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.
JSE share code: AFX.
NSX share code: AOX.
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
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
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
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."
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