African Oxygen Limited - Press Release Release Date: 30/10/2003 15:06:00 Code(s): AFX
AFRICAN OXYGEN LIMITED - PRESS RELEASE
AFRICAN OXYGEN LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1927/000089/06)
ISIN Code: ZAE000030920
South African Share Code: AFX
Namibian Share Code: AOX
("Afrox" or "the Company")
PRESS RELEASE - AFROX POSTS BOTTOM LINE PROFIT INCREASE OF 42 PERCENT
PROFIT BOOST LED BY INDUSTRIAL
African Oxygen Limited (Afrox) once again produced excellent results for the
year ended September 2003, recording a net profit increase of 42 percent and
increasing net cash inflows from operating activities by 34 percent. This was
led by the industrial business, which grew its share of net profits by 61
Afrox"s chief executive, Rick Hogben, says, "The results demonstrate our
ability to manage our assets and improve competencies within the business. Our
marketing and efficiency enhancing initiatives over the past two years have been
successful, particularly in our industrial business, which contributed 62
percent of the net profit for the year. This excellent growth occurred in spite
of the stronger rand, which had the effect of reducing foreign currency receipts
from our global export sales and earnings in Africa. The negative impact on
earnings amounted to R40 million.
Hogben says the economy and the manufacturing sector were stronger in the first
six months of the financial year and sales reflected this with a 17 percent
increase. In the second six months, however, the manufacturing sector declined,
and Afrox posted a full year 13 percent increase in revenue to reach R7,3
billion (2002: R6,5 billion).
For the first time, Afrox"s operating profit exceeded R1 billion to reach R1,1
billion (2002: R896 million), an increase of 22 percent. As a result of sound
asset management and, partly due to interest rate reductions in the second half
of the financial year, net interest paid was down 22 percent to R122 million
(2002: R157 million). Earnings per share were up 38 percent at 165 cents (2002:
These sound results enabled the board of directors to declare an increased
dividend of 83 cents per share (2002: 62,5 cents per share). This dividend is
covered two times by earnings.
A regular feature of Afrox"s results is its strong balance sheet. This year is
no exception reflecting the company"s ability to focus on quality working
capital management. Cash generated from operations increased 24 percent to
R1,4 billion assisted by stringent management of debtors days, which were
reduced from 53 to 44 days in the industrial business.
In spite of a robust capital expenditure and acquisitions programme of
R552 million (2002: R497 million), borrowings reduced by R248 million and
gearing was down to a record low of 13 percent (2002: 21 percent).
Hogben says, "In the past two years we have developed new markets, extended our
global customer base, and added to our product and service offerings to existing
and new customers. We have optimised our human capital, technology, and
production facilities to increase our productivity and global competitiveness.
This has helped further to improve Afrox"s resilience in most economic cycles."
All businesses, Industrial and Special Products (ISP), Process Gas Solutions
(PGS), and Healthcare performed well.
The drive to improve brand awareness, marketing focus, and to become more
customer and service centered, has been rewarded. ISP and PGS posted strong
results in spite of a downturn in the manufacturing sector over the past six
ISP successfully retained its margins and increased market penetration.
Handigas recorded another excellent performance reflecting skillful management
of fluctuations in the oil price and the rand/dollar exchange rate during the
In its first full year of trading, the Afrox manufactured AfroxPac 35 self-
contained self-rescuers for underground miners obtained substantial local and
export orders, making a strong contribution to profits.
A vigorous campaign to market Afrox-designed and manufactured gas and welding
equipment continues to be successful. Afrox"s parent company, The BOC Group,
provides access to global markets through its world-wide infrastructure.
Although the rand"s strength has affected this export drive, growth has been
stimulated by forays into new markets in tandem with BOC.
"We are excited by new applications and growth opportunities in special gases
and packaged chemicals," says Hogben. "In addition, by creating a separate
division for medical gases we have broadened our product offering and
concentrated on the clinical management of medical products."
Hogben stresses that Afrox is constantly developing commercial offers that are
tailor- made for different customer segments. He cited retail sales as one
example. "We reassessed the location, image and product range of our retail
outlets focusing on our calling customers" needs. Since refurbishing our sales
centres, enhancing our retail competency, and adding our safety products and
personal protective clothing range, sales in this sector have improved
PGS"s performance was enhanced by its application of sophisticated technology to
produce and improve new and existing processes. Firm pricing trends and
initiatives to increase operating efficiencies added to earnings, and ensured
that PGS exceeded its targets for the year with increases in revenue of 10
percent and operating profit of 14 percent.
Referring to shortages in the supply of carbon dioxide as a result of the Petro
SA shutdown, Hogben said that forward planning and product forecasting had
ensured that Afrox customers received an uninterrupted supply. It was the only
gas company to achieve this.
Afrox Healthcare"s contribution to revenues and profits were derived from strong
organic growth, increased activity, and benefits accruing from the full
integration of last year"s acquisitions.
Michael Flemming, Afrox Healthcare"s managing director says he is pleased with
the results. "We continue to grow revenues and operating profits and the
segmental results show Healthcare to be 28 percent up in operating profit of
R550,5 million and 15 percent up in revenue at R4,5 billion."
"Growth of Healthcare has been recognised by the Financial Mail, where Afrox
Healthcare Limited, as a stand-alone company, was nominated as the 13th best
performing company on the JSE Securities Exchange, based on a compound annual
growth rate over five years."
In July, a joint cautionary announcement was made by Afrox and Afrox Healthcare,
which stated that, `Afrox is in the process of considering its strategic options
with regard to its shareholding in Afrox Healthcare Limited. These discussions
may or may not lead to a change in Afrox"s shareholding."
Hogben said, "As this process has not been finalised, we are unable to make
further statements but we expect some conclusion in the near future. When this
occurs, a full communications exercise will inform stakeholders."
Issued by African Oxygen Limited
For further information contact:
011 490 0554 or 082 495 1481
011 490 0712 or 082 891 5149
Date: 30/10/2003 03:06:05 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department