted Gautrain high-speed rail link, meanwhile, is interfering with AECI's property plans at Modderfontein in Johannesburg.

AECI has gone to court to interdict Gauteng from expropriating a 9km stretch of the group's land.

AECI said the Milnerton, Western Cape, property sale would be recognised in the financial statements when guarantees covering the full purchase price were received.

This was expected to be before the conclusion of the interim reporting period.

AECI said it would release its interim results on July 25.

 


Publisher: Business Day
Source: Business Day

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