South Africa’s top explosives-maker set to boom

AECI, Africa’s biggest commercial-explosives maker, said it’s rolling out a strategy aimed at doubling profit by 2026 while at the same time cutting its emissions.

The company aims to expand globally through a combination of organic growth and acquisitions and wants to focus primarily on servicing the mining industry, Chief Operating Officer Denvor Govender said.

AECI reported a profit of R1.2 billion ($67 million) in the year ended December 31. 

“Most of the energy now is focused on the mining side,” Govender said in an interview at Bloomberg’s Johannesburg office this week. “There will definitely be good earnings going forward.”

The change in strategy is aimed at helping AECI become one of the world’s three largest mining-explosives makers by 2030 after the company’s stock lost half its value — in dollar terms — over the past decade.

Its plan to focus on mining and expand across Europe, Latin America and the Asia-Pacific region is designed to help it compete better against rivals Orica and Dyno Nobel.

“We are heavily investing in those regions,” said Govender, pointing to the start of the manufacture of products in Germany that it had formerly exported to that market from South Africa. It may also widen its product range by making acquisitions in Europe, he said.

It’s also close to selling a non-core business — Schirm GmbH, a German agrochemical ingredients business that it bought for €110.5 million ($119 million) in 2017.

AECI erred in the past by making acquisitions that didn’t deliver earnings, including Schirm, which was “terrible,” said Brendon Hubbard, a portfolio manager at ClucasGray Investment Management, a South African investment manager that owns AECI’s shares.

“Under new management, they are cleaning the company up,” he said. “We are certainly buying into what they are promising the market; we believe that they can deliver on it,” he added, saying the stock will “re-rate” once earnings start to rise. 

Govender joined the company in December, while Chief Executive Officer Holger Riemensperger took up his post in May last year.

In March 2023, the company took a R471 million impairment at Schirm. 

Over the past three to four years, the proportion of revenue from AECI’s home base has fallen from 60% to 30%, said Govender.

That’s due to a combination of poor rail and port services in the country, the natural decline of the mature deep-level precious metals mining industry and international expansion, he said. 

Revenue has jumped 55% over the past four financial years to $2.13 billion. That compares with $5.3 billion at Orica.

To cut its emissions, the company has signed a memorandum-of-understanding to have a green ammonia plant built in South Africa to supply some of its raw-material needs. The plant — to be built and operated by a third party — will initially produce 80,000 tons of the product for AECI, with the potential to ramp up to 280,000 tons a few years later, Govender said. 

Green ammonia is a derivative of green hydrogen, a clean-burning fuel made by splitting water using electricity from renewable energy plants. 

AECI has also built solar facilities to help power its South African plants.