AECI Ltd (AFE) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the AECI 2020 interim results. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Mark Dytor. Please go ahead, sir.

Good morning, everybody. Welcome to AECI's interim results for the first half of 2020. We have an agenda. I am joined by the whole executive team. So Mark, if we can get the slides. So we will be talking about -- sorry, go back one. The -- obviously, what we've been doing around the COVID and the impact on our business. Obviously, performance summary; looking at the business drivers, which are very much the same, but some of them have gone in the totally wrong direction, as you all would know. We're going to earnings analyze performance by segment, and then we'll look at the new structure and branding. And I'll give you -- at the end of it all, I'll give you what is our outlook for the remainder of the year and some of the focus areas that we believe we need to concentrate on. So I have the all executives on the line who will be helping with the presentation, and which you've all met before. And we also have a lot -- and welcome to our Chairman and to the NEDs, Dr. Khotso Mokhele, we also have on the line. And also all our non-execs will be joining us this morning. So thank you to them as well. Going on through the presentation. I think as we moved into 2020, expectations were pretty high. As we have done a lot of hard work on rejigging, taking costs out exactly, especially on the water and also the mining side. And all intents and purposes, the first quarter was looking very positive, and then COVID hit. And I guess when we did give the year-end results, it was highlighted as a risk, but I don't think anybody could contemplate how big a risk and a disruptor it has been, not only to us to the South Africa to Africa, but to the world. So I just want to put into place what we've done, next, Mark. So we -- in February, we started to see this risk emerging. We put together a task team, which comprises all that executive team, plus we have medical advisers in there, the medical aid. We also have a risk as well as human capital that we are tracking everyone on a global basis throughout the world relative to where they are in terms of COVID infections. And the priority has been the safety of our people not only in the workplace but at home. And that's been a continuous driver in the last few months. It's discussed on a daily basis. And we ought -- we discuss BCMs in terms of business continuity, supply chain. And fortunately, during the start of the total lockdown in South Africa, we were seen as essential services in some of our business areas. And that was mainly in core mining, potable drinking water and obviously, agriculture. So those sort of sectors, albeit the balance of those industries which they serve were not back, we were forced to bring people back into the workplace. We have 7,600 people, 26 countries. And if I update to this slide as of the 24th, that's when I put the slide, but we do have a more relevant number, we have 183 cases, of which 90 are active, 89 have recovered. And unfortunately, 3 people have passed in the last 2 weeks. And they were admitted to casualty to ICU. And unfortunately, we lost 3 of our coworkers in the last 2 weeks. At the moment, we have only 1 person that is hospitalized. But as the pandemic is actually rising in Gauteng province and KwaZulu-Natal, and I'll show you exactly what this slide is. We have a majority of our people in South Africa of the 7,600, and the majority of them are working in the Gauteng and also KwaZulu-Natal. And if I go into the next slide, you can actually then see that the majority of our cases is in Gauteng province and KwaZulu-Natal. And from -- South Africa now #5 in terms of infections, we have no way reached the peak of our curve yet and therefore, we are vigilant in terms of our operations in the areas that we operate that we've shift patterns, that we've got spare shifts available. It was our biggest -- in terms of supplying essential services like the mines and also water and agriculture, we actually cut customers down. And at the same time, you have to make sure that our people are 100% safe when they come to work. Unfortunately, we've seen most of the cases, not -- we haven't seen work outbreaks. We've seen people coming from outside that are showing symptoms and then, of course, are being turned away. And it's obviously around how they're behaving on weekends and weekdays, after hours in -- and that's been a challenge to control. Moving on, Mark. To give you an idea as we move into our full lockdown, and I guess, if we looked at all the countries in which we operate, no one went to the extent of South Africa where we totally locked down from that last week in March. We had 35% people working in sites of our operations. This is on a global basis. And 18% were actually working from home. As the levels are being lifted, you are seeing -- and you can see from the graph that we are seeing people coming back to work. And at the moment, we have 81% of our people back in the workplace. 12% are working from home. And of course, you can guess that a lot more people are asking to work from home, if they can, especially as this pandemic is rising in this area. So we've got a lot of our people back. Unfortunately, in the manufacturing sector, the manufacturing areas in which we operate, we do need a lot of people to run continuous operations, which means maybe not -- you're not getting all the volumes, but you still need the total cost base there. And of course, that puts a lot of pressure on the margins, and Edwin will talk to you about that. Mark, next slide. We've also done a lot of work in terms of donating, in terms of communities in which we operate. We've donated almost ZAR 12 million in PPE, water systems, sanitizer. And we've also launched "I Pledge", which is almost -- that we've got ZAR 2 million. That is really from the staff within AECI suppliers. And if any of you, I don't know, I've got lots of bankers out there who want to pledge some money for 287, we are -- we can feed a family for a week. At the moment, we put -- we've distributed 3,200 parcels. There's another 3,000 going out in the next 2 weeks, and our target is to get to 10,000 parcels in the next month. And this -- and it is very dire out there. People are starving. People are not earning income. What I can say through this pandemic that everybody in AECI at all levels has been paid, and -- which is obviously making sure that we give people encouragement to come to work under these difficult circumstances, but also maintain their dignity in this difficult time. Next one, Mark. So those are some of the initiatives, and we've done a lot with the Nelson Mandela Fund and JAM and -- but the emphasis has been on water, food and sanitization. And of course, we are seeing the stress now of service delivery or lack of service delivery, which was happening prior to the COVID-19 has obviously come back to bite us all now, that communities just don't have the water or the facilities to get them through this pandemic. Okay. So that's just an introduction. It is a priority, COVID is hot on our list. It hasn't gone away. And in my mind, will remain with us for the foreseeable future. And so the task team will remain intact and how we manage our business is important. In terms of the performance summary, now the results did go out this morning, but in these set of results, what we will try and demonstrate is the impact of COVID-19 on our results. And with my colleagues, we will go through the presentation and unpack what we've done in terms of restructuring, retrenchments, very much on the Chemical business and the Food & Beverage business, which we did discuss with you at the last results presentation. So we'll give you the full impact of that as well as the COVID impact in each of our business. Now the COVID numbers are not [ concept ] because we have -- in most of our operations, it's business to business. And we, therefore -- and usually contracts, monthly contracts, long-term contracts. So we know by each customer if they -- or each shaft, if they do not, if they close the shaft, because of COVID we know exactly how many shaft tube or how much explosive is lost or water treatment plant is lost or refinery, process chemicals are lost, we know exactly that number. So revenue probably less affected on this number, and what you've seen there is obviously impacts of rand-dollar exchange rates. And that impact is at the 48% of our revenue that you see there is now actually from outside of South Africa. And it just shows you how the ratios have moved. And if you look at our EBITDA, 18% down, ZAR 1.1 billion. And EBITDA is important to us because that gives us the indication of cash that we can actually generate. The underlying, if we put those factors back in, and I have put the asterisks on the bottom there, we are 7% up to ZAR 1.6 billion if we -- if things had normalized. And [Audio Gap] for you. The pleasing part of -- and we have been speaking to you prior is cash and cash generation. And we've been able to reduce our gearing in these times. Our covenants are all intact. So we've done really a great job around cash generation and containing cash in these headwinds. Profit from operations are 32% down with ZAR 558 million, as we disclosed it. But the underlying would have been 9% up to ZAR 1.065 billion. And we have agreed that we would also declare a dividend, albeit a conservative one, but in line with our HEPS and obviously, the outlook that we are seeing in our business, we have decided to give a dividend on this half year. Mark will talk about the dividend -- or the deferred dividend that is owed. We have all the intention to pay this. We are just going through some legal hoops on that, but Mark will get to that in his presentation. And the sooner we can pay that, the better for everybody. Next, Mark. The COVID-19, I think we've gone through that, hasn't had a major impact on our business. Cash has been a major priority. The restructuring cost of our Food & Beverage and the Chemical business, we've taken all the provisions through in these first half results. So the retrenchment cost, the closure costs, the closure of assets, the impairment of assets and goodwill has all been taken there. And as we alluded to earlier, we expect ZAR 100 million annualized savings and benefits from the restructuring. Dean Murray will talk about that and how the restructuring and how the new structure looks for that. We did sell the paper business, and we got ZAR 208 million for that. I'll talk about that in my next slide. And we did -- we have -- did monitoring -- the savings from the mining and the water business. We are certain that we are seeing those savings, they are coming through. And you might argue thank goodness we do because the results would have been a lot worse, obviously, if we didn't. Probably the only opportunities in terms of some of those projects is the growth projects. And unfortunately, in this COVID time, a lot of customers have put trials on the back burner as a priority, but we are starting to see the momentum starting to come back as we're now into July. Mark? And just to give you how that -- we sold the paper business. We -- it wasn't something that was for sale. And it's a product line of that we are linked in terms of its international partner. The technology partner wished to enter the continent directly. So the choice is either to look for another technology partner, introduce another technology. And obviously, what happened then is the market is actually probably not sustainable for both sides. With this partner, we had the agreement that they would pay us out to work into the product ranges that we've [ involved ], at which they did. And there was ZAR 108 million profit realized on that disposal. Safety performance, we were a little bit concerned, and we still are concerned with COVID. And the reason why we're concerned is that it distracts people's hearts and minds away from the work when they have family, friends being impacted by COVID and guests in their family. And we are concerned that people to remain vigilant in the workplace is a high priority. We maintained and actually brought that down. And now we're down to 0.36. I'm most happy to report that the acquisitions have also reduced considerably. So happy -- we're very happy with our safety performance. We've retained our level 2 B-BBEE contributor status. And as we went into COVID, we still did the GCR rating, and obviously maintained an A+ with a stable outlook, which I'm very pleased to report back on. There, you can see the improvement in safety. And of course, that includes all -- we don't talk about acquisitions anymore, but that includes the total business now. Next? The business drivers, and we'll just go through very quickly. The exchange rate, we did see the loss of the rand against major currencies. We averaged the first half at 16.66. That has helped revenue, without a doubt. It's not only from the COVID. Obviously, this was also the downgrade of the country that took place in those time. We are starting to see the rand strengthen a little bit, but it does play a big role on the revenue and some profits in some countries, if you bring it back to South Africa. Next, Mark. Gold. What I can say about gold is that a lot of the older mines in Western Africa that had closed, they're now talking to us about reopening because I think there's a lot more buoyancy on gold, and the outlook quite positive in these times. So we are seeing -- and Edwin will give you some mines that are now talking to us in the gold. Next one, Mark. PGMs still holding. The biggest disappointment around PGMs is obviously -- an even Anglo announced on the [ Amanda Gold, ] the underground shafts are not coming back at a very limited production, and we are not seeing the volumes going through concentrators. So it has a double effect on us. It has effect on underground shaft tube, but it also has an effect on the liquid xanthate in terms of extraction. Because, as you know, we look after about 80% of the concentrators in South Africa. And in April, a lot of those concentrators -- April and into May, a lot of those concentrators actually shut down because of not enough ore in the system. But we're hoping that this will improve the remainder of the year. Central Africa, definitely copper under pressure still, and obviously, cobalt. We did see through the time that mines, and you would have heard in the Glencore mines or Mopani that were closed and told to go on for 3 months, and now probably will extend that. We are starting to see some of the mines coming back in Central Africa now. So that looks a lot better from where we saw in April and May. So Central Africa coming back albeit at a slow pace. Coal and iron ore. Iron ore price is low. Iron -- coal [indiscernible] still quite robust. Our coal customers are looking pretty good. However, even the open cast mines are being disjointed with stop and starts in terms of COVID outbreaks. And what we've seen is where shifts have been taken out of their mines and blast actually preferred, it's around the COVID outbreaks in those areas. Moving on. Obviously, this is the -- on the local mining, it did come up. People are talking about this V-shape coming back in mining. But I think for South Africa, we're not going to see a full V return. I see, from that point, a flattening incline. And the reason is we won't see underground mining come back 100% straightaway. I still think we're going to only see that in the first quarter, second quarter of 2021 because they're still very much restricted in the underground areas. Brent crude oil also dropped off, showing some return. And next slide, Mark. And this with the -- the horror show of our manufacturing sector. We're waiting for May. It would have gone up, but I think it's going to take us a long time to -- there's probably -- and I'll talk to you a bit later in the -- in terms of the outlook for the remainder of the year, we are uncertain of what manufacturing sector actually comes back and in what guide and format will actually be. Because we are hearing of customers that have actually closed or closing. And it is a concern because this does take a lot of the specialty chemicals. In this sector, the [ SEPI ] are not exporting as much as they did. We've seen impact from sulfur, sulfuric. You're also seeing the coatings and paint sector has totally been decimated in the last 3 to 4 months. So we'll be watching that with a very close interest. Okay. I'm going to hand over to Mark, who's going to start going into the earnings analyzed, and give you the breakdown exactly of the impairments, the retrenchments and also the COVID effect as it's been played out in our business.

Yes. Thanks, Mark. Good morning, everyone. Yes, I'll take you through the earnings analyzed. And we've put up some very detailed slides but that will just give you a guidance as to how we've looked at our numbers and how maybe you should look at it from a normalized position. What we can see in this slide really shows what we've reported, and I really want to focus on the 2 columns, which is the profit from operations and the HEPS one. And you can see we reported a HEPS figure of ZAR 2.40. If -- and last year, if you recall that we did do strategic realignment projects at both the mining business and the water business. And last year, it impacted us by ZAR 1.00. This year, similarly, we delivered a restructuring exercise in our Chemicals business, mainly, and that cost us ZAR 0.59 or ZAR 92 million in restructure costs. We also -- through the year, we have impaired some of the businesses that we are exiting and that -- those impairments really relate to some plant and also some goodwill that we had on the balance sheet. So that was ZAR 69 million. Obviously, that does not impact HEPS. And then Mark spoke about the sale of the paper business, the paper chemical business, of which we made a profit on that of about ZAR 108 million. So if you extract all of those items, which we see as one-off items, our HEPS would have been ZAR 2.99, which is in line with the drop-off in operating profit as we reported at 35%. However, as Mark said, we have been tracking the impact on our COVID -- on our businesses with regard to COVID. And the largest impact really came out of the mining business as well as Much Asphalt, which did not even sell a kilogram of asphalt through the month of April. So I think what's important is that the process in how we've gone on and calculated and estimated these numbers is that we've actually done this from day 1 of lockdown. So from the very first day, we had a template out and each finance and business department have put these numbers together. So we believe it's a fair estimate of what we've actually lost from the market. And that impact, we see as ZAR 2.94 in HEPS and ZAR 454 million that came through our profit from operations. And if you add all of that back, our HEPS would have actually grown year-on-year on a normalized basis versus last year by close to 28%. What I will do here is to just show you how the profit of operations can be analyzed from a quarter-by-quarter basis, and you can actually see how the impact of -- how COVID impacted us. And what I would do later on in my slides when I talk about cash, I'll also show you the cash generation during the second quarter and the first quarter. So if you look at this slide, what we can see is that our profit from operations after the first 3 months was really fantastic. We were actually beating the prior first quarter by 22%. And that was really strong growth. The businesses went out expecting really good results in the second half -- or the second quarter. And what we have also seen is that we started realizing the savings of the 2 projects that we are -- restructuring projects that we initiated last year for Mining Solutions as well as the water business. So then along came COVID in the second quarter, and what you can see here is the fall-off in profitability as well as revenue during that second quarter of the year. And when you take that ZAR 454 million that I spoke to you on the previous slide, what you can see is that we would have been, from an operating profit point of view, a plus 20% up for the half year. And then if we look at the abnormal numbers that we've taken through regarding the strategic alignment costs, and you can see where we would have been from a first half point of view, where we're comparing the ZAR 611 million underlying versus the ZAR 982 million. And then what we do is we add the ZAR 454 million. And what we can see, on a normalized basis, we would have probably been about 8.5% up year-on-year on an operating profit point of view. And what's evidenced from the COVID impact is a drop off in margin. We are well on our way to make a larger margin where we always wanted to be. But obviously, with COVID we have dropped off to 5%. Just on this slide from a HEPS point of view, we are 34% down. Our trading margin, as I said, is at 5%. But most importantly, our return on net assets has fallen off as a result of COVID to 11.4%. And the tax rates, I've always given you guidance on this number, we are at 32%. Last year was a little bit lower. There were some one-off adjustments through that. But for the year going forward, we're predicting -- or forecasting a tax rate of 32%. If we look at cash management through COVID, and as you -- and I've had some discussions with some of you, especially the bankers out there, I've always said that what's important for us is to remain cash neutral through this period and reach up to the end of June, and I'll just demonstrate what we have done. Yes, if we look at CapEx, we spent ZAR 322 million on CapEx. There is really tight controls on CapEx. Lots of those CapEx was already projects that we had started at the beginning of the year. And on the expansion projects, we have spent some cash in Germany, and which I'll go through later on. And we -- on the sustenance side, we had spent some money on Edwin's abatement projects in Modderfontein. And we also started doing -- also started spending cash but not executing it, on the nitric acid #11 shutdown, which we have deferred now. So all that cash hasn't come through yet but we have deferred that project to early next year. The net working capital, that shows some level of deterioration. And the reason for that is, while most of our debtors have actually settled us, there were some small debtors that we have provided for. But most of our debtors have paid us through this cycle. And -- but they have paid us a little bit later than normal. And we do understand those cash constraints. And also through the cycle, what we have done is because we were expecting a bigger second quarter before COVID, we did stock up, and we did have some inventory in place. At that point in time, we were worried about supply chain. So it did hold us in good stead to have a little bit more stock on hand. But we are working that stock down. And hopefully, in the second half of the year, we will be -- there has been lots of instruction given to our businesses about the tightness of working capital. Our gearing's at 32%, as you can see on the graph. That is an improvement from the 36%. And that actually includes the IFRS 16 cost, and I'll talk to that just now. Our cash interest cover at 6.7x. Foreign dividends, we've continued receiving cash out of the rest of the continent and some of our foreign subs, so we received ZAR 9 million. Last year at this time, it was ZAR 8 million. Regarding dividends, the Board was very pleased to announce a dividend of ZAR 1 a share. And the real reason behind that, we are looking through the cycle. As Mark says, and he will tell you later, we are looking at a more robust mining environment going forward, especially outside South Africa, but also that our cash has been very well managed. And hence, we've declared a dividend of ZAR 1. It is 35% down on last year, and that's very much in line with our HEPS. Regarding the final cash dividend, that will be paid during the course of this year. So before the end of the year, we'll pay. We're just waiting for an outcome from an application that we have made to the company's tribunal, and that's really regarding the corporate action timetable where we declared a payment date of 6/4 and for shareholders registered on the 3rd of April 2020. As I said, we would like to maintain that time table. So we have applied to the tribunal to give us some relief on that. So we're just waiting for the outcome. Once we get that outcome, we will settle the dividend. Just coming back to cash, and I think this is quite important to take you through what has happened with cash. As you can see, our gearing, if we exclude IFRS 16 opening last year was at 31% and you can see that we've generated ZAR 1.1 billion in cash through the year -- or through the half year. We have also generated cash out of working capital, ZAR 145 million, which is quite different to what we did last year. And then we spent some money on CapEx. The net amount was ZAR 302 million. We finalized the Dinacon acquisition. And then we put some money in money market investment, about ZAR 140 million offshore and we see that as cash, however the contents will tell you a little bit different. But if we look at the end of the period, we can see that our real gearing outside IFRS 16 was actually sitting at 27%. So we believe that we've actually managed cash in a very responsible way through this period. And as I said, I'll show you what's actually happened through the quarter. If we look at our gearing at the end of -- excluding IFRS, at the end of quarter 1, we're sitting at 30%. We generated cash through the second quarter. We -- and just to remind you, we were profitable in the second quarter as well as EBITDA positive in that second quarter. So that shows you fairly strong cash generation in the second quarter, ZAR 504 million. And then at the end of the second quarter, which is -- which I did demonstrate, we're sitting at 27% gearing. And we brought that money market investments into account, we would be at about a 26% gearing. So that gave us the confidence to declare the dividend of ZAR 1. And if we look at some of the payments that are coming forward from this point and if we brought those deferred cash flows into account, so including the interim dividend and the final dividend of last year, that cash outflow will be about ZAR 556 million. And the performance shares, management also deferred performance shares, that was another ZAR 102 million. So management will only get their performance shares towards the end of the year. And if we put that into place, you'd see that our gearing is still in a very healthy position at about 31%. And that will all happen in the third and fourth quarters. And what I'm not taking into account here is the generation of cash flows through those quarters, inflows that we're likely to have. Just from a term debt point of view, you can see our gross debt is sitting at about 5-point -- or close to ZAR 6 billion, ZAR 5.9 billion. That's foreign debt converted as well. I think what we're happy to show you is that we have got a payment of ZAR 12 million to make this year on the debt, which we will pay. And then next year, we have some term debt maturing of about ZAR 1.1 billion. And we'll decide whether we pay it or roll it. And we have -- we are -- we will start engaging with bankers around that. I think what's important on this slide is that we've met all our covenants. Our most stringent covenant, as I see it, is a net debt to EBITDA, we have to be less than 2.5. We're currently sitting at 1.3. And if we just put a threshold to that, we -- in order to break that threshold, we'd have to increase borrowings by 3.5, which we don't see an intention of doing, and we would have to drop our currency EBITDA by another ZAR 1.4 billion. So those are the thresholds. And I thought I'd rather just be very transparent about that so you know where we are from a liquidity point of view. I would like to congratulate my team. They've done an excellent job in getting these treasury shares canceled. It's long been coming, but we have finalized -- finally concluded the sales. And thank you to the shareholders that voted in favor of us doing this. And I think what's important about this is that it had no real impact on our income statement or our balance sheet. The shares are exactly the same. And it does give us now the capacity if we want to repurchase shares back into the market when the time is right, and there's no limitation on that. Yes, just taking you into the performance by segment. And just looking at the segments here, what I'd like to highlight on this, and I won't go into a lot of detail, is that Mining Solutions business has taken a significant hit as a result of COVID and the restructuring process in Chemicals, as you can see, the chemical side, and that's where Much Asphalt sits, and they've taken quite a big hit on the COVID side. The positive side is that the water and process business, Dean will go through that later as [indiscernible] really well as the Plant & Animal Health, and we'll unpack those numbers for you. So now I'd like to ask Edwin just to take us into the Mining Solutions. Edwin?

Thank you, Mark. Next slide. And good morning to everybody. This slide shows our revenue per mineral that we represent in our diverse portfolio. And we can clearly see that gold has increased year-on-year because the inner circle represents 2019, and outer circle 2020. And that gold was on the back of West Africa that we've previously said did well. PGMs, Mark Dytor has alluded to it, said our South Africa underground mines were highly affected by COVID. Coal, we said stable. And in Central Africa, we've mentioned that we were also affected in that region in copper, you can see the effect of that. The other one I want to point out is the category Other and that is -- one can categorize it as opportunistic ammonium nitrate sales. And that's normally sales we do at a commodity price and the margin is normally lower than what you would get under normal circumstances. And that has grown significantly. We had some opportunities of sales. Next, I will not go into the top line. Mark has showed it to us earlier, which is as reported. But if we look at the underlying performance then revenue up 6.5%, EBITDA up nearly 21%, trading profit up 30.8%, trading margin at a healthy 13.2%, working capital slightly down, and I'll talk to that later. Revenue in the business was highly affected by the weaker rand and also by less sales in South Africa, it had an effect where our total revenue is now 64% from outside of South Africa. I was also referred to the ammonia price to talk to revenue. Ammonia had a very small effect. The rand ammonia price this half versus the previous half is very similar. I mentioned the trading profit, that's up. When coming to working capital, we've really -- when COVID hit us, we started a project where we controlled cash and cost, and we had very good inventory control from there onwards. But unfortunately, if you look at the ratios, the last quarter fell so rapidly in terms of sales that the ratio will show you that it looks worse. But we are quite proud that we've done really good work in terms of what we wanted to achieve in terms of the cash preservation. If you look at CapEx as well, similar approach, we delayed the No. 11 shutdown. We delayed some of the completion of the abatement. Some of the projects we had to delay because of travel restrictions, European engineers needed to come and sign off. They are not able to come and do it. And we are planning to maintain the strong CapEx discipline for the rest of the year. Our business was really 2 very different quarters. We were very excited about the first quarter. In the second quarter, everything just fell down. We -- as I mentioned previously, we would say the less favorable product mix because our category project Other has lot of commodity sales. But also in Australia, we've seen very good sales. And the Australian sales are done at lower numbers. I'm proud to say that this month will be the first month that we will have Explosives and Chemicals all included in our SAP system, and we'll have our first month end with a full -- fully integrated SAP system. Next. Mark has shown to you earlier what the group numbers look like, this is the mining business. So we can see in the first quarter 2019, we did ZAR 206 million. And in the first quarter 2020, we did ZAR 344 million, which was a very excited jump quarter-on-quarter. And we were all very happy and then all of us know COVID hit. And then second quarter 2019 was ZAR 293 million, included in there was ZAR 104 million strategic realignment, which then made the half at ZAR 603 million. Our profits in the second quarter for 2020 was severely affected by COVID, only ZAR 49 million profit. We did some small restructuring cost. And then we had the COVID effect -- calculated COVID effect. So our calculated underlying number is ZAR 789 million, which the margin -- trading margin is very similar to our first quarter which [ says that ] we believe our calculations are correct on that. SA was severely affected, and Mark has alluded to it, underground was one of the big reasons. And Mark said that both our Explosive business and our Chemical business was affected by that. We -- ISAP was running at very low capacities. And we've mentioned in the previous reporting period that some of the shafts that permanently closed, and we've seen those closures. Our realignment project in Explosives has really showed the achievement of those targets that we've promised, and we're quite happy that we've engaged in that. SADC, or as I call them, our bordering countries, was affected but not so severely. Central Africa, as mentioned before, severely affected, and we only see a ramp-up opening towards the end of the year. West Africa, Indonesia and Australia unaffected. Australia didn't get the message. They really had a good year. Next. If we look at mining explosives specifically, I mentioned in the previous reporting period that there are 2 tenders that are out. I'm happy to announce that the 1 tender, we received 100% award, and it's for 5 years. And it's on the back of a value-added product and service that we developed together with the customer. The second tender, we lost the bulk commodity product volumes. And that will be effective from August '20. We believe it's on the back of very aggressive pricing, and it's a 3-year tender that was awarded. The volumes that we've lost, we engaged in a program to regain these volumes. We're already between 40% and 50% there to regain volumes. And we believe we will recover the total loss by the end of quarter 1 2021. The -- as I mentioned, we've regained -- in our business -- in this specific tender, we regained technology-based business, for example [ hotel ] type business, vertical drop type business and electronic type business. We had good results in West Africa, Indonesia and Australia, as mentioned. And the Dinacon integration was finalized. Although it's a little bit slow in terms of the growth plan because our growth plan is to get into mining. And we're struggling to get people, experts to travel and help with that plan. Next. Our Chemical business, similar to our underground business and Explosives, was affected in this half and was severely affected as a result of COVID and the stoppages and liquid xanthate as a result was -- suffered sales. We do have a full order book for solid xanthates, and we've improved sales to South America. We also had good sales of flocculants year-to-date. But however, a large customer went into care and maintenance from May. So that is affecting us as well. Next. If we look at the future, South Africa, we are still concerned about the underground. And I see there are announcement of slow ramping up from big mining houses, which is positive. But I think we'll see a more normalized scenario in the first quarter 2021. We have closed our Anfex, as we said, but we were rolling out the underground emulsion products. It is a little bit slower than what we wanted. And obviously, we don't have that regular access to mine. So it's a bit slower. And then the benefits of the project realigned, we are fully on track to get the full benefit of this project. The chemical business. New opportunity for the chemical business, they struggle to get to mines and send people, for instance, to Brazil, Europe and places like that, to go into technical work. So that is also hampering some of our growth potential that we've seen. Outlook in West Africa, Indonesia and Australia still remain very positive. Central Africa, we see a normalization towards the end of the year. However, there's some tender activity happening in the next year in Central Africa. The SADC countries, our bordering countries, we're seeing ramping up that I'm mentioning Botswana here, but my team says I'm a bit negative, this looks a little bit better than I put it here, so remain to see. Dinacon, as we've mentioned, we are worried about Brazil still with COVID. But we are planning to ramp up in '21 and enter into the mining explosives business there. Chile, we've established their site. We are -- we have a project plan, and we're well on our way to establish ourselves in Chile. We will continue with development of value-adding products. And for example, we've just recently developed a very good product for hot hole and reactive ground. So you can now use your product in hot holes and reactive ground at the same time. I will now hand over to Dean Mulqueeny, who will look at the segment Water & Process for us and give us more detail on that. Thank you.

Thank you, Edwin, and morning to all. Water & Process has been one of the fortunate industries that are left to a larger less extent affected by COVID, especially in our public water space, as alluded to by Mr. Dytor. So I'm not again going to unpack the results as they are, but more talk about the underlying, which is relevant because we had a major restructuring last year as well. So from a revenue perspective, you can see that the revenue underlying was more or less flat. And I think the 2 things, there's been an impact from a COVID perspective in quarter 2, which I will show on the next slide. But also when we restructured the business, we moved away from low margin and the smaller businesses that were [indiscernible]. So the next [ line ] was the trading profit. I think that's shown a real positive growth. And that is yielding the benefits that we've seen from the underlying business as well as the realignment [indiscernible]. Our margins, from an online perspective, is getting quite accessible of the 15% region. And with this kind of service in technology, we believe that's the mark -- that's the level that we should maintain. One of the negatives, if you look at it straightforwardly, was working capital or trade working capital, and the largest impact from that was on our public water space. We were very concerned with supply chain, remembering that a lot of our raw materials are imported. And through discussions with major water boards and municipalities, we took the decision to bring in extra stock in -- from as of the end of quarter 1 into quarter 2. And I think as a percentage, this was also impacted of the reduction in the sales in the rest of our business that the percentage jumped. But we're confident with the team and with the commitments that the customers have filed off already that this trade working capital number will return to the normal levels before the end of 2020. I'll just speak very quickly about it. The COVID impact we're seeing is about ZAR 17 million. And looking at our -- under the reported number of ZAR 100 million, that's about a 17% for H1. The realignment projects, as I've alluded to earlier, in reporting seasons is we are about a 50 -- 55% to 60% H2. So the targeted savings and upliftment for H1 are -- have been achieved and are on track, and we're confident that this will be maintained. Even though a lot of the projects -- the upliftment projects are being postponed, I think the pipeline and the way the team is operating now is always looking for alternate products -- projects to try and negate the impacts of any delays. The lower cost to serve, as I've said, as we shared a lot of the tail end of our customers, which were quite high. And this is now really helping us in our SAP bolts, which is translating into improved profitability. The project ourselves, we had 2 minor ones that we had to continue with today with the product rationalization, so a small one in operations, and then our direct business in Nigeria, which will -- we will be exiting from a company perspective, but we have now established a very good distributor in that region, which will happen in August, but we have taken the provision in H1. If I summarize, South Africa had quite a good performance. The only areas that we would say is really being highly affected is our mining sector and -- as well as the refining sector. Public water, on the other side, is really doing extremely well. We have changed our product mix from public water, which is a lower margin industry, so that has an impact on some of our overall performance. Exports. Exports, we were anticipating a big growth, but the big negative part of the exports on the water side was the oil and gas in West Africa, mainly in Angola and in Nigeria, but the other parts of our exports, public water and our mining sector, has really grown nicely. Next slide. If I just quickly unpack the impact of the realignment and the COVID. If we look at the gains that we had in terms of quarter 1 2020 versus quarter 1 2019, we can see ZAR 56 million versus ZAR 33 million. And generally speaking, public water quarter 1 is the smallest quarter of our year, especially from an exports perspective. So we were anticipating quite a nice upliftment as well in quarter 2, and that's why we really are confident that the COVID impact numbers of the ZAR 17 million, plus the realignment, we would have had a quarter 2 that was getting on to nearly ZAR 17 million. So underlying, we still feel that the business has grown 23%. And as we said, the trading margin ratio is now looking a lot healthier. One of the things that we launched in our previous reporting period was our Project Purpose. And I think it was really exciting. It's something for me that was done before COVID, but you can see the importance of it now during this COVID period. And the key objective was, from a group perspective, for us to reduce drinking of potable water were not required. And this was, not only in our own factories and plants, but we were looking at it in -- on the continent as a whole. The other area and aligning ourselves with our sustainable goals of improving the quality of water, an effort that's been discharged, and reducing it as well. So this will overall enhance the environmental and the societal benefits. We went through a whole lot of different ways that we can do this, but I think more importantly on this slide, is the key market segments that we're focusing on are on our public water; our private, which is refineries, chemical plants and other major industries; as well as mining. So mining internally in the mines, but also looking at projects in the Acid Mine Drainage space. Next slide. And if I just start off on this slide, it is one of the projects that we have commissioned together with eThekwini, and this has just finalized the second phase in July. And what this picture is showing is these are the types of systems that we could put up in a matter of 2 months to 4 months. And it is all electronically controlled, with a little schematic on the bottom left side of the picture. But more importantly, these are systems that can be put in rivers, and it's a project that is almost decentralizing and allowing communities that are further away from the main water boards to also have access to good clean drinking water. In this particular site now, we are supplying 1.5 million liters a day, which is giving more than 6,000 people good clean drinking water. And we are working on projects to try and increase these types of projects through the coastline or where there is access to river water. From a community and the CSI work, we've done quite a bit. And we started last year, supplying these types of systems to schools and the containerized plants. And the one on the top right is the one, we believe, we've done in Hammanskraal, which is supplying nearly 2,000 children a day, school kids' drinking water. But more importantly, we've also set up a system that can now supply tankers to the community, giving 800 families in the immediate area water, good drinking water. But also during these COVID times, I think it's playing an important part to be able to allow people to be able to wash their hands and try and reduce the spread of the disease. We've done these smaller skids as well in some of the other schools, but also in the Limpopo province, we've put these skids. And these small D2 Skids can supply around about 1,000 children a day -- of humans and people. But more importantly, these are skids that we can mobilize in a period of under 3 to 4 weeks. Furthermore that we are doing when we -- together with our CSI as well as in this particular one was in conjunction with the Nelson Mandela Foundation where we were able to work together and mobilize the skid, which is now not only supplying the school, but also 450 people in the community. And this has had a big impact and I must say, it's one of the things that we, at AECI, are very proud. But these are systems that we're putting in place that allow for us to actually enter the area of school. So there's been a lot of discussions with the education department and we're hoping to actually achieve a significant portion of trying to get schools rather than just purely having tanks, which end up -- was not being filled regularly or sanitized, to put these types of skids in as many schools as possible in -- on the continent, that we can allow the kids to have good drinking water. And this is also allowing us to enter a new market space. We did speak about the private sector, and I think it was a big focus for us to work, firstly, at home. So we have firstly tackled -- and the little schematic on the right-hand side is what I had reported in February. But just to bring everybody up to speed, we've commenced this project at our Modderfontein site. So we are now going to be reducing the potable water that Modderfontein site will have. And this work has already started. So we are replacing it with recycled water. And we are talking in the region now of 400 million liters per annum of fresh drinking water that we will be removing from the AECI demand off the grid is [indiscernible]. So the [ servers ] are done, and we expect this plant facility to be commissioned. It also will be a good case study for us to guard the rest of industry, allowing us to grow in this market space. We're also looking at the effluent, which is part of the AECI side, so getting us off the grid and then also trying to aspire to Zero Liquid Discharge. So that Phase 2 will also commence at the end of this year and we're expecting to, over the next 3 years, to eliminate, as far as possible, liquid discharge from the Modderfontein site. The work at our other facility down in KZN Umbogintwini is also been initiated. And I think the big goal there is to reduce our effluent that's currently being discharged to sea. Although in permit and within specifications, we want, as far as possible, to try and close the pipe as my CEO often says. And then our final 2 steps within our 2 major other sites will be Sasolburg and Chloorkop. So from the Project Purpose to outside the AECI businesses, we have, in the last 6 months, been able to establish a project funnel. So we have a dedicated team working on this. And as I've said, we're focusing on the public, private and mining. The funnel already now has been somewhere in the region of ZAR 300 million that we are hoping to mobilize in the next -- start mobilizing in the next 6 months to 18 months. And these are major priorities that has been given to the team. Already, we've been awarded a potable water reduction technology at a refinery and we are anticipating at least another one in the next year coming up. Looking at various options of water supply for borehole water treatment, which is -- we've done a lot of CSI work, but now we're moving into the business phase. And we've done some work in Gauteng and Limpopo, and we are looking at the other provinces as well. Going forward to the coastline, the drought relief programs, we have put 2 proposals to be the more of a decentralized model. So it's not the major desalination plants, but these that can at least give 6,000 to 10,000 communities. And we're finding the ones that we've already put down in the Western Cape are actually giving competitive rates to what the municipality fees are for potable water. So that 2 is now another nice opportunity. And there are other various ones in Limpopo that are also being assessed. If we talk about water, where we're looking, I think, in terms of the risk, we're still concerned with mining and refining sectors, and we know about the unfortunate incident in the Western Cape with that refinery. So these are the areas that we have to keep as a risk for now until they get back to normalized trading, which we envisage will be, as well as mining, as in line with what Edwin has spoken about, maybe early next year. The realignment project, as I said, is a strong focus. The weekly monitoring and reporting to the executive every fortnight. So these projects are on track. And we're confident that the ZAR 100 million that we were speaking about, we will realize this in 2020. Big focus will be on working capital. We're getting those numbers back to where we should be. And the -- obviously, translating all of that stock into cash. Many opportunities on the continent in Sub-Saharan Africa for Water Board tenders. And I must say, we have, especially in our exports, the growth rate has been really well. And we are partnering now with the local South African municipalities and Water Board. So we are trying to come up with a very different model, and I think it's working quite well. Technologies continue to be investigated to supplement our growth targets. So being very specific in South Africa, the momentum we've got from Project Purpose, that's a strong thing to which will lead us into future growth in the next 3 to 5 years, but that the team is working very hard on. And then I think one of the important things during this COVID period, we are finding that the opposition is there is quite aggressiveness. So we are trying to find ways to secure our longer-term contracts as well as also to try and maintain our base because the base is what's generating the cash for us to allow us to grow in the future. Exports, we're extremely excited about in public water and in mining. And I think that the team is ready for the uptick on the West Coast in oil and gas. That's -- from water, that's it. And I'd like to hand back to my colleague, Mark K.

Thanks, Dean. Yes. If we just go into Plant & Animal Health, what you can see is that it's been a really positive 6 months for Plant & Animal Health. It's had no real -- the COVID impact has had very little impact on the agriculture sector, unlike the mining, water and chemical side of our business. What we can see is that revenues and margins grew at both Nulandis and Schirm. And Schirm obviously started manufacturing sanitizers. I'll talk about that later on. And the weaker exchange rate from euro to rand has really assisted the performance. Both businesses, Nulandis and Schirm, have gone under good cost control initiatives and will deliver savings as we go into the H2. Okay. If I just go into Schirm, I think what's pleasing about Schirm's performance is that they've really improved on safety. It's really aligned that in the -- into AECI culture around safety, so that's been very pleasing. Last year, I did announce that we were going to go through some cost reduction projects. Those have been executed at all our German facilities. The sugarbeet herbicide project that I did refer to over the last 2 reporting periods, the registration process, that has been completed. The new production facility at the Schonebeck site, the MSA 3 plant, the synthesis plant, that's been fully ramped up now to meet all production, and that's with increasing customer demand as we see it right now. The lease site at Magdeburg, that's been closed at the end of June. And we should see some good cost savings in the second half of the year once we have finally exited that site. What we have seen is that Schirm's strategy has always been to diversify out of agrochemicals going to fine chemicals. And what we have done is we've now diversified into sanitizer and disinfectants. We have taken this opportunity with both hands. The teams really deployed quite quickly to get their clients adjusted to manufacture sanitizers. And we have signed an initial order with the German Department of Interior. And we're still executing on that order, and that will be fully delivered by the end of August. We have also branded our own sanitizer in the market, and that's initially for the German market. And hopefully, we can actually export sanitizer to other European countries. We -- the negative impact on Schirm is really on the performance from COVID has really been on the German automotive sector. One of Schirm's plants, the second synthesis plant, is really dedicated to automotive chemicals. We had to stop that plant as a result of the decline in the automotive sector. We hope to see that business come back next year. The U.S. business, that has continued on a really solid trajectory. And I just want to finally say that Schirm has had really good positive cash performance during this first half of the year. If we just look at the outlook, the 2 pictures that you see in front of you. The first picture that looks like a warehouse is actually an SC plant, a super concentrate plant that could -- that we have approved CapEx for. And that has been -- that will be up and running at the end of this season, which is 2020, and it will be in line for the 2020, '21 agricultural season. So they're moving quite quickly on that CapEx. The picture on your right, it looks like a big cake mixer. What it is, is a Blender 5000 machine that we've put in place for powder products. That's at our Baar-Ebenhausen facility, and that's really been installed for the personal care and other industrial applications. So that plant has come -- has already started running and we hope to fill that up by next year. We -- the ramp-up of a new blue-chip contract that I spoke about at the last reporting period at Wolfenbuttel, that has started and volumes are starting to come through. I did talk about the automotive chemicals, that we are concerned about it, and that will probably remain depressed until the end of the year. There is a good healthy project pipeline and tender pipeline that we're currently embarking on. And they're all with some significant reach of customers that are looking to diversify some of its supply chains and curtail risk that they've experienced out of the COVID impact. And then obviously, we're looking forward to continuing our sanitizer and disinfectant sales into 2021. I'd now like to ask Dean just to look at -- to discuss Nulandis.

Can you hear me? All right. Just to talk a bit about Nulandis. I think, first of all, we've mentioned this on several occasions that there's been minimal impact on the business due to the COVID-19 as Nulandis was essential service provider. The other positive thing, of course, is that the momentum that we saw in the second half of 2019 has continued into the first half of this year as well. Of course, the focus on our in-house products. We've seen much improved sales in -- local sales of in-house products, which were up 18%. And this is quite important because these are our products with our better margins. We've also been able to appoint some new agents to grow our South African footprint. And then, of course, we also saw some strong growth in the export market as well, which was encouraging. And Nulandis also embarked on a cost-saving initiative, which has now been completed with -- where we did some restructuring and improved the quality of the businesses. And there, we anticipate to see an annualized savings of about ZAR 10 million. The other encouraging news for us was the turnaround of FOL in Malawi where revenue was up by 38%. And we were quite successful in a number of new tenders there, and we have to see this continue for the remainder of the year. And then, of course, the Biocult global registrations. We succeeded in registering in a number of new countries there as well. So that will be a key focus going forward. Next slide, please, now. All right. We just talked a bit about some of the in-house products. You can just see there. I just put up that slide to show you the impact. And I think the first one is the Xanbac, which we use for soil pathogen control. And then I mentioned the Biocult, which is our micro riser, which is used for improved root development, which you'll see in that second picture there. And then, of course, our Alexin, which is quite an old product, but we've been quite successful in South Africa as well as overseas with this product, which is used in stress management in plants as well, particularly frost control. And of course, in some regions, we've got very extremely high temperatures as well. Next slide, please. All right. And just -- maybe just to give you some insight on some of the new products and services that originally originated from the innovation growth office. The first one is Khula. And Khula is a small start-up company that we bought into. And really, Khula or the Khula Ecosystem is a farmer's management platform, which has also been enabled for e-commerce. And with this particular platform, farmers can obtain technical services and advice on the actual app itself as well as then purchase the agricultural input requirements online. But this app also allows the farmers to sell their produce online as well. And really, the reason for us moving into this Khula app was to really target the emerging farmers in South Africa. And then, of course, SupPlant. You've heard about SupPlant. We've talked about this in the plant. And this is really our intelligent farming technology where we install equipment that automatically provides water to plants, which then obviously, depending on the water, let's say, the water requirements or nutrients that the plant requires, the dosing systems, obviously, are able to track this and monitor this very carefully. And of course, the key benefit here is saving on water, which is quite critical in SA. Of course, increasing yields, we've seen that as well by as much as 20%. And then, of course, also this has huge financial benefits for the farmer as well. Next slide, please. So if we just have a look at the outlook. The outlook, I think, will be positive for the year-end -- the outlook for the year-end is positive. We've had some very good winter rainfall in the Western Cape. And as you perhaps know, this is quite an important region for Nulandis with the high-value crops. I think we should still see the benefits of growing the footprint in South Africa as well with the launch -- with a key focus on the KwaZulu-Natal region as well. And then, of course, the sustained focus on in-house products and technology that we will keep rolling out. Export drive. There's a strong focus, particularly with our Biocult, in the North American market as well, but also into Canada as well as into Vietnam. And then, of course, SupPlant, which I mentioned earlier. We've already deployed this technology on 5 farms in the first half of this year and we have another 5 farms targeted for the second half of the year. And then lastly, the Khula app, which is really starting to take traction now. This will hopefully give us good access to the emerging farmer that we're looking to try and grow our business. Right. Onto food and beverage. Thank you, Mark. Next slide. So the food and beverage business was severely impacted by the COVID-19 on quite a number of the categories within food. You can see there that the impact of COVID on the trading profit was around ZAR 18 million for the half year. And it was particularly adding in the supply of raw materials and additives to the alcoholic beverage sectors of the market as well as the what we call the quick service restaurants, the foodservice sector of the market. This was one of the businesses that was impacted by our restructuring project. And you can see there, we've incurred costs in the half year numbers, of restructuring costs of ZAR 32 million as well as a goodwill impairment of ZAR 12 million. And part of this restructuring is the exiting of our sauce business in Cape Town, which we plan to have sorted out by the end of this month. And we will possibly sell that business as well. And then really, the focus will be on a more improved quality of earnings in the food business going forward. All right. Mr. Dytor, I'm going to hand over to you to give us the intro on chemicals.

Can you hear me? Yes. All right. So the chemicals, the revenue was substantially down as well as EBITDA. And this is probably one of the sectors that was -- pillars that was mainly affected or quite harshly affected by COVID. Also having the Much business in the sector, the first quarter coming out of last year wasn't up to the expectation as we thought, but as we went into March, the whole of the Much business actually just fell off and we actually closed down for 6 weeks. As I said earlier, it was actually deemed as nonessential. So we are keeping a very close eye on that. We are starting to see much ramping up again. And when I talk about the next slide, I'll give you a little bit more on that. But the effects and the optimization has all been taken in. So when you've got a -- when you look at the food and beverage and you look at this sector, that's where most of the closure costs and also restructuring costs have actually taken place. And you can see, here we had a negative effect of ZAR 127 million. Also, our SANS Fibers business in North America has closed down the whole of July, and that's the back of no orders coming in from the automotive industry. However, there is support from government in giving us support in wages, et cetera, in that area. We are also still -- there were some gains. We did see gains in sanitizer and home care in this segment, but we also realized we couldn't carry on with the amount of cost we actually have in this business, and that's forced us to take the impairments and the restructuring that we've done. And we also -- part of these numbers, you would assume ZAR 108 million coming from the sale of the paper business. Next slide, Mark. So a disappointing start from Much Asphalt. Also, we -- what you did see that where refineries were seen as essential. But as the refineries got through April, they realized no one was consuming either air fuel or petrol, which then, with a lot of refineries took plant shuts, which is obviously now backed up in terms of bitumen end usage. So July has also been a bit of a challenge in actually making sure you can get enough bitumen for the asphalt industry. The good news is, I have said the Namibian work has now commenced. There's cost savings done. And you would announce -- you've seen in the government gazette quite a few projects of infrastructure, but particularly roads, have been approved as priority for the country. Having said that, the Much team are very upbeat about the remainder of this year. However, we also have to be a little bit realistic. Is the cash -- is there enough cash in the system to be able to continue pulling in these infrastructure projects? So we are watching with apprehension. It is an easy way to create jobs and create the economy to grow. It's just, do we have enough cash in our system to be able to do that? We can go to the next one. So Dean Murray has been put in charge of this project optimum, which is a restructure. And I just want him to give you a quick feedback of where we are. As I said earlier, all the costs have been taken in. We've actually done that in the first half. And all the new structures are now effective of the 1st of July. So we should start to see the benefit of that coming through. Dean, if I hand over to you.

Thank you, Mark. As we talked about this restructuring program that we were going to put in place last year at the results presentation, it was delayed by a couple of months obviously because of the pandemic. But effectively, what we have done now is that we have, first of all, the food and beverage business has been incorporated into AECI Chemicals and the 2 businesses in food, namely SCP and Lake Foods, have been consolidated into one company. All right. Then the -- in the chemical sector, 4 of the chemical businesses have been consolidated into 2. We followed a quite comprehensive Section 189 process with proper consultation. And that was completed -- that has been completed now. And there, we've unfortunately had a reduction of 30% in the staff complement, but absolutely be necessary. The restructuring costs for this exercise was ZAR 64 million, which we've now taken into in the first half of the year. And all the people-saving cost, we'll see the benefit of that coming back in the second half of the year through, obviously, the headcount reduction as well as the business improvement projects, which have now been put in place. Total impairments for the projects was ZAR 69 million. And the main -- this is mainly through the exit of the sauce business in Cape Town, as I mentioned previously in foods, as well as the closure of the tall oil distillation plant at our IOP facility in KwaZulu-Natal. And as we mentioned before, I mean, the main purpose of this restructuring was to obtain ZAR 100 million structural and sustainable annualized benefits, which we believe we will see, and starting -- well, starting from January next year. And also we've improved, I believe, the quality of earnings in our chemical business where we need to keep the trading profit percentage over 10%. Next slide, please, Mr. K. And then just to show you how we've restructured this, you can see we've collapsed, as I mentioned, the 4 chemical companies into 2 new businesses, one called Industrial Chemicals, the other Specialty Chemicals. And then of course, you can see the Food & Beverage business, which will also be under Chemicals. And then, of course, Much Asphalt and SANS Fibers, they were excluded from this restructuring process. Thank you, Mark.

You got me back. And what I can say, it was not an easy feat having people not allowed to travel in this time because there was -- we're talking about company -- parts of our business in KwaZulu-Natal halting and also in the Western Cape. So going through consultation and those process, it's been extremely difficult. But we got to a point in the -- as the COVID lockdown got extended, that we had no choice but to push ahead. And thanks to Dean and his team. He's been able to do that. At the same time, we've restructured the group. And if I get next slide, so we've simplified it in a way and brought everybody under an AECI logo. And the tagline, which you're going to hear a lot more about, is "One AECI, for a better world". And that's obviously, you can see that with water, with food security and how do we, with our products and services, improve the quality of the world. So we've got AECI Mining, AECI Water, AECI Agri Health and AECI Chemicals. And these will be headed by the executive that you have on the call today. So senior management will -- senior executive will be taking charge of each of the strategic pillars. And the next slide, Mark. So AECI Mining, it used to be AECI Explosives and AECI Mining Chemicals, as you can see how those companies have come into that. Next one. ImproChem is obviously the quite more simple one in terms of water, but it encompasses not only the process side of water and boilers and cooling water, but most importantly, wastewater and drinking water. And that's going to be their logo phasing out. Next one is Agri Health. So that's split into -- under that is 3. So we've got the Plant Health, which is the mainly Nulandis. We've got the Animal Health, which is the animal feeds and nutrition business. And then we've got Schirm, which will be known as AECI Schirm in future. Going to the next one. And the Chemicals one is, as Dean has just referred to, is industrial chemicals, which is our bulk, continuous process chemicals, our specialty chemicals, which is more of a specialized application and manufactured in small batches. And then we've put the food and beverage in a smaller, and that's really on the business side. And then we've left -- obviously, Much and SANS is left in there. The whole idea of the restructuring is not just to take cost out. It's how do we build a better focus in terms of innovation, new projects and new opportunities going forward. So that's been the agreement of the team is how do we then grow these businesses into new areas, looking at the overall strategy of AECI. So the COVID times has been -- it's taken a lot of time, but we still need to focus on the future of AECI, which is important to us. Next one, Mark. And then we obviously -- we still have the AECI Property Services, which actually looks after the leasing of some of our properties that we still have. Next, Mark. And now if I can just ask us to play that video. Hopefully, it's available. [Presentation]

And so from that, you're going to get a feeling from how AECI touches everybody's lives and a better world. And obviously, the new branding in terms of the strategy which we were going to. Mark, final slides? Okay. Outlook and focus. I think you've heard and you've also seen from the presentation from my colleagues and I what the concerns are still in the business, what the challenges are, but there's still -- we had at the end of the year in terms of world trade, I think there is still lot more tension, especially after the COVID. And I think the effects of COVID, no one would have contemplated, that has increased exponentially since that last -- since February this year. Extreme weather events. These will all be items that will be -- which will probably come back up to the surface once, hopefully, COVID is behind us. For South Africa, I think electricity supply, unfortunately, not acceptable. Looking at the numbers, if you look at the production rates, the consumption should be well in control. So we've got issues on electricity stock. And obviously, you've seen prior to COVID how service delivery or lack of has now pushed us into a lot of more dire need of service delivery in this country. The low GDP in South Africa, you'll see, it's getting more negative as we look. And the predictions for next year is also pretty dire. The manufacturing sector, I am concerned about. I'm not sure how it's going to look when it comes back, but we will be in position to take the challenge and to maneuver in different areas if we have to. The mining sector, sustainability of underground. I think running at 40% and 50% capacities underground is going to be a challenge for most mining houses in -- especially on the underground side. Loss of skills, I think, is unchanged, but no one can actually go anywhere at the moment anyway. So we haven't seen any mass movements in that direction. Next slide, Mark. Safety has improved. If we're looking at Schirm, and it is on everybody's lips, and Much Asphalt, the investment case, obviously, we keep an eye. We're far more comfortable about the Schirm. Obviously, Much is the one, and if you looked in our statements, we are keeping a very close eye on impairments in Much Asphalt as we move throughout the year. And we need to see how much of that industry comes back and if the volumes do come back. So we'll be making a call on that one at the end of the year. The strategic alignments, we are seeing those cost savings, thank goodness. However, we are seeing, in terms of the customer-facing projects, a few delays. Brazilian explosives is up and running. We need to get people over there to get us into the mining sector. And you would see we've completed in a big tick with the food and beverage and chemicals area. Established explosive manufacturing, Edwin and his team are busy. They have looked at sites. They have found a site. And of course, that will be something for us to tackle into the new year. Next one. And then existing geographic footprint. Probably, less has been done because of travel restrictions. Growth opportunities, acquisitions. Opportunities are coming our way. We are seeing some companies under stress. There will be opportunities coming. However, we need to be very conservative on our cash. And if there's anything that comes off, really it has to make some strategic sense for us. The -- again, in that line with, "One AECI, for a better world", you can see the strategy around water and food security is getting higher and more important issue on our agenda and a strategy for us. But the financial team and we -- every evening, we are monitoring the amount of cash from all our companies. It's vigorous. It's going to continue to be vigorous. We have to manage our cash day by day. We have to look at our cost control and the benefits of the realigning needs to be -- we are measuring them. We're meeting every week, making sure that those costs are coming back. Working capital, I think we're being a little bit time on the stock relative to how COVID has hit. And as we move through the remainder of the year, stock reduction is going to be top priority. And then CapEx. CapEx, obviously, sustainability in terms of statutory shuts, we're going to have to continue with. However, we'll be very selective on what capital is spent where -- elsewhere. So overall, what -- looking forward, and I think in terms of mining, the rest of -- Australia is still looking good; Indonesia, looking good; West Africa, still looking quite good; Central Africa is starting to come back, and as Edwin said, seeing some normality, more normality the end of the year; South Africa, we are concerned. It's the underground sector that is still pretty risky for us for the remainder of this year, and even our open cast mines in this country. And you've seen with the politics of unions, et cetera, how mines are being closed down and taking shuts. So we will continue to see that through the remainder of the year. I think, agriculture, I'm a lot more buoyant about. Looking at the range in the Western Cape and food security, I think the agriculture sector will be looking quite good. I'm also still upbeat about the water, and you can see the results there. Challenges will face us on the manufacturing sector and our chemical business. However, we have done the optimization projects and we should -- and we will see the benefits of that and the new focus areas of that coming through the remainder of the year. So with that, I think also a special thanks to you all for all your support, but also to my executive team are all in here. A lot of hard work has gone in on a daily basis to make sure that our people are safe, make sure that we continue supplying and that we're not missing a beat. Thank you.

Mark, can we go to questions now?

Yes, we can.

[Operator Instructions]

Claudia, it's [indiscernible]. Can you hear me?

Yes, I can.