AFROX CONTINUES EXCELLENT EARNINGS AND CASH FLOW PERFORMANCE Release Date: 05/05/2003 08:26:03 Code(s): AFX
AFROX CONTINUES EXCELLENT EARNINGS AND CASH FLOW PERFORMANCE
AFRICAN OXYGEN LIMITED
African Oxygen Limited
(Incorporated in the Republic of South Africa).
Registration number: 1927/000089/06.
South African share code: AFX.
Namibian share code: AOX.
("Afrox" or "the Company")
AFROX CONTINUES EXCELLENT EARNINGS AND CASH FLOW PERFORMANCE
African Oxygen Limited (Afrox), the gases, welding and healthcare group, posted
strong results for the six months ended 31 March 2003, with revenue increasing
by 17 percent to R3,6 billion, operating profit up 23 percent at R528 million
and headline earnings per share of 78 cents, 32 percent higher than the
comparable period last year.
Afrox"s balance sheet remained strong as a result of keen focus on management of
working capital. Interest paid reduced by 11 percent to R72,4 million (2002 :
R81,5 million). At 31 March 2003 borrowings of R831 million were R254 million
lower than the previous year"s. The lower borrowings were achieved, in spite of
a robust capital expenditure and acquisition programme, which resulted in
expenditure of R256 million, the majority of which was growth related.
Gearing has reduced to 22 percent (2002 : 31 percent). This improvement, due to
excellent working capital management, resulted in net current assets declining
by 9 percent to R701 million (2002 : R768 million). Improved profitability and
stringent asset management significantly increased the return on capital
employed to 28 percent (2002 : 25 percent).
These sound results enabled the board of directors to declare an interim
dividend of 33 cents per share (2002: 25,5 cents) an increase of 29 percent.
Managing Director, Rick Hogben, says, "We have concentrated on organic growth in
our core industrial businesses, as well as new products and initiatives to be
more customer and service focused. Our industrial businesses have performed
well, with some notable achievements. Healthcare has had a very successful six
months, reaping benefits from the full integration of last year"s acquisitions
and its focus on clinical excellence and quality care."
"Although the previous growth in demand across the basic manufacturing
industries appears to be abating somewhat, our product range spans key sectors
of the economy, so we"re not overly dependent on the economic fortunes of a
select few. Many of our customers partner us through long term contracts of
between five and 25 years. These contracts account for a large portion of
annuity income and are one of our main revenue streams, the other being the
annual rental of bulk on-site gas tanks and cylinders."
Hogben attributes growth in the company"s welding and cutting operations to the
underlying strength of the South African economy, as well as to product
excellence, above average service levels, and, strong marketing.
"Being part of The BOC Group plc has given Afrox enviable advantages for a
South African company. It has facilitated distribution through BOC"s world wide
infrastructure in some 50 countries for our locally designed and manufactured
products, which are generally considered best in class," he explains.
"During the past six months, through BOC"s extensive network, we launched our
products in North America. We are already exporting to Australia, New Zealand,
six south east Asian countries and several others where BOC has a presence.
Revenue receipts priced in dollars have reduced owing to the Rand/dollar
Nevertheless, the drive to open new markets for Afrox-made products will
increase factory capacity, reduce unit costs, and enhance our share of the
global market for certain selected items."
The safety services business gained substantial local and export orders for the
Afrox manufactured AfroxPac 35 self-contained, self-rescuer. The AfroxPac 35 is
a benchmark unit, with SABS approval, supplying oxygen to miners in the event of
an underground emergency. A strong order book and increased production of
AfroxPacs necessitated the opening of a dedicated factory in Benoni that is now
"Exciting new applications in the special gases and packaged chemicals
operations are beginning to add value through service opportunities," says
Hogben. "Business wins in the automotive industry have increased Handigas
volumes, and, collectively, the African operations performed well."
"Medical gases have been created as a separate business unit. This has enhanced
our focus, enabling us to protect market share and to focus on new applications,
clinical sales, and marketing skills. We integrated Medispeed, our specialised
home oxygen therapy/respiratory operation, into medical gases to provide a
stronger base for future growth."
Long-term bulk gas contracts and increased volumes in bulk gas supply boosted
revenues. Referring to shortages in the supply of carbon dioxide as a result of
the Petro SA shutdown, Hogben said that detailed product forecasting and forward
planning had enabled Afrox to offer customers an uninterrupted supply.
Turning to Healthcare, Hogben said that a majority shareholding was acquired in
the Little Company of Mary Hospital strengthening Afrox"s presence in Pretoria.
Major expansion and upgrading projects currently in progress at several of the
hospitals were designed to enhance the quality of services offered. The
hospitals acquired in 2002 have now been fully integrated, and are realising
benefits in excess of expectations.
For the first time, Afrox Healthcare engaged individually with funders to
negotiate tariff increases for 2003. A move from fee-for-service to a per diem
basis was also agreed with some of the major funders.
"In striving to produce quality healthcare that is affordable and accessible to
lower income groups not covered by medical aid, we launched our affordable
hospital model to two medical schemes and are approaching specific employer
groups seeking healthcare services for their uninsured employees, " says Hogben.
"Our industrial business is well balanced with long term contracts, established
branch and distribution networks, strong branding and steady revenue streams.
This enables us to perform well through all economic cycles. We plan to pursue
our growth strategy further using our core competencies in design techniques,
manufacturing, and marketing to create new products that add value to our
5 MAY 2003
Issued by African Oxygen Limited
For further information contact:
Ros Beart (011) 490 0712 / 082 891 5149
or Chris Fieldgate (011) 490 0554 / 082 495 1481