AECI Ltd (AFE) Earnings Call Transcript & Summary

Good morning to everybody in the room and those joining us live on the webcast. Today, we announced and published our annual results for the year-ended 31 December 2024. And before I get into the order of the day, I'd like to welcome our esteemed Board led by Dr. Khotso Mokhele and our ExCo members. My name is Itumeleng Lepere, and I'll be your host this afternoon. And the results will be presented by our Group CEO, Holger Riemensperger; and our acting Group Chief Executive Officer, Ian Kramer. And just a normal cautionary statement. Our presentation will be in 5 parts. Holger will take you through the group performance overview, then Ian will take you through the financial and core business performance and then Holger will return for the outlook. And then we'll finish off with the Q&A. So for those on the webcast, please post your questions on the top left of the screen. Yes, Holger without further delay, please come through.

Yes. Good morning. Welcome, everybody here at our head office in Woodmead and out there at your screens. So before I go into '24 -- and back into '24, I have to deal with '25. So some of you may have seen the announcement this morning. So our esteemed Chairman of the Board, Dr. Mokhele is serving since 9 years AECI with a strong commitment and an incredible record over this tenure, starting with a vision to create an international global company and business and a very structured approach, not surprising as a scientist, I have to say, starting top down, internationalizing, globalizing the Board; and from there, the executive team, including myself, and I said big reason is yourself that I find myself here. And I said an organization is -- I always say it's a living animal, and it has DNA. And every person that works for an organization, no matter what rank, leaves a mark in the DNA of this organization and some marks are probably smaller and some are bigger. I think your one is huge. Thank you so much for all your commitment. And I know this is not the final speech, it is May in the AGM. So thanks a lot for all what you have done for this company. Thank you very much. And the Board also then elected a new Chairwoman, which makes me even prouder than -- what can you wish more than getting more women. We are driving the women in mining and now we drive that even from the top. Happy that Philisiwe Sibiya is elected coming in as the new Chairman of AECI. And particular important for me was in specifically the situation where we are, and I will talk to that. For me, it was so important to say we need somebody and I talked to the DNA that understands this DNA, knows where we come from, where we are at and where we want to go to. And we could have not chosen a better successor for Khotso Mokhele. Thank you very much, Philisiwe for accepting that challenge. All right. So back to '24. I know that if one just looks to the reported numbers, the numbers we have put out plain, they are looking as they look, I would say, more a true reflection of the fact that we are executing our strategy successfully. And between Ian and myself today, we really want to explain the best way possible so everybody understands what the numbers mean exactly. So let me start and what I want to do here is I really want to take another step back. And we're holding very high the one commitment we make and that covers the rest and that is a promise made is a promise kept. If we promise something, we go for it in full. And we have promised to the market, to our shareholders, our owners, knowing the investment that we were putting into all this transformation that we will deliver ZAR 400 million in our P&L in year 1 to cover all the cost almost in the first year. So I'm so proud that this team, and it's really a big team effort, but -- led by Rafael Fernandes, our Chief Transformation Officer, delivered ZAR 500 million, so even more than what we committed to. We committed ZAR 800 million EBITDA as a run rate, which basically means there's another ZAR 300 million that we have delivered in the projects, but they have not yet shown in the P&L are now coming in. And we have delivered that ZAR 800 million as well. And that's particularly important, and I'll come back to that later because this shows the way forward to the big commitment we made on doubling our EBITDA. On internationalization of mining, we have worked further, but I guess it's understood that the focus in '24 for us was the internal value unlock. So that was what we really worked on, and that was our #1 focus. But of course, we have plans to further internationalize both through organic and, at a certain point in time, also inorganic. And we have started -- or not started, but continued working on that. So we have further increased our explosive sales internationally, specifically outside of Africa, clearly also following what we said in our strategy. We have started to internationalize our mining chemicals. You may remember that we have closed one of the sites of Schirm in Germany and repurposed that, which is now a mining chemicals factory. And that enables us now to serve the Southern Hemisphere out of South Africa and start growing more also our mining chemicals business in the Northern. Then we looked into LatAm. And we said our #1 focus is defending our position in Africa. This is where we are, that is our home turf and leveraging chemicals there. And then we said the other one is Asia Pacific and specifically Australia, where we have very nice growth momentum. And the third one we said is LatAm. So please read that Peru entry as a further preparation to really build LatAm. So this is not the one big step. It is slowly, slowly building a base. The portfolio optimization. I have learned something over the last 12 months-or-so because we said our ambition is to sign all 6 businesses that we have out for disposal by mid of '25. And so that ambition is obviously then read as, "Okay, you do it all by the end of the year." That's what we never said, and I want to be very precise on that. So I'm very, very happy that we could find the right buyers at the fair value at the right price for Much Asphalt and for Animal Health. We always said that we are not going to fire sale businesses. That would not be responsible. So every move we make has to come with a fair value. And up to now for some of the businesses, we have not seen the value as fair. But everything continues. So nothing has stopped. We continue basically our process, and we are still in talks for all the remaining businesses, and I will now not go exactly. But for me, I still believe there is a chance for a big part that we have that done in '25. And it's the end of February, it's not June yet. We will see. I would say, no fire sale. We'll do it responsibly. And therefore, this is where we are. I will go a little more in detail then when I'm speaking about the business and how it actually performed. So usually, I always start with culture and more precisely with safety. So we have changed that for a reason now. For me, the culture continues to be our #1 change program because it doesn't help making changes -- technical changes without changing the culture because you're building something new. We are going away from a holding, we are going away from an SA-centric business, African-centric business, so we cannot do that and just continue business as usual. So it continues to be absolutely important. So the new operating model is in place. We continue to build that. We continue to take leverage from that, and I'll talk a little bit about that later. We have rolled out our leadership and culture code, which is sacred for us. So that is a very important step forward. And now the first one last. So safety, we are always committed to safety, and safety is our #1 goal. So I'm not celebrating, but I'm happy that we had no fatalities in '24. We had a life-altering injury, same like '23, which is very sad, and we need to improve. Our overall safety performance has improved, but I will never be happy until there is a nil, and I'm not naive enough to expect that ever one day, there will be really a nil. But that has to be our ambition, and we will not stop working hard to achieve that. So on the bottom, you see some of the investments we have done in '24. We have reported that before. So I think there is not really news. And so, therefore, I move on. Talking quickly about the different business segments and starting with the managed businesses first. So I'm very grateful that actually all the businesses that we are looking to divest have performed better than the prior year. And that shows the commitment. And I think that also shows the way how we, as an AECI, an organization, and a management deal with that because if there would be low commitment, no commitment, then that would have never been possible. So I'm very proud that the team has delivered under a certain level of, say, strain and uncertainty. So that's highly regarded. The exception is Schirm. Schirm suffers from a difficult external environment. Still, it has improved to some degree in Europe, Germany. At least it didn't get really worse. But that requires further rightsizing, which is initiated. And the U.S. also, the market growth was practically nil in '23 in the agri sector. That was probably also a contribution of the expected change in administration, but we will see. So both Schirm businesses are now undergoing some cost cutting. But again, all those businesses if we have the right offer, we are open and we continue that process. Chemicals has delivered an incredible '23. So I'm blown away, honestly, so I didn't expect that. But more so happy that team jumped very early into the change process, adopted new ways of working, focusing on the right stuff and delivered a great result, and Ian will go into that. I'll leave that to him. The mining business came in lower than expected, but in line with what we have guided the market for in the half year presentation and also during our Capital Market's Day. So just -- it was a little lower than what we expected. But also one needs to recognize that '23 was an all-time record for that business and building a record on a record is always a bit more challenging. So the margins, however, have maintained. They are good. And again, Ian will go into details. We have done the statutories, just to wrap that again, which will help us going forward. We have delivered a very strong Q4 in line with the presentation and therefore, commitment of Stuart in November. So the monthly run rate has tremendously improved, keeping momentum, and we work hard on and successful on the working capital side. So now I give it to Ian. I think it's worthwhile you introduce yourself better than I will do.

So thank you, Holger, and good morning, everybody. For those of you who don't know me, I'm Ian Kramer. I've been previously at AngloGold Ashanti in the Financial Controller role there and interim CFO there. And I received a call from Holger at the end of November to join here in the financial advisory capacity on the 10th of December and then found myself in the acting CFO position at the end of the year. So quite interesting journey in the last 80-or-so days, but it was a lots of fun, and I had -- there was some great moments and great excitement. I think I will be remiss to not acknowledge everybody in this organization, all of the welcoming attitudes I received from all the employees within the organization. And the leadership team that immediately embraced me, brought me in under the umbrella, so to speak, and then also the Board and their support to me. Everybody was hugely supportive in bringing me completely up to speed at a very rapid pace, as you can imagine. I want to specifically call out the finance team standing here this morning and being able to present a set of results with the level of accuracy that went through the process. It was a significant effort from the guys. I heard -- Itumeleng introduced and said good afternoon. It feels like good afternoon somewhere in August at this stage, but yes. If we go to the group results, it is obviously 2024 was the first year of full execution of the new strategy as introduced by Holger and the Board. The group made a number of necessary concessions in terms of its divestiture strategy as well as the transformation management office introduction, and it acts as key enablers for the successful execution of this strategy. In accordance with accounting standards, and I won't bore you with that, Much Asphalt has been reclassified as a discontinued operation following the status of its sales process. And consequently, the prior year profit and loss numbers has been restated. Our EBITDA from continuing operations, so the whole group except Much Asphalt, ended 12.7% down at just over the ZAR 3 billion mark. This decrease was primarily driven by the ZAR 860 million once-off investment costs, which entirely included the ZAR 467 million transformation cost, the ZAR 186 million divestiture costs incurred and the ZAR 204 million spend on the statutory shutdowns in mining that was a carryover from the prior years, as Holger has already alluded to. The profit from continuing operations ended up ZAR 1.5 billion compared to ZAR 2.4 billion the prior year. In addition to that delta was added to by the additional impairments of ZAR 377 million from the continuing operations, and that I will go into detail a little bit later. The group from continuing and discontinued operations ended up with a loss per share of 268 cents compared to an earnings number in the prior year of 1,112 cents per share. This reflects the once-off investment costs as well as all of the impairments from the continuing and discontinued operations. Again, I will get into that a little bit later. Management, with the approval of the Board, took the decision to declare a final and total dividend of 290 cents per share or ZAR 231 million. The total dividends for 2004 therefore, aligns with the total dividends declared in 2013. You would recall that the company didn't declare an interim dividend in 2024. But in 2023, there was 2 tranches, an interim dividend of 100 cents per share and a final dividend of 119 cents per share, giving you a total for the comparative year of 219 cents. This dividend payout is in line with the dividend policy of the group and it's underpinned by the newly introduced capital allocation framework, and it results based on current share price in a dividend yield of 2.4% circa, around there somewhere. It signals the intention of management and this Board to continue to declare dividends that are sustainable. Let me go to the next slide. If we look at the group EBITDA from continuing and discontinued operations and normalizing it for all of the divestiture costs and TMO uplift, it remained relatively flat year-on-year, ZAR 3.7 billion compared to circa ZAR 3.8 billion. The impacts of the cost of the ZAR 860 million was partially offset by the transformation management office uplift of ZAR 504 million that was recognized in profit and loss and better than what was signaled to the market before. More than 85% of the transformation management office cost uplift is sustainable and will again contribute to the EBITDA in 2025 with the further TMO uplift that will be achieved as more TMO initiatives are realized through Rafael and his team. Since the divestiture process is continuing, it is anticipated that divestiture costs, although it's indicated here as a once-off, would repeat again in 2025, but not to the extent as we have seen in 2024. So if I can spend a bit of time on the group impairments here and just unpack it for you, slicing and dicing in a different way that you can understand how it works. These impacts, although unfavorably on group earnings, reflects the company's strategic repositioning to create that long-term shareholder value that Holger has been communicating to the market. ZAR 377 million of the total ZAR 1.1 billion relates to the continuing operations and the ZAR 732 million relates to the discontinued operation Much Asphalt. If you then look at where the impairments sit, it sits in ZAR 372 million in property, plant and equipment and intangibles and goodwill of ZAR 737 million. I think what I want to highlight there is just on Much on the discontinued operations side, basically, the impairment that was booked as a result of the sale relates to the goodwill. And therefore, the underlying business, the real motor and stones of the business has been sold for favor -- for he full value. And that is what Holger has always indicated we will do with the divestments. If I can then split as per the operations, the Schirm impairment of ZAR 222 million reflects the introduction of the rightsizing plan and the impact that has on those operations. I referred to Much Asphalt already. There was mining impairments of ZAR 135 million; and then at Animal Health, ZAR 22 million, which was already reported at half year. Turning to the next slide. If you look at the net asset value of the group at the end of December at ZAR 11.9 billion and you remove the held-for-sale Much Asphalt position of ZAR 1.1 billion and you look at what's to come into the future in terms of the other potential divestments that we are working on, we estimate that the group following divestments will sit with a net asset value of around the ZAR 8 billion mark. This certainly helps us to start to think of and opening the path for us to consider the growth options, which is the second part of the strategy that Holger has always referred to. If I can turn the attention to capital spend, our capital spend profile is most certainly being guided by our disciplined capital allocation framework. Capital spend for the year-ended just shy of ZAR 1 billion. I think it's a known fact that we have historically underspent in the maintenance CapEx side. But as you can see from the slide, we have started to correct the underspend in 2022 and continue to do so. And it's most certainly the intention of us to sustain our maintenance CapEx spend at a minimum level of 0.8x of the budgeted depreciation for 2025, preferably more than that. Should there be sufficient free cash flow generation in the business, and following any dividend payouts, which is the order in which our capital allocation framework works, we would then intend to increase our total capital spend to levels of between ZAR 1.2 billion to ZAR 1.6 billion with significant focus on growth CapEx initiatives. The achievement of growth CapEx, if sufficient free cash flow is achieved, will also be impacted by our ability to execute on our growth CapEx plans. So I just want to put a caution on that. This elevated growth capital spend is definitely one of the levers that we will use to assist us in setting our goals for EBITDA growth through to 2026. I think the other thing I just wanted to point out is that we do not foresee this elevated level of capital spend to carry over into 2026. If I can go to the next one. Our effective tax rate from continuing operations has increased to 71%. And I think it requires a little bit of unpacking here. The effective tax rate remains volatile for as long as we have divestment processes that continues, that results in impairment charges and divestiture costs being incurred that always has an unfavorable impact on this accounting calculation. If we normalize for those initiatives, our ETR for 2024 ended up on a normalized basis at 44%. We have already started to implement initiatives in the last quarter of 2024 to close that gap to the statutory tax rate of 27%. If we analyze that delta between the normalized number and 27%, there are 3 focus areas for us that we would need to continue to focus on in 2025. These are: Reviewing our withholding taxes arrangements, the non-deductible expenses we have including interest, uneffective interest and also loss-making operations resulting in assessed losses. Addressing the first 2 items on that list is very much structural and is dependent on the existing group structure and would require an in-depth analysis. We have initiated that process and we will continue throughout the year with that and most likely into next year as well. I think from my personal perspective, ETR is an accounting formula, which is driven by the outcome of income tax and deferred tax expressed as a percentage of profit before tax, which takes into account once-off nonroutine potentially significant accounting adjustments and in my mind, not reflective truly of the tax exposure of the group or the cash taxes paid. This is very much evidenced by our cash flow statement, where you would have noted that our cash taxes paid slightly decreased but remained in levels around ZAR 900 million to ZAR 1 billion. If I look at our net debt to EBITDA, we ended the year very good at 1.2x our covenant ratio, and we expect that to continue to decrease. The proceeds on the closure of Much Asphalt, which should come through in the first half of the year, possibly even by the end of the next month, will substantially reduce our net debt further. Our net debt remains well within our maximum covenant ratios per our lending arrangements, which is 2.5x. We also have significant undrawn cash facilities in the region of ZAR 3.1 billion at year-end and in addition to that cash on hand of ZAR 2.4 billion, which leaves us in a very healthy liquidity and solvency position. Just analyzing the net debt movement. There was a reduction of circa ZAR 600 million. Cash generated from the operations contributed to that reduction to the extent of ZAR 3.3 billion, and that was partially then offset by the payment of finance costs on loan and lending arrangements on the cash taxes paid, as I already alluded to, and the investment activities cash outflows, which is mainly the ZAR 973 million CapEx for the year. The net debt reduction is further being driven down or the reduction has been supported by our continuing focus on working capital and working capital management. So turning the presentation to some of the 2 core businesses in the portfolio. Looking at mining, AECI Mining continues to execute its globalization strategy. Our normalized EBITDA for this division is circa ZAR 2.5 billion and reflective of the temporary headwinds, including supply chain disruptions and technical constraints in our nitrates and detonator facilities, which has now been broadly resolved. Our EBITDA margin remains solid at 13%, with the EBITDA performance in the fourth quarter ending better than the preceding 2 quarters of 2024 as well as the comparative fourth quarter of 2023, setting us up with a strong foundation for 2025 performance. And then lastly, AECI Chemicals. Holger has already mentioned the magnificent performance of that business unit. Normalized EBITDA increased significantly, mainly due to a very strong performance from the water business and a solid recovery in the agri business. It resulted in strong cash generation of ZAR 970 million, in line with the strategy for this business section. The focus remains here at cost and margin management, working capital reduction and debt recoveries, notably in the water business. Thank you very much, everybody. I'm now handing back to Holger to conclude.

Yes. Thank you, Ian. Yes, as a last step, I want to now go back to '25 and have an outlook. Just to go back again into how do we structure this transformation program? As it is so important that everybody understands, we can work hard and we can do things good. We cannot do miracles. It's all about hard work. And it's focus and it's how we execute. So '24, we always said was the year of optimizing and realizing quick wins. So that was procedures, processes, way of working. It was mostly that type of things. Also, it was with low investments in CapEx, which you have seen in the presentation of Ian. So what was the most important for me, actually 2 things was, one, get us as an organization into a change momentum. And I'm really, really convinced that we have seen that. And in particular, I'd say, around September, I could see, I could feel and I'm not alone, we could see a shift in the organization that we are now in this momentum. And the other part was we want to make this sustainable, and we also said we don't want to continue with a lot of consultants. So part of the agreement with BCG was also to transfer skills and knowledge to our internal team so that we can continue on our own, and that is what we also achieved and that was important as well. Now looking into '25. Also here, this was always the year of, what I call, the hard cost savings and preparing for growth. So our focus this year already is on structural cost optimization, driving efficiency. We announced and discussed that we want to consolidate our head offices and bring people basically here to Woodmead. We are looking into unlocking headcount efficiencies. I talked last time about the benchmarking that we have done versus peers in the industry where others operate similar businesses, let's say, we are at 1.2x to 1.5x the number of people employed in a similar business. And I'm now not talking about this or that number, but it just shows there is optimization potential, and we will unlock this, this year. The other part is about focus on margin improvement, which is a big contributor to our EBITDA growth going forward. So that is now really around the pricing and pricing excellence, that type of things. The procurement side, we have covered rather in '24, but we need to make that sustainable. And as we also said in the presentation of Ian, you could see that we are signaling high investments. Those investments are required to deliver the third and last pillar of our strategy to '26, which then is top line growth, scaling up. And of course, we have to see it before we harvest and we have to see a significant time before we can harvest. And that means we are looking into ramping up investment in specifically mining, in specifically mining chemicals and more so in our international business. Of course, we will not lose sight on our key and most important KPI, which is free cash flow. So we will do those investments according to our capital allocation and according to our investment policies and not just invest for the sake of growth. When we talk growth, it's not -- I mean, I call it top line here, but it's not growth into revenue, it's growth into profitability. So that is our focus '25, looking a bit into '26. And here, I want to give you a sense about where are we in the execution today. So remember, we said we simplified a little bit, but we also want to manage all expectations. So the baseline '22 of the core business, ZAR 3.1 billion. And then we say we want to double. And that's the ambition, absolutely. And then we said, what would that look like, and that's ZAR 5.6 billion to ZAR 6.3 billion. I still think we can deliver what we promised. And what that slide shows you is that according to what I just explained, so the internal unlock has delivered more in this first year than, for instance, the growth because I said we have to prepare for that. This is not coming automatically. And that's why you see the bulk of what was P&L relevant in '24 sitting in the value unlock, so the operational and functional excellence programs. And we have started to see some organic or additional growth. Now that together, and again, then on the other slide, remember, we said the run rate end '24 means now what is to be expected in '25 from those initiatives is ZAR 800 million. And actually, that should give you some comfort that we have delivered those ZAR 800 million and a bit of the organic growth. I said mining was not exactly at the point, but quarter 4 was showing the run rate we expect. So we are very optimistic that we will catch this up. So I think that should give some comfort around that we are on track to deliver what we promised. Wrapping up, again, we said, and we gave the year the title "A Year of Transition." Not only but also -- so when I came in, in '23, so actually, we worked on a new strategy. We announced that in November '23. And you are actually end of November and then everybody goes on a holiday. So to be honest, we could not really start this on Jan 1. So that started a little earlier. And it was a lot of things that we needed to change. So that is why it was absolutely a transitional year. '25 will be a difficult year. We are not naive. We know that we need to work hard. So this is not just falling from the trees. But we are ready to do so. And we are very optimistic that what I call the noise in the numbers, we will see less in '25, but we already signaled that the continuation of the divestment program will definitely lead to some disturbances. But I guess you can know or you know now what you can expect. I started with that and I almost finish with that. The promise made is a promise kept. We don't want to surprise and definitely not surprise the market in a negative way nor any other stakeholder. We stand for what we say and we do what we say. And we are open and transparent. And even if it hurts, we are. I think what also this year shows the underlying core business is very resilient. It continues to be profitable. It is flat year-over-year. That's correct. But it is flat in a year where the organization is dealing with a whole lot of transformation projects, initiatives on top. And if you remember, the way that Ian presents it, let me maybe go back just to that slide because I really believe it is important. So if you look to the black bar of the normalized EBITDA, and actually, you look to the uplift, the ZAR 500 million, understanding that most of the costs that are in this graph are actually once-off. And some will repeat because we are not finished, as Ian said. But actually, that gives you a signal that reality is on a normalized basis, if you take the ZAR 500 million in, which is sustainable, I think we have delivered what we promised. Sorry for that, but I felt this is important. Yes, our capital allocation framework. I think what we are proving one with last year of not spending too much, let's focus on the right things and let's make sure we have projects that are delivering the expected ROICs. So that's what we have prepared, and that's what is coming now. But also, we are sticking to our capital allocation to our dividend policy. We always said that as long as we create sufficient free cash flow during the period of transition, our ambition would be to pay a dividend because we believe that it is only fair that our shareholders participate in the success of the company. But during that period, we also said we will stay rather at the low end of the range, and that's what we have done. So also here, you can always trust that we mean what we say. And yes, I already mentioned so '25, it looks like we are investing a lot. And yes, we are investing a lot. But still, it is for us, free cash flow in the center. And the investment we do in '25 is there to increase the free cash flow in '26. Thank you.

Thank you very much, Holger. Thank you, Ian. In true AECI fashion, can you please have all the ExCo Board members join us on stage? Okay. So we'll take questions. We'll start with people in the room, and then we will then take questions from the webcast. [Operator Instructions]. Thanks. Hi, [ John ]?

Congratulations on the excellent performance of Chemicals. Very good. Just I've got 4 questions actually. The first one is regarding the mining impairment. I find it a bit strange given that the growth engine of the company going forward is going to be mining. So what are you impairing in that asset? Number 2, can you give an idea of the quantum of restructuring costs likely in 2025, please? I guess that would include success fees on those transactions completed. Thirdly, just a comment around your dividend policy. I find it very strange that you have a policy that's dictated to you by your share price when really, I think if you look at the norm in the JSE for industrials over 2024, the average dividend cover is around 2x. So would that be something that AECI can pay going forward? And fourthly, comments on the cultural challenges you're facing so far because you are in this restructuring phase, I think culture for me is one of the most important parts of going forward. Therefore, the challenges you've come across so far, and how you have coped with those challenges?

I suggest 1, 2, 3 most likely CFO, and I'll take the last one.

Right. If I can start with the mining impairments, ZAR 135 million, the majority thereof was ZAR 90 million in Brazil. I can ask Stuart maybe to give the reasons for that. The remainder of that delta relates to some setup costs in Chile that was impaired and then some general odds bits at the various other parts of the mining division. So maybe, Stuart, if you just want to comment on Brazil?

Yes, sure. So with Brazil, the cash-generating unit was impaired, which was aligned with the explosives business. We do have an underlying successful chemicals business in Brazil, which we're focusing on looking forward. We saw the explosives market there being very challenged on a raw material cost basis, which led to those impairments. And we've looked at our focus shifting more towards Peru as part of our Latin American entry. And that's really looking to focus our energy into following our customers that are pulling us in that direction. So as was our entry into Australia, which has been very successful off the back of some very key customer relationships, we're getting the same pull into Peru, and we'll be focusing our attention there. Okay. Ian, do you want to take third one?

Certainly. So if I can answer the question on dividends, yes, I agree with you, the dividend yield is currently the policy. The long discussions that Holger and I had in our minds also does not make sense, and we will consider moving towards a deep dividend cover measure. Obviously, that will always be dependent on affordability and the ability to generate free cash flow. And sorry, I need to apologize. Can you just repeat your second question?

Consumer restructuring costs likely in 2025 and maybe in 2026, and including success fee [indiscernible].

So obviously, that's an ongoing process. It's very difficult to quantify as we go through the process. I think we'll -- Holger unless you have some other ideas. But I would think at this stage, it's too early to say.

Yes. I would not really quantify it, but the one you mentioned is divestment costs. But we have to say or understand that actually, it's mostly around success fees. So the work is done and things are in progress. And then what we said is, and that is what Ian said it is a bit difficult. So we said that if we find projects, important, profitable projects where we need external support, we would, of course, do the project and bring in external support on an as-needed basis. We are not talking about the levels we had last year. That's way behind us. But just that there is not a nil. And again, it has to make sense if these projects are there, so that's a bit difficult because as we progress, we generate new ideas and more ideas. And so there might be things coming up. Culture. That's indeed -- I would say culture is management's Champions League. Culture is nothing that is a technical thing. It is humans, it's people. And humans don't like change, generally. That's actually a biological neuroscience process because the brain needs a lot of energy when you change. And I'm not kidding here. So that is when the first pushback comes in. So you need to understand how you deal with people. You have in any organization, early adopters, you have those that come, say, as an early maturity labor, so old story. And you have like when [indiscernible] did that comparison on mobile phones, I said there are still people that are sitting in front of a telephone landline and they wonder why nobody calls, but they still sit there. So there are people that never change. And we are reflecting of a normal society. So we have all those shades of gray. And we are working hard. We have an external partner that is supporting us in a very creative way to engage with employees at all levels in different ways and with different tools to drive that change forward. And for me, it's not even necessarily an exact outcome of a change. I said earlier, it's the momentum. It is can you adjust as an individual to change? How are you dealing with it? And I think that is the important part. And that's where our work is. It's not easy. Absolutely not. But it's successful so far, I believe.

Are there any instances [indiscernible] change is more difficult? For example, Chemicals have done really well. Is the culture change there more accelerated than with mining, for example?

I wouldn't say the cultural change. I tell you what I think the reason is in Chemicals. But no, because every business as an organization just represents the whole range of society. So I do not believe there are more early adopters or whatever in one or the other business. So what is true for Chemicals and what, in my view, made the difference was that the Chemicals team adopted earlier, like 3, 4 months earlier in full and started to own the change and Mining was lacking. But that's now not finger-pointing. That's just a reality that we have seen. And yes, there is a part of that. I'm sure.

Thanks, [ John ]. Rowan?

It's Rowan Goeller from Chronux Research. Two questions, if I may. The first on your growth CapEx, can you just outline how much of that would be organic? I mean if there's any acquisitions that you're thinking of? And for your 2026 targets, are you thinking of any acquisitions to help you achieve it? That's the first question. And secondly, what return metrics are you measuring yourself on through this whole process? And on that, where are you now and where would you like to be?

I'll take it. The growth CapEx we show is organic only. The commitment we made to '26 is organic only. But the 2030 ambition that cannot be organic only. We also said that absolutely key for us. One of the commitments we made was we want to improve the balance sheet and reduce debt. So that's an important KPI for us, and it's in the forefront, which doesn't mean we want to grow ourselves into the stars -- sorry, to shrink -- not to shrink ourselves. So there will be a balance at the right point in time, but the focus is clearly on that. And the other one was, which is the measure? I mean the rationale is for me, there is 2. Under different circumstances, I would say there's one. For me, the #1 KPI that we are managing this business for is free cash flow. We are a cash business. And for -- but to track all the initiatives and what we do for us, EBITDA is an important measure. It's actually then I look to, let's say, the pure business and the result and how the business performs. And then I have all the rest accounting-wise and then I look to my free cash flow, which is impacted by some of the initiatives we do. But we are -- our #1 KPI, the one that we really manage is free cash flow for the business, but for the transformation, we look to EBITDA as a key one.

I'm [ John Williams ] from [indiscernible]. With respect to mining chemicals, could you give us a sense of the potential upside? What's the size of the price over a number of years for mining account?

Yes. So I think I mentioned in November that I felt that the mining chemicals business was the sleeper in the organization with a lot of potential. I think there's real potential to take this business in a multiple of 2-plus over the course of the next 3 to 5 years. I think there's opportunities that look at organic growth where our footprint is currently placed as well as looking at potential acquisitions around the world. One of the things that we are very focused on is leaning into our global footprint in our explosives business. So that will hone our focus on where we want to play. And we are looking at other things with respect to chemicals related to modular manufacturing. So we want to take the success that we've had in the explosives side of the business. We're putting assets closer to demand centers, and we want to replicate that in our mining chemicals business and we're advancing that -- those studies currently.

Thank you, Stuart. We'll just take some questions off the webcast. First one, Warren Riley from Bateleur Capital. Two questions. At CMD, you guided to a 20% to 25% growth in EBITDA of the 2024 normalized base. Do you still aim to achieve this in 2025? Secondly, you show Schirm net of asset value. Schirm's NAV is now ZAR 2 billion. Is this an accurate reflection of realizable value? And what is the outlook for Schirm losses in 2025?

You do first, I'll do second.

So CMD, we guided 20% to 25% EBITDA growth on a normalized basis, is this still expected for '25?

I think what was mentioned in the Capital Markets Day is still the objective, but it's a growth rate to be achieved in 2026, and we're still on track for that.

Okay. And then on we disclosed a NAV of ZAR 2 billion. Is this an accurate reflection of the realizable value for Schirm? And what is the outlook for the losses in '25?

Yes. The short answer to that is no. It is showing the net asset value and not a fair value of in that sense. We had discussions about the disposal. And as I said earlier, we were not satisfied with the offers we received. So instead, we are going now and looking to other options. Remember what the plan was to sell a combined business. We are now looking also into individual sale of assets, and that makes it a bit more difficult to say what is the exact outcome. I would expect that the outcome of individual processes is better than combined. We also -- the business outlook for Germany has stabilized at low level. I also not expect that there will be a massive, massive upside in the short term. It will improve from where we are, and we can see the improvement in the market. But what we are doing now is we are rightsizing the organization to adjust the cost to the market situation. That's for Germany. The U.S. was also slow from the market side. Again, I was a bit stalled in a way before elections. Everybody waits for certain outcomes and decisions and we expect a relatively also rather flat year compared to last. So again, not that things are getting worse. It's just not the massive upside, but improving on the EBITDA because we have some of the investments and restructuring behind us in the U.S. So overall, I am -- I think we should expect slightly better, but we have to execute some of the measures I was referring to.

Okay. Thank you Holger. Another question from Warren. Can you talk to volume growth outlook in Mining division for the year ahead? Any recent contract wins?

I'll leave that to Stuart. But before that, I want to just say we are not looking to grow revenues and we are not looking to grow volumes, we are looking to grow free cash flow and EBITDA. But I'm happy to refer the question to Stuart.

Yes. I think Q4 was a successful tendering cycle for us. We retained 100% of our contracts in Ghana, which was very encouraging. We're also seeing strong organic growth in other key markets outside of South Africa. Year-on-year, we saw the international business move from about 64% contribution of bulk explosives volumes to 70%. And we expect that trend to continue in some of the key markets. There are a number of active tenders currently in play, which obviously I can't talk to, but a number of those are reaching the end of their assessments, and we're hopeful that we will see some more growth as a result of those.

Thanks, Stuart. Can we take more questions from the floor, if any?

[ John Williams ], again. Lihir, any news?

Yes. So we've taken over the blasting at Lihir, which is great. We can share some photos and videos. So there are AECI employees managing the blasting operations at Lihir. So that contribution will start coming through as of this month.

Thanks, Stuart. Any other questions? Okay, we'll take another one from the webcast from Keith McLachlan from Integral Asset Management. What exactly was the ZAR 467 million of transformation costs spent on? What does this actually mean? Detail on what these actual costs were would be appreciated.

Sure. Probably I'll take that one. So the biggest part of the ZAR 460 million was what I mentioned earlier that we have asked the support of a global Tier 1 consulting firm, BCG, I said that before. And it was important. It was important for me. If you -- I mean, we have a serious ambition, and we are benchmarking ourselves with the best in class. And when you want to play Champions League, you do not hire players from the third division. So if you want to play Champions League, you hire Champions League players. So we deliberately decided to go with some of the best we could find. Again, also very important was that did come with a cost. But these guys helped us to structure, to set up a transformation program of which we had absolutely no experience internally. And they have trained up and skilled up, just looking to one of the employees that now are able to do that. So for me, that was money well spent. That is the by far biggest part. Then there is some re-adjustment cost in that, there's cultural transformation, so some more kind of consulting. But actually, those costs will -- I say black and white, I could say go away, but to be really precise, as I just answered the other question, if we believe that we need support, we will go for, but we will never be, ever again, close to that number. But if punctual support is required, we will do that, and then we will show that. But technically, I can almost say black and white, this is going away.

Okay. Thank you, Holger. Another one of the webcast, [ Adam East ]. AECI has decided to pay a dividend in terms of the capital allocation framework. How it would appear that AECI has not spent enough on maintenance CapEx in the past, and it would appear delayed requirement shutdowns. Is the business investing enough and not making short-term decisions?

I think that is what we addressed in the presentation, hopefully. But to build on it, it is a matter of fact that the business was underinvesting for many years. In maintenance, we have shown that. Typically, what you would expect is an investment, a CapEx back into your assets anywhere between 0.8 to 1.2. And that really depends. So as a rough number, you would target like a 1. We have ramped that up. We continue to ramp that up. Our goal in the moment is 0.8. And as Ian also signaled, it could be more if that is within our, let's say, capacities in the sense of executing. We are not underinvesting nowadays into anything. And back to that statutory one. So from the disruption of COVID in 2020, there was a gap that was created or a backlog in total 4 statutory shutdowns that should have happened in the years before. And in '24, we decided to do that all and actually clean it, therefore. So all those statutory shutdowns are done, and that means they are recurring in 3 years as a regular basis.

I think I can add to that and just say that in the first half of the year, there was no free cash flow. So there was no dividend declaration. We only did the dividend declaration in the second half of the year after free cash flow generation exceeding ZAR 1 billion. So we're carefully monitoring that. We are doing the maintenance capital expense now as required and dividends only follows after that.

And I just want to add one more thing about the operations as well. After these investments that were made in the first half, we did see a marked improvement in our overall operating efficiencies across our assets, and we saw a year-on-year improvement as a result of those investments. So I think that's encouraging us as an organization to continue to invest in the right parts of our operations, which will always be prioritized from a process safety perspective first and then asset reliability improvements. So we're looking to continue to drive those OEEs up further.

Thank you very much. That's it from the webcast. We'll give the floor chance again to ask any questions. So one more question just came up on the webcast. Charles Schwartz from Titanium Capital. Mining is a key focus area going forward, including the globalization. Does the impairments in mining cause you to question your global expansion plans going forward?

That's a very good one. No, but it is something that we have learned and we need to -- and actually, we have already put that into our capital allocation and the way we decide entering new markets. So the 2 successful ways and the most successful way for AECI so far was you go on the back of customers organically. That was very successful so far, and that's a pretty safe bet. And if you decide to go proactively, then there are 2 things that I believe that really require a good deep understanding of the risk you take. And the other one is you cannot do similar size growth than when you follow a customer, you can actually start small and go. If you do that without being on the back of the customer, then you have a stand-alone relatively small business and then you put that in a corporate, that's prepared for an accident, I think that is the learning. If we do not go on the back of a customer but decide to move from a strategic view, it has to be right. The risk needs to be understood and the scale has to be at a certain level. And otherwise, we will not move. That is clearly in the M&A policy.

Thanks, Holger. Another one from Wessel Joubert from Oyster Catcher Investments. Can you please break down where the ZAR 800 million TMO savings or profit contributions are coming from, the ZAR 800 million run rate?

So ZAR 800 million is a mix of key work streams we undertook during the course of last year. The lion's share of that comes from procurement-related initiatives, strongly supported by commercial work in terms of looking at our cross-selling opportunities and margin lift where appropriate. And behind that was manufacturing as well as the physical supply chain. So 4 key work streams really helped to deliver the ZAR 800 million.

Thank you very much, Rafael. Okay. I think that's it from the webcast. So in the absence of any questions in the room, that concludes the business of the day. Thank you very much for joining us for our results presentation. And please feel free to join us for refreshments after this. Thank you.