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African Oxygen Limited - Press Release

Release Date: 28/10/2004 15:34:20      Code(s): AFX
AFRICAN OXYGEN LIMITED - PRESS RELEASE                                          
African Oxygen Limited                                                          
(Incorporated in the Republic of South Africa).                                 
Registration number: 1927/000089/06.                                            
ISIN: ZAE000030920.                                                             
JSE share code: AFX.                                                            
NSX share code: AOX.                                                            
("Afrox").                                                                      
PRESS RELEASE                                                                   
28 OCTOBER 2004                                                                 
AFROX"S EFFICIENCIES REAP REWARDS                                               
HEADLINE EARNINGS GROW BY 15% AND DIVIDEND OUT OF CONTINUING OPERATIONS BY 24%  
In a difficult economy, African Oxygen Limited (Afrox) produced satisfactory    
results for the year ended 30 September 2004.  Revenue increased by 7 percent to
R7,8 billion but headline earnings increased 15 percent to R643 million (2003:  
R559 million) as a result of Afrox"s stringent efficiency and cost reduction    
measures.  Afrox"s continuing operations grew operating profit by 18 percent and
net profit by 16 percent.                                                       
The company"s continuing ability to generate cash was again a highlight of this 
year"s results.  Cash generated from operating activities were 126 percent of   
operating profit at R1,6 billion.                                               
Operating profit increased by 17 percent to R1,3 billion (2003: R1,1 billion)   
and gearing reduced to a low 4,6 percent (2003: 12,5 percent).  This improvement
and the company"s strong balance sheet are due to continued focus on working    
capital management.                                                             
These sound results enabled the board of directors to declare a final dividend  
from the continuing industrial operations of 31 cents per share (2003: 29 cents 
per share).  This brings the total dividend for the year to 64 cents per share, 
which is a 24 percent increase on the previous year.  This dividend is covered  
1,8 times by earnings.                                                          
Afrox"s chief executive, Rick Hogben, said, "Our results are indicative of      
Afrox"s ability to perform well in all economic conditions. We have been        
successful in establishing new industrial markets with more product service     
offerings that add value to our consumers, and we are seeing some of the        
benefits of a three-year programme centred on our customers."                   
The strong rand impacted on Afrox"s customers, particularly in the mining and   
manufacturing sectors, causing a decline in demand for core products.  The      
rand"s strength also affected Afrox"s own export revenues and foreign currency  
receipts from earnings from the company"s operations in Africa.  Nevertheless   
efficiency-enhancing measures were successful.                                  
Hogben said, "With the mining and manufacturing industries under pressure from  
the strong rand, we are fortunate that our product range spans the key sectors  
of the economy, so we"re not overly dependent on the economic performance of a  
select few."                                                                    
All three businesses, Industrial & Special Products (ISP), Process Gas Solutions
(PGS), and Healthcare, performed well.                                          
New business gains, particularly in the beverage industry where Afrox complies  
with stringent specifications, and the renewal of existing long-term contracts, 
contributed to PGS"s robust performance.  Other contributory factors were       
buoyant demand for carbon dioxide for use in a wide variety of applications, and
operational efficiencies implemented by PGS.                                    
Hogben said, "Our industrial products did well in spite of the difficult        
economy.  New Afrox manufactured regulators and medical oxygen cylinders were   
launched with encouraging feedback, and sales of our safety products have shown 
a marked improvement over last year."                                           
Afrox"s gas equipment and welding products have gained market share in the South
Pacific, and are also being marketed in Asia.  Export revenues held their own   
against the rand"s strength, and Hogben said Afrox continues to pursue further  
global opportunities.   Locally, loyalty to the Afrox brand helped to shield the
company against the influx of cheaper imports, many of dubious safety standards.
Afrox Handigas is a significant contributor to Afrox"s profit and is the second 
largest contributor to revenue with several opportunities for growth in South   
Africa and the rest of Africa.  Handigas sales volumes increased and, in spite  
of oil price fluctuations, which ranged between $29 and $45 a barrel during the 
financial year, Handigas performed well.  Volumes and market share were boosted 
by the renewal of existing contracts and new business gains.                    
The Scientific Gases, Packaged Chemicals, Helium and Refrigerant Services       
operations were restructured for future development.  Exciting new applications 
on offer include a complete range of diving gases, fire suppression gases for   
occupied spaces, an improved customised helium service, and a broader           
refrigerant service offering.  This section provided excellent profit growth.   
Afrox has improved management and fiscal disciplines and processes in the       
company"s African operations.  In addition there has been further investment in 
new plant and equipment.  The intention is to replicate the South African       
activities by entering and servicing industrial markets in several sub-Saharan  
countries, which should provide above average growth in future.                 
Turning to Healthcare, Hogben said, "As the sale of Afrox Healthcare is still   
pending, we are unable to make further statements, but we expect some conclusion
fairly soon.  When this occurs, a full communications exercise will inform      
stakeholders."                                                                  
Healthcare had an excellent year in spite of stiff competition and increased    
government regulation.  A majority shareholding was acquired in Wilgeheuwel     
Hospital and construction began on a new 194-bed hospital at Fourways, Gauteng. 
The Jan S Marais Hospital in the Western Cape was sold and two small sameday    
surgical centres were closed.  International expansion progressed through a     
venture with Care UK plc in the United Kingdom, providing orthopaedic services  
to the National Health Services.                                                
The hospitals saw a small improvement in patient volumes, and focused on        
operating efficiencies.  The tariffs negotiated individually with medical       
funders reflect an increase in risks shared by the hospitals.  Legislation      
affecting the pricing of medicines was introduced during the year and required a
further review of tariffs.  These negotiations were successfully concluded on   
the basis of remaining cost neutral to funders.                                 
"Our business base is broad, providing essential products and services to almost
every industrial company in South Africa.  We will continue to build on our     
strong brand and marketing, focusing on our customers, and packaging new and    
innovative product service offerings that add value to their operations, and    
that will contribute to growth.   Our service related businesses account for a  
large proportion of revenue and profits, making us far less dependent on the    
engineering sector and GDFI related markets than we were some years ago."       
Ends                                                                            
Issued by African Oxygen Limited                                                
Contact: Chris Fieldgate (011) 490 0554 / 082 495 1481 or                       
Ros Beart (011) 490 0712 / 082 891 5149                                         
Date: 28/10/2004 03:34:40 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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