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AFX - Afrox to Cut R200m in Costs

Release Date: 07/05/2009 16:07:02      Code(s): AFX
AFX - Afrox to Cut R200m in Costs                                               
African Oxygen Limited                                                          
(Incorporated in the Republic of South Africa)                                  
(Registration number 1927/000089/06)                                            
JSE code: AFX                                                                   
NSX code: AOX                                                                   
ISIN: ZAE000067120                                                              
("Afrox" or "the company")                                                      
AFROX TO CUT R200M IN COSTS                                                     
Market leader announces raft of measures to counter economic crisis             
Sub-Sahara`s leading gases and welding company, African Oxygen Limited, has     
confirmed operational and structural changes to deliver R200 million in cost    
savings by the end of 2009.                                                     
Measures announced at its annual general meeting held today (May 7, 2009)       
-    A reduction in filling sites, elimination of minimally profitable or slow  
    moving product ranges, and optimisation of routes to market.                
-    A review of all outlets is complete and closure of branches that do not    
    meet minimum return thresholds is underway.                                 
-    A head-count reduction of close to 15% will be achieved by the third       
Managing Director, Tjaart Kruger, said: "The current actions being implemented, 
albeit addressing immediate requirements, are in fact strategically correct to  
ensure long-term sustainability.                                                
"We look to these measures to mitigate the impact of the global crisis and,     
together, I believe, they place the company firmly on the road to realising its 
"In today`s economic climate, forecasting is difficult, leaving us with the only
option to manage efficiencies, reduce cost, and maximise cash to our full       
"Change management requirements are huge. The current external pressures and    
internal changes to the company require the biggest culture change Afrox has    
ever experienced. The challenges of changing this culture should not be         
Kruger warned the first quarter of 2009 "has been a continuation of the trends  
set in the last quarter of 2008".                                               
He said: "Volumes, sales, pricing, cash-flow, manpower, production costs, are   
all under market-reflected pressure and we don`t expect any significant reversal
in the short term. Customer cutbacks in capex are evident which will undoubtedly
affect expansion opportunities in tonnage and we see spare capacity for the     
foreseeable future."                                                            
Kruger told shareholders that 2008 was less a year of two halves and more a year
of quarters, with each period progressively worse than the previous and, by the 
fourth quarter, each month was significantly more depressed than the last.      
He reported that the company`s African operations achieved excellent results at 
good margin, contributing a record 23% of group profits.                        
"The R1-billion of capital expenditure programme, referred to in the previous   
trading period, continued in 2008 with the remaining project, the Gases         
Operations Centre in Germiston, to be finished this year," said Kruger.         
He added: "As a result, the carbon dioxide plant was successfully commissioned  
in the last quarter of 2008, and the Kuilsriver air separation unit has now been
"Competitor activity was noticeably fiercer in 2008 as economic conditions      
worsened and, going forward, a rigorous pricing regime is the order of the day  
to protect market share."                                                       
Further strengthening Afrox`s position is its `A`-rating, or Level 4, BEE       
Said Kruger: "We are making excellent progress with our black economic          
empowerment objectives and remain committed as ever to creating opportunities   
for black people to contribute to the economy.                                  
"The new rating means Afrox is the first chemicals company listed on the JSE to 
achieve a Level 4 value adding status for our commitment to BEE. In line with   
the Department of Trade and Industry`s generic scorecard, customers can now     
claim 125% in BEE recognition on all goods and services purchased.              
"This is already having a positive impact on customer retention and State-      
related tenders, an invaluable source of new business in the current climate."  
7 May 2009                                                                      
Barnard Jacobs Mellet Corporate Finance (Pty) Limited                           
Date: 07/05/2009 16:07:01 Supplied by www.sharenet.co.za                     
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