AECI Ltd (AFE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Khotso Mokhele is my name, and I'm Chairman of AECI. I know it's a bit unusual for the Chairman to open the results presentation because this is typically normally the role in the duty of our Chief Executive, but the COVID pandemic may not be completely behind us, but I'm delighted that it's given us space to meet in person even though I'm informed that there's many other people who are on the webcam system. It is unusual for me to do the welcome and introduction of the results announcement, but I do so because as you would all be aware now, this morning, we announced the planned retirement of our Group CEO, Mr. Mark Dytor, effective July 31, 2023. Now Mark has been with AECI for 38 years now. It will be 39 years come July 2023. And the last 10 of those 39 years, he would have served as the Chief Executive Officer of the company. Safe to say on behalf of the Board, in expressing our gratitude to Mark for his tremendous contribution over the 30 years thus far with particular reference to the utmost dedication and passion for the international business story that is AECI, a hallmark of his contribution. Consequential to his forthcoming retirement, the Board has initiated a comprehensive internal, external search process to identify a permanent CEO, and the process will be led by myself as the Chairman, supported by the Chairman of the Remuneration and Human Capital Committee. In the meantime, Mark will undoubtedly continue to manage the business in the dedicated way in which we are all accustomed to and supported by a strong team, many of whom you have long-term association with. The team, as you're aware, has been further strengthened by our new Company Secretary, Cheryl Singh, who is sitting here in front of us. And our new CFO, Aarti Takoordeen, who also is sitting here in front of you, who will also take you through the financial results. I'm joined in person today by Mr. Godfrey Gomwe sitting here in front, who's Chairman of the Remuneration and Human Capital Committee and together, we'll be happy to take any questions after the results presentations have been concluded. But for now, he is still the CEO of AECI for the next year. I hand over to Dytor.

Thank you, Chair. Okay. Good morning, everybody. Good to see you all here in live, and also on the webinar, thank you for joining us. And we also have a number of the AECI staff, also to Chair, thank you for those kind words. I'm not going to respond to my retirement today. I've got some time to think about it at least, and also a special welcome to Godfrey, thank you for joining us here. And also for the other NEDs and Chair that are also on the line. They are all watching and obviously, looking and available for questions later on. It is the interim results. It's always a great privilege to present. And I think overall, we are very pleased with the set of results relative to what's going on around us in the world right now, and I'll talk about that a little bit later. So we have an agenda, and we're going to talk about the business results relative to the exact business results in an overview, which I will do. Aarti, our new CFO. She's smiling at me here. And she's ready to give her first interim results. So we sure it's going to go 100% fantastic. Maybe the results will also go 100% in the near future, but I look forward to that. And then we also have segmental reviews, which I'm helped by my exec, by [Indiscernible]. And I also have Cheryl here to make sure that I'm on the straight and narrow, Cheryl, thank you for that. And then, of course, we'll have outlook, and I'll give you something, which we're looking forward to the future. And then we'll take questions from the webinar, also from the phone line and also from the floor that is here. So welcome shareholders, investors. And obviously, we also have auditors here as well. Thanks, Eric, for joining us. He's also making sure I stick to the right line, but I'm sure they're also happy with the results that we'll present today. I am indeed very happy because you can see sales up, in terms of revenue, HEPS are up, operating profit is up. And of course, we've been able to give you a dividend, which is up. So I think from my side, very happy overall. And just to start off, which is core to us is our safety, and performance, we have now a safety committee and health committee, which the Chair has brought into the business, chaired by Steve Dawson, who is from Australia. And what I can say is I'm very proud of the performance of our safety performance throughout the group. We are really world-class standards right now at 0.15, and if we measure ourselves against our peers, we are probably just 0.01 above Dow, which is actually the benchmark in the industry. So really -- and also all my employees and staff that are on the line, fantastic achievement and really thank you for that because safety is the core of our business, and especially in explosives and chemicals, we have to do things right and right at the first time. But we have to keep on with the drum beat here and never take our eye off the focus. And exactly the milestones, and I've asked my -- I have Neil Franklin in the room, and he's not even smiling. And I've asked him to try and tighten up a little bit on those milestones as we move forward. So we'll be tightening up those in the near future. ESG and of course, what we are an interim. So what I am looking at is we're not giving you greens and reds and oranges, but we are creating yearly milestones to get us to the 2025. We've actually obviously gone past some of those milestones already. And therefore, we'll be tightening those up in the next year or so. And it's really around as production comes up back to 100% again. Obviously, we have to create the right benchmarks to improve our performance. And Dean Mulqueeny is hitting that with Neil and I'm glad to report that we're on track to achieving all those milestones by the 2025, and we'll probably be adding some more relative to the JSE requirements, which we'll start reporting next year. Operating environment, so the good stuff. There's lots of good things. So customer demand is progressing well. We've seen demand from customers coming back really on a global basis, especially mines. And obviously, we're taking full advantage of that. And we're definitely seeing commodity prices holding, and I'll show you some of the graphs that sort of demonstrates that. And ESG is obviously very important to us. And I think the one AECI for a better world, as I explained in our strategic session, which is on our website, is going to be core to our strategy for the foreseeable future. And we've created a net 0 target as well. And I guess, as per every other business out there, the 2050 number will come -- will come back to 2040 and of course, there's numbers even being muted in the market about 2030. However, it's been also difficult. I don't think any of us would expected to be where we are relative to COVID. And I think from my point of view, coming out of COVID, and there's a bit of normality around the world in terms of travel. And of course, we are seeing some outbreaks in different countries that probably went into a deeper lockdown, which are now feeling the brunt of that. But we are seeing travelers coming to the South Africa, we've got a lot more people arriving in airplanes and of course, baggage issues around Europe. So we're seeing people are moving again and business is actually starting again. So that's a big, fantastic opportunity for us all. But who would have thought as you come out of that, that we would have had the Ukraine, Russian crisis, which would push us deeper into a lot more financial stress around the world. And we are starting to see now, which has been unheard of in North America, Europe and Australia. We've seen employment costs escalating, 6% and 7%, inflation is going up. And I think as we sit here, we're quite used to that environment of inflation, right? And probably we've seen the lowest inflation that we can record in many years in the last 2 to 3 years. But from my point of view, we are starting to see a lot more inflation in more of the developed countries now, which is definitely affecting our Schirm, and obviously, the SANS business that we have outside, as well as the mining business in various countries around the world. So there's that. And then we are seeing labor shortages, labor shortages, which have been unheard of in Europe and U.S.A. And in a contradiction, we sit in South Africa, where we've we need to create jobs. So there's a big contradiction in the world that we are in now. And the geopolitical conflicts that we've seen on our continent alone and Mark will allude to those in terms of cues. So looking at the environment, I think we can write probably in my retirement in a year's time, I could write a book on the challenges. And for my team, I've got the book of excuses as well, which they always share with me. So whenever we don't make a target, there's always an excuse. But -- and I'm looking forward to that. Just looking at the market, as I said, it's quite resilient. The rand has obviously weakened again. I think we went over ZAR 17, we're probably about ZAR 16.85, ZAR 16.70 today, and that does affect our business, right? Especially, foreign operations, but it also has a big impact on our input costs because remember, outside, most of our employees are paid in a dollar basis, especially on the mines and obviously euros in Europe. So that is playing a role here in terms of our costs, but it will play a role in terms of profits relative to our outside operations. And of course, Mark has already put in his report, over 60% of our mining business is now outside of South Africa. And that's my intent. And the Chairman did allude to in terms of our international strategy that the Board has supported that we are pushing quite aggressively on an international basis, but obviously, very cautious how we do that. All right. The mining volumes, and these are mainly South African mining volumes to give you some sort of context. They are pretty flat and probably below last year. And we've seen -- obviously, the reasons for that is, obviously, weather conditions, lots of rain around, especially in the open coast and in the coal area. But also we've seen underground strikes. So we've seen volumes coming off. However, you are seeing the benefit of the commodity prices and rand exchange by the increase in sales coming into the country relative to minerals. Brent crude and that reason why we put that up is really around it affects all our specialty and commodity chemical prices. So that's really the basis at the moment. And a lot of those raw materials come from a refinery basis right now. And of course, that does play a role and have also a double impact in terms of energy pricing and crisis, especially around Europe and obviously, Russia supply of gas, which was actually escalating week by week. And of course, continuality of supply is a big risk. And you've even seen probably the largest chemical company in the world, BASF, are under pressure around gas supply. And -- we buy a lot from BASF. So we are watching that space and liaising with them on a continuous basis. Going down to more -- in the South African manufacturing would be remiss of me not to mention that, but continues to disappoint, is probably the -- we're not seeing much in manufacturing. And of course, what you are seeing there is the refineries that are closing down, customers that have closed down from the COVID time and actually just have not come back. So we are seeing quite a lot more imports coming into the country. However, I think from my point of view, quite disappointing that customers have actually closed down, there's lot of late recent, we are hearing of customers coming back. We're hearing of Astron, opening back up late in the year. We also talk -- Foskor has also come back in terms of mining, export to phosphate. So there are some good sort of tails coming through, but that medium manufacturing sector is actually where a lot of specialty chemicals goes into has definitely retracted and actually has not come back. Going back to the -- obviously, from the minerals and the PGMs, the prices are holding. And you did see this week AngloPlat, put their results out, pretty decent set of results, albeit, I think they're saying that there's a 7% discount in the PGM basket, but that's all been priced in relative to the globe where it is right now. Gold, very much a safe haven. And we are seeing the impacts of that on underground mines being -- the length of mine being continued and obviously, new mines opening up on the continent. And Mark will talk to you about the new feasibility studies, et cetera. And of course, coal, everybody is moving back into coal, especially with energy. And from stats from Australia, you've seen coal exports have actually surpassed iron ore. So it just shows you where the globe is being shopped into the crisis around Ukraine and Russia. And obviously, we are seeing the impact on all of us around the world, and it's having its impact on prices. Iron ore is holding. But I think the good story is definitely around Central Africa, and we are seeing mines staring to come back, albeit that some of them are waiting for licenses, especially in Central Africa, but cobalt, copper, nickel, and that's really around, obviously, the renewables actually pull -- having a pull on that market. So there's some good signs out there. And I think from an AECI point of view, and Aarti will go into that is, for the first time in a long time, we've seen more capital going into growth projects. And these are actually organic growth opportunities in the business that we're in. So we're either expanding, we're either putting new plants in. And we did announce recently the plant in North America, where we're looking -- where we've actually tied up customers that have given us long-term contracts on the back of a supply contract into the agri space, which we're very excited about. So I must talk to you about whether I'll get to now as of -- so those are the graphs. They're all on the slide show that I've just spoken about. So very impressive. As per the investor presentations that I did, that we have done, what we've done is, obviously, we will give you feedback on the Much and the AECI Schirm. Much, definitely, as I was alluding to in the previous presentations, looks a lot more positive. And we've seen it definitely an uplift quite substantial uplift in the first half of this year. And we are seeing that continue. Despite being having the rain and the flood issues in KwaZulu-Natal, which obviously impacted roads and infrastructure being built down there. And of course, what we do expect from August, September, October is usually where we come into a nice, sweet spot because the Western province areas of the Cape really have rainfall now. So that does come off a little bit, but I am pleased to look at the order book, and we expect a good 6 months coming forward around the Much business. So -- and we -- as I did say in the Investor Day, we're really looking to get back to the levels that we acquired when we first looked at the business back next year. So good signs there, and the team are focused and actually have done a great job in reducing their cost base by taking our costs and some of the older plants, we've been able to reduce costs which obviously makes us more profitable as the volumes start to come through. AECI Schirm, and I'm putting the easier one first. The North American business is really cracking ahead, a good first half. We do expect the improvement in the second half, which will be up on the second -- on the first half results. We are expecting that relative to the forecast. And also that plant is actually fully loaded, the existing plants for the next 18 months. So the North American business is really in its sweet spot. And we are expecting net ZAR 504 million, obviously, $31 million CapEx to be completed by the 1st of December and obviously starting to continue supplying from that time for. The challenge we have is obviously the German operations, and that's been a challenge for some time. We have and we have disclosed a lot more which probably transparency is a good thing, and something that I'm going to be measured against for the next year, is obviously the turnaround or the profitability of the German operations. And I think really what's caught that business in the first half, and you can see the numbers that we disclosed is really the rapid increase in energy on a week-to-week basis, increase in people costs and also shortage of some key raw materials that we've seen. So lots of attention being played to selling prices right now, making sure we recover all the selling price and all the costs, but importantly, what the good news is, and we've always spoken about those great assets in the synthesis plant, the synthesis plant is fully loaded and fully booked for the remaining of the year and early into next year. The challenge is to put a fourth shift on, which they will be doing now and to get the labor to do that. So Trevor Roberts and his team are focused on that, and we are expecting for the results to much more improved in the second half. Going to the results. So revenue up 31%, and this is just an overview, mainly on the back of raw material pricing. And if you -- if I single out a couple of raw materials, it's ammonia nitrate and ammonia relative to mining. And of course, the fertilizer businesses would actually see the same effect. This is really a pass-through. So what you are seeing here is that 81% increase that we've seen this year alone gets passed through to the customer. Probably there is -- there has been a lag in the first half. We've moved customers away from a quarterly base pricing to a monthly based pricing. So that's helping us. And of course, as the price gets to level out, you do get catch up and obviously, you get some margin back in terms of the overall picture. However, with the Russian announcements of pulling back on exports of ammonia nitrate, fertilizer into the -- especially fertilizer into the food industry, it's still going to create pressure on ammonia nitrate. But we've seen with most commodities where the world is now in caustic, sulfa, bitumen. Those prices are all escalated from about 50% to 100% and you are seeing that effect on our top line. So as I said in our strategy session in the mining business and probably in the asphalt business in bitumen, it's a pass-through effect to the customer, where -- but obviously, there's no percentage margin gain or rand gain in terms of margin. But on the chemical side, they are more fortunate in terms of the solutions driven businesses that they're in and the high value business, they do hold on to margin. And that when Dean Murray presents, you will see the effect of those results on the chemical business, which has had some really fantastic results. EBITDA up 6%; EBIT, 11%, and of course, HEPS up to 573, which was in line with our expectation for the year -- for the first half. CapEx, and I'm not going to dive into it, but I did say that a lot more money is being spent on growth opportunities and they have all earmarked some really decent returns and especially in the mining industry around new contracts. And of course those ones, also Biocult in the Cape and also the Northern America, the Schirm expansion. Gearing has gone up to 44%. We did -- in the investor presentation about a month ago, gave you some guidance relative that our gearing would be up. Yes, we're always keeping a very close eye to it. It's nothing that really concerns us right now as we've given you guidance in the past that we're quite happy to move between 40% and 60%. However, working capital is the fundamental issue in that what's driving the gearing. And of course, that's because of the selling prices and Aarti will give you the breakdown. And of course, interim cash dividend of ZAR 1.94. So everybody is happy with that. And I've had some good response from that. And of course, all shareholders really look forward to the dividends and our policy coming forward on that one. So now for the first interim results ever, Aarti, please welcome to the podium and present the results, please. Thank you.

Thank you. Good morning, everyone. Good morning to our shareholders, our Board members, all the AECI colleagues on the webinar. And of course, I must recognize our Chairman of the Board, Dr. Mokhele, who joins us today. And I must recognize Mr. Godfrey Gomwe who is the Chairman of the Remuneration and Human Capital Committee. It is such a privilege to be associated with the AECI International brand. As I reflect on my start in terms of serving the organization 9 weeks ago, and of course, I've always scraped the surface in terms of understanding the business. I have to say that I am so privileged to serve for an organization that in its culture is so deeply ingrained the seriousness and a genuine commitment to understanding and supporting the safety of its people and its environment. So that's been really impressive for me. I have actually received -- I've actually gone through a new appreciation of safety coming from outside of the industry. The other big reflection for me is deep and genuine commitment to sustainability. And that is built into how we run the business and how -- and many, many of the processes. So that's quite impressive, and that makes me incredibly proud. And of course, as a South African, this is a really strong South African growth story in international terms. And so I just thought I would share some of my initial reflections having spent 9 weeks with the organization. It is such a pleasure to be able to share with you such a strong set of results. And of course, I am grateful to Mark Dytor, our CEO and his executive team for all the support in my onboarding and the collaborative way in which I joined the company and was supported. So if we move into the results, we have delivered record revenue, EBIT and HEPS performances and really quite on the back of that strong global commodity prices that's resulted in that revenue uplift of 31% to ZAR 15.5 billion. The EBIT up by 11%, helped by our focus on pricing discipline in new and existing contracts along the way. Now that is less -- that is something that we have been dealing with for the past financial year and, of course, have made sure that our pricing discipline and focus has sharpened in the half 1, and you'll see that come through and that allowed us to pass on most of the increased input costs in this half. As we had expected, we have elevated levels of working capital, and that was funded by short-term debt, which I will unpack later. And of course, that has a consequential increase in net finance costs. Revenue is up across all our segments in our business and that is mostly reflective of that pricing uplift that I mentioned and some new business and a combination of -- in the combination of increased market share and some customer wins. Now my colleagues will later pull out some of that new business wins in the business segment reviews. On EBITDA and EBIT levels, you can see that Schirm has a drag-down effect on the agri pillar. Now what we've done about that is, as Mark has mentioned, in the interest of transparency and at the behest of you, the investor community, the Board and management have decided to share the performance of Schirm in absolute terms. And my colleague, Dean Murray will share that shortly in the next sections. As for the water pillar, we sold a different product mix this half versus last year. And that pricing discipline lessons learned is also built into what explains the margin decline for this half. In terms of inventory, I think it is safe to say that the strength of the balance sheet was really tested in these times of high input prices along -- and I think that is the same story across the industry with our global peers as well and that high input prices, of course, impacted the value of our inventory as we had previously guided, and that was matched by higher short-term debt. Now we've previously also guided that this flexibility allows us to continue to meet, of course, all our customer commitments, and we've been pretty good in that execution over this past half. Now the increase in inventories again, primarily due to the price impact was matched by short-term debt as we had previously guided and as we expect. If we look at the increase in accounts receivable on the balance sheet, primarily driven by that high prices as well, it is offset by accounts payable. And I'll show you a different way of looking at it. Meanwhile, the SA credit rating agency maintained our A+ credit rating, and in fact, upgraded the outlook from neutral to positive. As I've mentioned, we've previously said that we are comfortable, we actually expect the significant increase in input prices. And in particular, the ammonia prices increased are working 83% along with other key chemical price increases on the back of a full year last year of really high increases in those prices, continue to increase that 83% is from year-end number, all the way up to 83% for half 1 this year. That has increased the value of our inventory levels from ZAR 4.9 billion to ZAR 6.5 billion. As I said, expected, and we're very comfortable with this level given the robust balance sheet. And given that we remain confident that this will unwind itself over the coming period, because most of these are actually backed by customer commitments and customer demand. And so that's great as an external comfort level. But also internally, we've amplified the focus within the group on efforts to actively manage and monitor these working capital levels, okay? So that value of accounts receivable and accounts payable -- as you can see, the second view I wanted to share in half 1 is that, that has largely moved together, and then they cancel each other out on a working capital basis. If I move to another important element on the balance sheet being gearing. Firstly, well within the expected range. The volatility in our working capital amplifies the importance of, of course, active balance sheet management, which is something that I've shared with you in the past is something that is very important to me and definitely a #1 priority on the front of mind of the management teams. We saw gearing increase from 24% to 44%. And again, a story of it being mainly due to the change in the working capital and as described previously. I'll just add to that, that as in previous years, our half 1 is typically a more cash-intensive half 1 than we expect in half 2. And so again, that just reinforces the comfort levels in terms of cyclicality and that we will unwind these positions as we move towards the year-end. Although you will hear my colleagues views in terms of the pricing and what they're doing even in July, we're planning for making sure that we have robust working capital management and balance sheet management in balancing all these levers. I have to say that -- it is something that is fortunate for us that we have a robust and a strong balance sheet in choppy times like this. And we're grateful for that position on the back of seeing many industry consolidations and organizations hurting from a solvency and liquidity perspective. If I double-click on the debt, our net debt, which we disclosed as ZAR 5.1 billion is made up of ZAR 6.2 billion in debt and ZAR 1.7 billion of cash levels -- ZAR 1.7 billion in cash levels. Now the increase in the short-term debt as we had guided before, is mostly driven by working capital, and you can see quite nicely the short-term debt is a high component of that gross debt number. And that if our rating agency just reconfirms that outlook from neutral to positive. And so that makes sense for me. From an overall perspective, we are well within our covenant levels, and that's it on the debt. If we leave debt and switch to another component of capital allocation, this is an evolving conversation in the group. As I've explained when we previously met and gave pre-close guidance. And we will be sharing the evolution of capital allocation, as we formalize this policy within the group. From a CapEx perspective, we are sharing to Mark's point about seeing increased CapEx requests, but quite pleasingly, a higher percentage of growth CapEx requests. And you can see that we landed the half 1 on ZAR 748 million of total CapEx spend with most of it concentrated around growth CapEx. And we look forward to those relatively shorter period growth CapEx coming in being realized, some of it in half 2 already, but most of it from 2023 and beyond. We've also given you guidance on all the CapEx commitments for half 2, for those of you who are modeling on cash outflow, as well as obviously return within invested capital, you will see that we've committed half 2, and that's about the bulk of the commitments. Again, the trajectory is a concentration of growth CapEx being prioritized. Now that does not mean that we will neglect our assets because we are quite heavy fixed asset-based PPE based organization. And you can see that the maintenance levels are well within, in absolute terms, what we've done in prior years with some peaks which talk to major upgrades. The other important component for capital allocation would be dividend back to shareholders. And again, we're committed to returning that value back to shareholders and with that announcement of the interim dividend of ZAR 1.94 per share. That's quite pleasing, an 8% increase and it is aligned to our commitment to progressively grow dividends and give back -- return back to shareholders within what makes sense from a capital allocation perspective. If I wrap up on capital allocation, we've shared this with you before that we are quite focused on allocating capital to firstly safely meet the commitments of the organization, as it continues to run. And then second, manage that balance sheet along the relevant -- ratios of balance sheet management, which is very important. This is a very working capital intensive organization, and that is a key priority that must be a key priority. And then we commit to giving dividends to our shareholders in terms of recognizing that value that we create. And lastly, what is left is distributed for growth. And now that is in the form of organic or inorganic growth, but certainly prioritized from the perspective of efficient growth and within maintaining the group's margin levels. And with that, that does bring me to the close of the financial review section of the half 1 2022. I will take questions afterwards, and I look forward to engaging post results in our one-on-ones, which we've got scheduled. But for now, I'll hand over to my colleague to take you through the segment reporting, Mark?

Thanks, Aarti. Good morning, everyone. It was -- as Mark said earlier on, it was an interesting set of results that we've presented from a group point of view. But just coming to the mining part of the business, I just want to congratulate my team that we did deliver a really good safety result. Now Mark did talk about it earlier on. The mining team has currently delivered 0.11 in safety result. And that's very much in line, almost world best as to where we are. Now when we talk about the mining environment and when our customers look at us, it's really about how we differentiate ourselves when we go into our customers' area. And they want to engage positive and safe contractors on their site. And 0.11, and be humble about that achievement, as we continually keep impressing safety in our culture. The mining business, if we look at it overall, and I'm talking to the pie chart -- sorry, I haven't moved forward -- here we go, just remember this. So used to people moving forward for me. But if we look at the pie chart, you would see that from a diversity point of view, where we, as AECI mining is placed. Gold is making up 20%. And this is not just a South African pie chart. This is an international pie chart. So gold in West Africa and in South Africa, those are main areas where we focused on. PGMs, largely Southern Africa, in Zimbabwe and in South Africa, that makes up another fifth of our business and then coal, 26%. So as Mark said earlier on that there has been a shift to coal and the contracts that we have won in Australia, which have largely been called, this has really supported the growth or the 26% of our business. Copper, that's largely out of Central Africa, that's 14% and then left with diamonds and iron ore. Now iron ore, we -- probably looking at it and saying, well, we're a bit short on that, but I'll talk about that later on. But otherwise, that really shows our agility and our diversity as AECI mining. Our results this year or thus far this year is that we've been able to present a 39% growth in revenue and EBITDA margin of 8%, EBIT growth of 10% up and an EBIT margin of 9%. And now I did say before, when I was asked this question as to where should -- where should the EBIT margin be? I've always said that margin should be a double-digit margin. Now what's happened is, is that the revenue has grown exponentially as a result of ammonia. If you normalized ammonia, our EBIT margin will really come in line between 10% and 11%. Working capital, as Aarti pointed out, we have -- it's sitting at 21%. It has deteriorated as a metric and the big issue there is about actually getting our customers supplied and the ammonia increase. So wherever we could secure some ammonium nitrate, we've been able to secure it. But this is a common trend globally in our industry where working capital levels have moved out. As Mark said early on, when revenue goes up, that's one part of it. But -- and that's a pricing issue, but revenue should also move up if there's volume growth. And what we can demonstrate is good volume growth. And as I go into the business, I'll show you where we've grown from a volume point of view. 64% as part of our international growth strategy, we look to increasing that percentage over time. And that 64% of our business is now outside South Africa, and last year was 62%. We've really seen good EBIT growth in our Mining Chemicals business and a very pleasing performance by that team. So global supply chain challenges have been on everyone's lips in the last few months. And it's something that our global supply chain team has been focused on. So we've got people working around the clock, be it where the sun rises in Australia, to where the sunsets in Chile. We've got people actually focusing on where to source products and how to source it back to our customers. If we look at the challenging year that we've had from a supply chain point of view, be it as it may, we've still been able to -- from an explosives point of view, if I just focus on explosives, we've been able to grow our bulk volumes by 6%. And that was largely in Asia Pacific, where we've grown volumes by 15%. And in South Africa, pleasingly, volumes have grown by 5.3%. However, on the African continent, outside South Africa, our volume growth has -- or our volumes have declined by 5%. Now what have been the challenges in our environment currently? Now you would have seen results being presented by many of our customers in the last few days, and you would have also seen that mining production volumes have been down, more specifically in South Africa, it has been a challenge. However, we've been able to succumb to some of those or at least rise above some of those challenges. We have seen initiating systems down 12%, and that was largely due to the underground strike that we had at one of our big gold customers. I'm pleased to say they're back, and we will start supplying them from this week onwards. So that's pleasing. On the other hand, we've had a significant amount of rainfall in the eastern side of Johannesburg, in the coal fields, that has prevented good growth in coal volumes, but we are pleased to say that we're back on track, and customers are actually pulling in volume again. The Australian business, and I'll focus on the Australian business, we did -- I did mention to you in the Investor Day that we have been very successful with the Hunter Valley contract that we were able to get in the New South Wales area. That contract started up in March, and we have delivered to expectations on that contract, and we continue to deliver -- to deliver. So congratulations to my Australian team. They've done an excellent job out there. In Botswana, we also had some excellent volume growth coming through where we have also secured a contract in March, and we started delivering against that. So that's been fantastic. And the African team in Ghana was able to secure quite a substantial contract in March as well. We've kept our customers supplied. We've used our South African manufacturing facility being #9 and #11 to supply ammonium nitrate in other parts of Africa. Now ammonium nitrate has -- there has been a shortage globally, and our global supply team has been able to source ammonium nitrate by also using our facility that we've -- our facilities to keep certain African countries fully supplied. As you know, we are based outside in the rest of Africa and in some of those areas, it did come with some significant challenges. And more specifically in the Francophone areas, where we have seen coups in Mali, and in Burkina Faso, that has all been very challenging through that period of time. And hence, the African volumes, when I said they were down, it was really down to those specific reasons that we've experienced. But the DNA of our people has been able to meet those challenges and we have kept our customers supplied right through that period of time. The Mining Chemicals business, excellent performance. We have been able to fulfill all customer demands, largely in South Africa, in Central Africa. The operations team has done a fantastic job in upping the production levels, and there's still a bit of a way to go, and that does give us opportunity in the second half of the year. Export volumes have grown largely on the African continent, outside Africa, the offshore volumes, that's been challenged. Shipping in South Africa has been a challenge. Some ships don't even stop in Durban any longer. They go straight past or they don't even load our containers. So that has been -- it has constrained our growth. And hopefully, we will see those numbers or those volume is going to come through into the second half of the year. In our emulsifiers business, we were down by 7%. And the pure reason for that is that we haven't been able to support -- or the growth in coal has been constrained. But shipping constraints have really prevented them from growing. If we look at the global status of mining, it's very healthy out there. So what we can see, we've presented this before where we show the projects that are under exploration, pre-feasibility, feasibility and construction, and those that are in operation. And I've used the whole span or most part of the world as to where we are, doesn't tell you where we're actually operating, but if we focus on the areas that we operate in Asia Pacific, now starting in South America, South Africa and Africa, those are the key areas that we look to operate in, and you'll see that the pipeline is healthy. There's good opportunity out there for growth, and we really start focusing on this chart and trying to understand the granular detail as to which mines we need to be engaging with. So if we look at the outlook of our business, we still believe commodity prices will be high for the rest of the year, and we should see some positive trends around that into H2 2022. We also believe that we will benefit from the full year of those new contracts that we have gained in Australia, Botswana and Ghana. So we haven't seen the annualized effect of that. So that's something that we will be able to see coming through into the second half. And then we're still pursuing international growth. The construction of the Chile plant is about to commence, and our target is still to try and start that plant up in the first quarter of 2023. We really have a good robust sales pipeline, and it's across all geographies. Starting in the Northern Cape in South Africa, there's some good opportunities and we look -- and it's positive going forward. And hopefully, that should increase our share of the iron ore business. Australia are looking positively at several opportunities right now as well as Central Africa. Coming back to CapEx. We are still going to prioritize organic CapEx-es. And as you know, as we grow in regions, we have to put down plants in those areas and there's a few of those that we're looking at right now. That's the end of mining, if I can call Dean up to discuss water with you.

Thanks, Mark, and congratulations again to you and your team on those stellar results. So water, I think we just start off with the top line position for growth, and I think we are taking a long-term strategy regarding our water pillar and the growth there of. So I brought in a graph on the right-hand side, just to show you how the business has evolved and managed to adapt to the change. Going back to '18 and I think during our Investor Day last month, I showed it to 2017, where the oil and refinery segment was such a big part and public water, which has the most growth potential on the continent was not that big. And every year, we can see today public water being 44% and oil and refinery segment being squeezed down to only 13%. And that's the key part for the business going forward. We have to now position ourselves for what is aligned to sustainability in the future of water and the importance that will not only play on this content, but in the rest of the world. So when I look at the overall performance, the revenue is up 29% to just short of ZAR 1 billion, and that is exciting. I think we would have loved to see this all translate into the EBIT numbers. But as we know, the product mix from public water taking it away from the industrial segment is of a different quality of earnings. It has had an impact. But more so, there's been quite a few challenges with raw materials on public water. And the main components being an aluminum sourced product in Richards Bay, which we usually -- we get about 60%, 70% of our raw materials locally, due to the challenges with load shedding in [Indiscernible] and flooding, we had to import a lot of the raw materials instead, which has an impact on not only the cost input, but also the working capital that you can see that has drifted out. The last time I will talk about the impact of refineries, but the last in case at end that closed in H1 last year, those are now out of our system and looking forward to all the growth projects in exciting new ways that'll be moving. I think one of the things that I have spoken about is our water sustainability projects. We internally call it project purpose. That's already exceeding 10% of the revenue number that you see, and I will expand on the next slide on some of those exciting projects, not just internally within the group, but actually in the -- in our market environment. So as I said, working capital it had an impact, but also had an impact on our EBIT because of the pricing formulations that we have with certain customers and the implementation. So you can see the revenue line has grown, but the implementation of those pricing. And an excellent thing that has happened in the business is the public water growth this year for H1 is over 60%. And a large portion of that is on the rest of the continent. So we're very excited. And these things are long term, it takes you 6 months of negotiations. And unfortunately, as some of these contracts started, we had those challenges in Richards Bay on raw materials and -- to make the decision of, are we planning for the long term or are we going to take a decision to be quite aggressive with customers. So we took a long-term view, and we are already through our technical department. I'm quite confident that we are really starting, and we've seen it in quarter 2, the margins are coming back, and we expect a much better deliverance on outperformance in H2 going forward. So again, disappointing, we'd have loved EBITDA and EBIT to be up as the rest and it has an impact on our EBIT margins. I know we're still targeting and we expect H2 to get us closer to our desired EBITDA margin of closer to 15%. If I just give you an update on our sustainability projects inside the group, I had alluded to it to our second stage at our Modderfontein site, which you guys -- some of you were able to see the plant last month. We finally now got the decision that it has to go through an EIA. We were hoping it didn't need to go through an EIA, but the good part on that phase is that we will be allowed to start manufacturing as long as we don't start commissioning of the plant. So the timing, the 2 will be done together. So hence, we expect that project to kick into Q3 next year. But more exciting, the picture that I've got on the left picture of the 2, is a new technology, which we're running currently at the Modderfontein site that ZLD is short for zero, liquid, effluent discharge, and this is an evaporation technique, which also allows that you don't need to go into big salt pans when you are reusing the water or extracting the water and then you left at this residue salt. So this technology also the trials are looking very good and we expect to roll that not only inside with inside our group, but it's also giving us opportunities at the external customers, which will allow us to increase our project purpose projects. Yes, I'm not going to go through them all, but remember, these are quite difficult effluence -- chemicals effluence are difficult to treat. So we have to make sure before we make the investments into capital that we've got all the signs behind it ticked off. So it takes a little bit longer, but we expect all of these projects to be on track before 2025 as per our deliverance criteria. Just a quick one. In terms of external projects, pleased to say we were awarded 8 new projects externally, 3 in public water, 2 in mining, 2 in industrial, and that's what's given us that revenue stream of over 10% of our total. We are in the process of actually being awarded a couple more in H2. So this project is really, as I said before, we expect this to be a big component of our sustainability drive within the group, but also our growth from water going forward. So again, strong pipeline in public mining and -- and it's good to see it is in all sectors. It's not just in the public water. The mining side as well as the industrial side. We've seen some growth there, but also some strategic wins from major competitors in the industrial side that we have had in H2, late in H1, but those volumes and revenue lines will start coming through in H2, looking quite forward to that. The water sustainability projects again -- the projects have twofold. They increased EBITDA for us, but also they reduced the outflow of cash from terms of our charges to municipalities for effluent discharge or for incoming portable water usages. So that has a double edge gain to AECI. Our Rest of Africa on the continent, mining really doing well, similar to our explosives, as well as our public water continues, the growth just continues averaging more than 40% for the last 3 years, and we expect it even to be higher this year. The innovation we are on the technical side, in the laboratories also pleased to see that the green products are starting. We've done the pilot trials. We now will be doing our actual first set of trials on the industrial scale, which will be quite different and take the market to the next level in terms of boilers and cooling water technology. We're also looking at replacing in the public water aluminum, which has us disadvantages with organic-based polymers and that development work is also looking really, really good. Again, all these good things, but we need to get that margin where it should be. So that's a strong focus for myself and the team as well as working capital before the end of this year, bring that in. We may not get to the '21, but we certainly will make a significant improvement in the next 6 months. Thank you. Hand over to Mr. Murray.

Thank you, Dean. All right. Good afternoon, all. Let me give you an update on the agri pillar as well as the chemical pillar as well. So I think -- let me just get on to the first slide, right. So let's start with the Agri Health side. And of course, we had a solid performance in our South African plant health business, which I'm very, very proud of the team and the work that they put into that. And of course, that was offset obviously by the Schirm results, which Mark has alluded to a bit earlier. So if you can see from the slide, revenue up 19% to almost ZAR 2.9 billion. And of course, that was really driven by the high commodity prices that we've seen, and obviously, it's impacted the revenue in the business. Unfortunately, EBITDA, you can see that's down quite significantly, and of course, the EBIT as well. But, I think let's focus on the -- sorry, and just to mention on the working capital, as in all the businesses, that has edged up slightly. And of course, we started to make sure that we've got stock now, as we get into the peak season in South Africa for the plant health business as well. All right. On the plant health side, the climatic conditions have remained favorable for the for the farming sector in South Africa, which has been positive, and that sustained the growth that we've seen in the first half of this year. Revenue in the Plant Health business, up 23% to almost ZAR 1.6 billion. It's a fantastic job that the team have done. And of course, as I said, supported by the higher commodity prices. But again, most importantly, the EBIT up 38% as well to almost -- well, to ZAR 70 million for the first half of the year. And you must remember that the first half of the year is normally the quieter part for this business. So we are really ambitious for H2. Okay. On the -- and just the other important point to mention as well is that we've seen a fantastic growth in our in-house or our own proprietary products as well. They now make up 30% -- 36% of sales, which is quite important because, of course, we know those are the profitable products that we sell, where we've been able to build our IP into that. On the Schirm side, again, as Aarti mentioned, we've unpacked some of the detail for you to see there. And of course, total EBIT loss for the year of ZAR 66 million. And again, I think -- but importantly for us at the moment is that we've had a good -- reasonably good performance on the U.S.A. side, where their performance has really been in line with the expectations. And as Mark alluded to earlier, is that we've got a very strong expectation for this business for the second half of the year as well. Lots of work to be done on the European side, as you can see. And again, look, they've had some real challenges, I think, in that market, which we've seen with regards to labor with the geopolitical situation in Europe as well. But again, they have a strong focused approach now. I think really focusing on getting those prices up and making sure at the end of the day, we have a recovery in this business for the second half of the year. Right. On the outlook for agri, again, we've increased the capacity, as I mentioned in the Investors Day on our Biocult facility. We ran a little bit late on this project because of some of the challenges with some of the infrastructure work that we had to do. However, the project will be completed by the end of the third quarter -- sorry I'm getting ahead of myself there. So again, our capacity increase on the Biocult finished by the end of the third quarter. And again, this was important to increase what we call the mother culture for our facility, and that will be online, ready for the busy season as well. And of course, we've increased the capacity at our Lilianton plant, and the synthesis plant, and we're seeing the benefit already of those volumes coming through. Further expansion of our agent network in South Africa, I mean, that's a key point, is growing. Our footprint in South Africa, which we've done this year by bringing on new agents, and we'll continue to do this as well. It gives us a better footprint to get, obviously, our in-house products into the market as well. Continued growth in registrations for the U.S.A. and the South African market as well. That's been a focus point for the last 2 years, as well as, of course, increasing our in-house formulated product as well. We've got quite a big R&D team in the plant health business focusing on that. All right. On to the Schirm Germany side. Again, as we've said, strong focus on addressing the performance in this business, our costs as well as our pricing to the market. And then, of course, the U.S.A. market where we've increased the capacity there or we're in the process of increasing that capacity. And those plants are due to be online by the end -- by the first of December, which was very ambitious, but they're on track and ready for, of course, the 2023 season. Okay. On to chemicals, and you can see the title there, regional champions in their local markets. So first of all, I have to say, I have to let me get to that slide as well. I should have it. Regional champions in the local markets. And I think the first point is that if I look at the hard work and the effort that was put into that chemicals business following the restructuring program, and what the team -- especially the senior management in those teams have done a fantastic job in staying focused in what they had to do and making sure we get our prices up, and we drop our profits down to the bottom line as well. So really have a look there, you can see revenue up 32% to just short of ZAR 4 billion, EBITDA up 18%. Our EBIT up 25%, the EBIT margin was a little bit lower than what we would have liked it to be at 8% because you must remember, we've always been targeting 10% in this business. The reason for that has really been the product mix and very similar, like we've had in the mining business, that 83% increase in sulfur prices, of course, there's a little bit of a lagging effect in terms of our pricing. So as we go into the second half of the year, we should start seeing some of that EBIT margin improve as well. Okay. So all the businesses, as you can see, they recorded a year-on-year profit growth, okay? And we have to thank the commodity prices for that. Working capital increases, which were a reality because of the supply chain challenges, but most of our businesses were rewarded for that as well, okay? Margins being maintained in most of the businesses despite the significant increases in raw material prices and again, it's because of the focused approach that we've had that we were in a position where we could pass some of these increases down on to the customers as well. Then if I look at just the Chemicals business, which you'll recall, this is the Industrial Chemicals business, specialty chemicals and food, excellent sourcing and supply chain management, all right? And we haven't let customers down. Of course, we were able to leverage our procurement from the China office, which was fantastic as well. Disciplined margin and management control in these businesses, which I think was very important. That was one of the key focus areas from our restructuring program, and we've continued that momentum as we moved out of the restructure now and we're back to business. So we've got out of -- we got to the gym to get fit, and how we're staying fit. That's the most important thing. Significant increase in the commodity chemical prices. I think that where we saw this major impact was in the Industrial Chemicals business on the sulfur side, and some of those commodity prices still have not come off, amazing. I mean -- and again, you can see when you see raw materials go up 80% to 100%, it's significant. And again, we've got to have a strong focus to make sure that we don't get caught with any expense of stock as well. So the team are very diligent on working on that. Then, of course, on to SANS Fibers. Again, a strong recovery in the demand and the prices in that region as well for our fiber operation, really on the back of the automotive sector. And again, this continues as we speak at the moment. And then, of course, the Much Asphalt you heard from Mark earlier, market improvements in performance, and we've seen the volumes and the revenues are well up on 2021 as well. All right. So we are well-positioned for growth. I think you can see there a continued expansion of our product and service portfolio. So we're continuously looking for new agencies, new products and growing that basket of goods. I mentioned in the investor presentation as well. There's a strong demand for big companies like the big multinationals to reduce the number of suppliers. And of course, we've got to make sure that AECI is the first port of call and the supplier of choice. Strong key account management across the segments. The one challenge, of course, we always were mindful of is the power supply challenges, which obviously affect our customers as well. And then like we all are, is the continued focus on the working capital, and of course, the cash generation in the business. From a CapEx spend, you would have seen on Aarti's slide earlier, we are going to expand our polyester production in the U.S.A. by putting in another single-stage equipment. That was at a cost of ZAR 60 million. That process is underway and that plant -- that additional equipment should be up and running by the first quarter of 2023. And as I mentioned before, Much Asphalt should also benefit from the normalized asphalt demand and they have to manage that very carefully. But other than that, I thank my team for a wonderful performance in chemicals for the half year, and we will push through to the end of the year. Mr. Dytor, thank you very much.

Thank you, everybody. Thanks, team, for the concise presentations. I'm now going to just talk to us a little bit in close, and then we're going to take questions after this, is really what is our -- the outlook for the remainder of the 6 months and obviously, going into the next half of next year. We are seeing an upliftment in terms of the demand for our products. And of course, we've been sort of trading on -- it's like a treadmill, is customers want products and it's making sure that we can actually get them on time and making sure -- and obviously, that has an effect on working capital. And with that, we are seeing a lot of customers looking and changing their supply chain and looking at near shoring. We've definitely seen this in North America. Hopefully, it's going to also translate into Europe where products can't be relied coming out of Asia, and are now looking to restart production facilities closer to home. So good opportunity relative to the plants that we have. And we've seen that's because of a lot of the demand and the expansion of those projects. The annualized benefits of the new products, the new challenges -- sorry, the new contracts that we've actually gained. Mark's giving you a little bit of a breakdown on that. And we are hoping that some more will be announced in the near future, Mark, is what I'm getting from the team. So we are looking forward to a lot of contracts in the pipeline that we are busy discussing and negotiating as we speak. The investment that we put in, and we did start and talking to you about last year that CapEx end to organic growth. We are going to see the return -- start to get returns of that probably as we come into the last quarter of this year and building into the first half of next year. So that's really positive news. Supply chain, nearshoring, I've discussed and then cash and capital allocation is going to be key for us. So we have from each of the businesses within the pillar, we have a granular view now of what their capital will need and their working capital needs to the remainder of the year. But as you know, if you have followed us and a lot of you have followed us for many years, we do generate a lot more cash in the second half. And as you -- the norm -- as the working capital normalizes, we start to actually -- to bring the cash back through. And usually, if you look at the seasonal impact of our business, both in mines and also in the agri sector, usually, the second half is a lot more positive. And obviously, we have a very strong growth strategy, particularly in organic growth throughout the businesses. I also shared this in Investor Day, we have a really international footprint now, and of course, Mark is really focusing on the mines and obviously, Australia opportunities there. North America, U.S.A., Canada is going to look real. And you can see from the projects that are coming online, the amount of new mines coming in those areas is going to be a focus area for us. And obviously, on the continent, as we move the chemical water businesses up there and the agribusiness on the continent is great opportunities for us. The value creation is our priority, and that's how we concluded the last presentation is Zero Harm and ESG is top of the list and I'm going to ask all my colleagues on the call really to focus on this in the next 6 months. In these times, people, especially with interest rates going up, we are looking for -- and obviously, petrol price is going up. There's a lot of stress and strain. And of course, we need people to be focused in the workplace, which is obviously the priority in keeping them safe. The international growth, and we spoke about it a lot during the presentation today, and the previous presentation that we've done is probably relative -- it's primarily mining, and you can understand why that is technology we can export and take anywhere in the world. And Mark and that mining team have really shown us that they can execute and pretty quickly and really in deep dark places in the world where the mines usually are, they've been able to execute within months and actually supply. So we're going to rely on that going forward. There are customers that are pulling us into different areas as we are gaining momentum, obviously with international mining groups. So we're going to be following that, looking for opportunities around there. And of course, the agri sector is of interest to us. And always has been, but also looking from a green perspective from the biostimulants. And hence, we've expanded our Biocult business down in the Cape, which obviously give us more export capacity, but also with the Schirm expansion, that also drives that agricultural space for us in a very big market. And then we also have continued focus on working capital, cash. It's going to be, as I said earlier. And there's also a review continuously of the portfolio and obviously, as we build it up. But we are going to be staying in those sweet spots in those strategic pillars for the remainder of this year and into next year. And key for me is really -- and those acquisitions and obviously, they passed acquisition now. They are part of our family, which is key. But you can understand, if we can turn the German operations around, the impact on our results in the next 6 months. So that's where the focus is going to live from management, and there's a lot of commitment from that management team that we're going to actually get a lot more positive results in the next 6 months. So with that, I thank everybody. I thank my team, I thank the team of AECI and the employees. I thank the Board for their support and the strategy for the -- they're very good, as Aarti alluded to, record results. And hopefully, we can continue with that for the remainder of the year. There's focus. There's commitment from everybody. And I really thank especially to my team out there who is on the call, I really thank for their support. And as we push and I will be -- we have a meeting with them next week. So we'll be pushing a lot of the priorities and strategic thrusts throughout the group in the weeks to come. Thank you. We are now taking some questions. And I think we're going to the room first, if I can have any questions from the room. And I will ask my colleagues to help respond to some of the questions where they are.

Steph from Avior Capital. Just 1 or 2 questions. Firstly, just on the Water business, maybe for Dean. The raw materials issue, I understand that. But I think if one assumes that -- that was an effect -- just given the new sales mix, are you still happy with the 15-odd-percent sort of EBIT margin target?

As I said last month, basically, as long as the gross margin without adding any more fixed costs to the businesses exceeding our targeted trading profit ratio of 15% that we should be still aiming at. And the project purposes are in margins higher than that as well.

Okay, cool. And so I mean, if the municipal stuff goes gangbuster -- that's sort of the baseline. Yes, it's not going to...

I like that word.

That's quite a tough question.

We do know like most of the businesses, the land -- the competitive landscape in South Africa is much higher than on the rest of continent. So as we grow on the continent, it does improve quality of earnings there.

Perfect. That makes sense. That's it for the water. Just quickly maybe on Schirm. I don't know if I understood the slide right, is was first off Schirm a ZAR 86 million profit because it's an operating loss, and then it had ZAR 86 million, and they went down to ZAR 43 million loss. Is that correct?

Yes. Can I take you back to that slide.

So it went from ZAR 86 million to ZAR 44 million -- ZAR 86 million to ZAR 43 million.

36 in 17. So...

So it got better?

No, no.

So it's a smaller loss, Germany is the ZAR 86 million loss. You have to add the purchase price allocation charge of 17 and then offset U.S. 36 performance.

Perfect. Then just last question. Well, just if you can maybe give us a bit more disclosure on Much Asphalt, Dean on like...

I'm going to ask to Dean Mulqueeny.

So I mean, what are we looking at there? Is it...

So we certainly -- it's one of the chemical businesses that has performed year-on-year extremely well. We're not yet at the investor case, I'd say we are sitting closer to the 70% to 75% mark.

Okay. And the SANRAL contracts that were deferred, have you heard any news on those?

Yes. So those are looking and in regions where we're very strong. So we're looking at some of them helping us in quarter 4 this year and moving into H1 and H2 next year and quite positive.

Okay. So that's looking good. And then maybe one last question on Schirm. Is it -- do you have the infrastructure in the U.S. just to run Schirm U.S. and just pull the plug on the European operations?

I guess look, they are interlinked relative to customers, which is importantly both sites. But at the end of the day, it's -- what we need to do is actually get the German operations right. And we're confident we can actually do that. So that's where the win is going to be for us relative to the loss if we can actually turn that around. And as I said, most importantly, the synthesis plant, which is at Schönebeck, which is our biggest site, which makes the more of the specialty type products and the higher-margin products, that is actually fully loaded for the next 6 months and probably the first 6 months of next year. We've just got to find -- so we've got a 3-shift system at the moment. But with the demand, we have to move to a 4 shift very quickly, it just now get recruiting the skills that are necessary. That's focus.

Okay. So just to understand that a little bit better. So I mean if you're running 3 shifts, and you made a loss of ZAR 36 million, then so I mean where is the biggest problem?

Pricing, costs. Yes. So as I did say a bit, the biggest challenge right now is rapid increase in energy costs, especially on a synthesis plant as a substantial amount of energy that needed there. So that's been going on a monthly basis. People cost has gone up 7%, obviously, with the inflationary pressures. And then the other item that hit them quite hard is obviously raw material pricing and sometimes lack of raw materials. So the contracts that Mark has already been discussing many the last, say, 6, 12 months, those have been gained. It's actually now -- some of them have been slowed down because of, obviously, the exports of agri chemicals into the Ukraine, as it had an impact. But it's mainly supply chain and cost. So the challenge now which they're working on as we speak is making sure we recover all those costs.

Perfect. Just related to cost my last question. With the mining, I think Mark used it you guys moved from quarterly pricing resets to monthly pricing resets with some of your customers. Has the rest of the business done that as well more or less shortened the pricing delay? And how is it going, how the customer is taking it? They can't be loving it. I would imagine.

All right. So Mark, maybe just on the mining side is because that was predominantly the first half is where we suffered with that.

So we've done that with most customers, and the customers don't like it.

Yes. And the rest of the business has really moved to monthly pricing. And sometimes weekly pricing. The challenges being with Dean is which is in the water business is obviously with SOEs, a lot more difficult to get them to move relative to the structures into that sort of pricing system. So there's a lag there still, which we're wary of. But majority of the chemical business, monthly.

Okay. Brilliant. That makes sense.

Okay. Can we go to the conference call questions, any? Conference call. Okay. Nothing from the conference call back. No, nothing from the conference call. I'm going to take from the webinar.

All right. First question to Mark Dytor. Mark, I'm paraphrasing, but this question really refers to share buybacks. And in light of the recent results and the very poor performance on the acquisitions, why has the company not considered buying more shares? And why has the company not considered a share buyback as a priority after dividends?

Okay. So I'm guessing that's from Paul. All right. All right. Yes, and that question always comes up. So -- and of course, the performance of the acquisitions, that's why I know exactly who's talking on the other side. But I think we -- at least we've come down to one area of the acquisitions that's really not performing right now. So for me, a lot more comfortable about the match and obviously, U.S.A., with a lot more focus on Germany. But I'm not evading the question -- you can -- and share buyback always gets pulled out up into Board level, and we discuss it quite at nearly every board meeting. But I guess it's around where the CapEx is going right now in terms of those projects. We do believe that those returns are substantially better in terms of returns. But we're also very aware of the demand on working capital. So we don't want to push the gearing to an extreme amount relative to share buyback. We need to make sure that customers are satisfied first and that we have got enough stock to continue. So that's probably where also Aarti was alluding to is, yes, we need to make sure that the business can operate, customers are fulfilled, we will get rewarded for their working capital. I can assure you for that. Customers have not unnoticed the efforts that we've gone to, and we will get better profits from that. But -- and obviously, the CapEx and then -- it is something that we'll always continue looking at relative to the pricing of our share, and it's something, I think, as we release cash, we can always -- it's always a consideration.

Okay. The next question, Mark, is from Investec Herbert Kharivhe, and it really relates to AECI mining. On a net basis, did you realize higher volumes for mining? How much of the 31% revenue increase is from volumes and how much was derived from the higher commodity prices? That's the first part of the question. The second part, Mark, if you can please remind us of how the explosives pricing works to better understand the disconnect between the ammonia, ammonium nitrate pricing and the 31% increase in revenue?

Sure. What a complicated question, Herbert.

And maybe I'll just put on the slide, Herbert, is to demonstrate the relative to the inventory movement and pricing -- so you can obviously see a majority of it is actually from price and the majority of our stock is actually held in mining. So probably that's obviously just to lead Mark into his answer.

Yes. So Herbert, I can't give you on this call the exact difference on that 31%. What I can tell you is if you go into the results commentary, most of the increase in revenue was really part of -- was price, which -- and the volume was offset -- the bulk volume growth was offset by the loss of the volumes that we got underground. And remember that the underground -- our contribution levels on underground units initiating systems much higher than on bulk volumes, okay? So short of going into the absolute detail, that's how I see it.

Okay. Next question is also from Herbert, but this will be directed to Dean Mulqueeny. How do you experience the delay in clean fuels and does it impact the business? First part of the question, how many of the 6 refineries are still operational today? And are you affected by the developments in Natref?

Yes. So the clean fuels in the oil and refining section, we are actually involved in asset integrity. And the consumption of water or the flow of water through the processes is something that will be there if we go to clean fuel. But if you say moving away totally to the electric vehicle, that's a different answer. But clean fuels is certainly a place that will grow for water demand in terms of asset integrity. In terms of the refineries at the moment as we stand today, Natref is the only 1 that is operating. And there's Astron is talking about resuming production in quarter 4 this year. Natref is a big customer of AECI Waters. So anything within Natref does have an impact on our numbers.

Okay. Thank you, Dean. And then the last question on the webcam directed again to you, Mark Dytor from Thiru Pillay of Emergent. Are you able to comment on whether AECI is integrated into its ESG targets and performance into the remuneration packages for your leadership team? And if so, please elaborate.

A fantastic question. I have the Chair of Rem back here, but I will answer that, Chair. So those indices have been integrated into 2 areas of senior management and leadership remuneration. Firstly, on the LTI. Now that covers the top 120 managers in the group worldwide. We have put ESG as a portion of the -- we've actually reduced HEPS and actually put in ESG components, and they are linked to the targets that we're giving relative, and they will move as we issue new sets of LTI. In the STI system, we also have a component in the KPIs, which is all linked in terms of all senior managers have an ESG goal and target in the ESG and the STI component of bonuses. Okay. Okay. That's everything. Thank you very much. Thanks for the great questions. Thank you for attending. I do appreciate this. We do have lunch outside. You're pleased, you're most welcome to join us and the executive and some of the Board members are here. The 2 Chairs are here of Rem and obviously of the group. If there's any questions, please be free to ask us over lunch. Thank you so much for your attendance. Thank you.