Investors Presentation 16 October 2008 Erinvale AECI UPDATE AECI - - PDF document

Investors’ Presentation Erinvale 16 October 2008

AECI UPDATE AECI UPDATE

• Trading environment

M lt d f l b l fi i l k t i i k l ti

• Melt-down of global financial markets causing risk re-evaluation

and credit squeeze

• Global recession looming
• Unprecedented volatility in input prices
• Effect on AECI
• Still believe that the strong commodity cycle will continue
• AECI is dependent on volumes of commodities not prices

p p

• Consumers in SA under pressure and volumes declining
• AEL
• Trading well in second half-year
• Trading well in second half year
• Projects on track, although cost escalation being felt
• Chemserve

Strong trading performance continues

• Strong trading performance continues
• Project costs under pressure but business case remains strong

AECI UPDATE AECI UPDATE

• SANS

Withd l f ff t h l b i

• Withdrawal of offer to purchase nylon business
• PET due diligence process complete, awaiting final offers
• Decision on nylon will be announced by year-end
• Pension Fund surplus and post-employment liability
• Stock markets decline has had adverse effect on investment performance
• Balance sheet

Balance sheet

• Debt capacity and terms have been renegotiated and restructured
• BBBEE

Employee and community share scheme

• Employee and community share scheme
• 10% of share capital – 6,5% EST & 3,5% CST
• Authorisation from shareholders planned for late ’08
• Implementation in 1H’09

CONTENTS CONTENTS

• External market environment
• Vision & strategy
• Land development structure

St ateg

• Strategy
• Valuation
• What next?
• Modderfontein
• Modderfontein
• Somerset West
• Leasing structure

Leasing structure

• Portfolio statistics
• Remediation
• Historical performance

EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT

8 9 6 7 8 ces, Rm 3 4 5 urrent pric 1 2 3 Cu 2000 2001 2002 2003 2004 2005 2006 2007 2008

Plans passed Buildings completed

Source : Bureau for Economic Research

EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT CAUSE FOR CONCERN CAUSE FOR CONCERN

• Electricity crisis
• Increase in building costs
• Increase in building costs
• Increase in interest rates
• Unavailability of zoned land

BER CONTRACTORS CONFI DENCE I NDEX BER CONTRACTORS CONFI DENCE I NDEX

100 70 80 90 50 60 70 20 30 40 10 95 96 97 98 99 00 01 02 03 04 05 06 07 08 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Source : Bureau for Economic Research

COMMERCI AL PROPERTY CONFI DENCE COMMERCI AL PROPERTY CONFI DENCE

60 70 40 50 10 20 30

• 10

10

• 20

Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08

Source : eProp 11/09/2008

I ndustrial Office Retail

EXTERNAL ENVI RONMENT EXTERNAL ENVI RONMENT I MPACT ON LAND PRI CES I MPACT ON LAND PRI CES

Increase in land prices has slowed but will improve from these levels

• Industrial land

R700 – R1000/m2 (prime R1500/m2)

• Offices

R2000 – R3000/bulk m2 O ces 000 3000/bu

• Residential

R500 – R800/m2 (30 units/ha)

MANDATE AND STRATEGY MANDATE AND STRATEGY

To optimise the value of AECI’s property assets and maximise To optimise the value of AECI s property assets and maximise benefit to shareholders through:

• Selling off land surplus to operational requirement

Selling off land surplus to operational requirement

• Maintaining and growing the existing property portfolio

LAND DEVELOPMENT LAND DEVELOPMENT

Wholesale Retail Gautrain Helderberg Coastal Sewer Road I nfrastructure

HEARTLAND PROPERTI ES HEARTLAND PROPERTI ES

Chief Executive Officer Anthony Diepenbroek

Development Development Commercial Sales Financial Development Director Somerset West Deon van Zyl Development Director Modderfontein Leticia Potts Commercial Director Jaco Strydom Sales Director Michael Walsh Financial Director Neil Hayes

OBJECTI VES OBJECTI VES

To optimise the value of land surplus to AECI’s operational requirements and release to the market requirements and release to the market Optimise?

• Strategic macro planning
• Installation of bulk services infrastructure
• Incremental land release

M hi k d d

• Matching market demand

RELEASE TO MARKET RELEASE TO MARKET Current contributions:

• Sell off parcels of land to developers
• Sell stands to individual end users
• Enhance value by means of development controls
• Identify and create high value precincts

Additi l l dd ibiliti Additional value add possibilities:

• Enter into joint ventures with developers
• Lease land & retain ownership
• Participate in ownership of top structures
• Participate in ownership of top structures

RATE OF SALE HA/ ANNUM 2004 RATE OF SALE HA/ ANNUM 2004 – – 2008 2008

350 250 300 200 Richards Bay Umbogintwini Somerset West 100 150 Milnerton Modderfontein 50

• 2004

2005 2006 2007 1h'08

VALUATI ON PRI NCI PLES VALUATI ON PRI NCI PLES

• An art and a science
• Based on a perception of the market at the time
• Reputable methodology and valuation company

Reputable methodology and valuation company

• Context of the urban framework
• Basis of development potential (bulk rights)

QUESTION & MODIFY ASSUMPTIONS NOT VALUE QUESTION & MODIFY ASSUMPTIONS NOT VALUE

BASI S OF VALUATI ON BASI S OF VALUATI ON

• I n hands of a developer
• Discount rate 25% real

Discount rate 25% real

• DCF 14 years
• Annuity income
• Land sales prices
• Industrial land

R800 – R900/m2

• Offices

R2000/bulk m2

• Residential

R350/m2

• Services estimates

MODDERFONTEI N R2,0 BI LLI ON SOMERSET WEST R0 5 BI LLI ON SOMERSET WEST R0,5 BI LLI ON

REGI ONAL REGI ONAL CONTEXT CONTEXT MODDERFONTEI N MODDERFONTEI N

Kraaifontein Kraaifontein Table View Table View

REGI ONAL REGI ONAL CONTEXT CONTEXT

Cape Town Cape Town CBD CBD St ll b h St ll b h

SOMERSET WEST SOMERSET WEST

Stellenbosch Stellenbosch

URBAN EDGE MAJOR ROADS SCENIC ROUTES

Muizenberg Muizenberg Somerset Somerset-

• West

West Strand Strand

Paardevlei SITE APPROXIMATELY 40 mins. DRIVE FROM CBD Cape Town

Gordon’s Gordon’s Bay Bay False bay False bay Cape Point Cape Point