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Afx - African Oxygen Limited - Unaudited Financial Results

Release Date: 26/08/2010 15:07:03      Code(s): AFX
AFX - African Oxygen Limited - Unaudited financial results                      
and dividend announcement for the six months ended 30 June                      
2010                                                                            
AFRICAN OXYGEN LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
Registration number: 1927/000089/06                                             
ISIN: ZAE000067120                                                              
JSE code: AFX                                                                   
NSX code: AOX                                                                   
("Afrox" or "the Company" or "the Group")                                       
UNAUDITED FINANCIAL RESULTS AND DIVIDEND ANNOUNCEMENT FOR                       
THE SIX MONTHS ENDED 30 JUNE 2010                                               
*    Revenue R2,3 billion                                                       
*    Headline earnings 38,8 cent                                                
PERFORMANCE SUMMARY                                                             
Revenue for the six months to 30 June 2010 was R2,3 billion,                    
down 3%, with R354 million in earnings before interest, tax,                    
depreciation and amortisation (EBITDA), down 13%, compared                      
to the same period last year. EBITDA margin was 15,3%, down                     
1,8%. Net profit was R125 million (2009: R127m) and headline                    
earnings per share 38,8 cents (2009: 38,7 cents). Capital                       
expenditure was R93 million (2009: R115m)for the period. Net                    
borrowings were R941 million (2009: R1,24 billion). The                         
Group`s gearing was 21,5% compared to 27,1% for the same                        
period last year.                                                               
Business review                                                                 
Afrox continued to experience difficult trading conditions,                     
with volumes lower than last year, as industrial sector                         
spending remained under pressure, with recovery only                            
experienced in the automotive and basic iron and steel                          
industries.                                                                     
The Group`s results were negatively affected by several non-                    
repetitive events.  Operations were adversely affected by                       
plant outages and a drivers` strike, which impacted on poor                     
customer service and costs.  The strength of the Rand and                       
high steel prices affected the competitiveness of Afrox`s                       
own-manufactured welding products and cutting equipment.                        
Finally, the Eskom and municipal tariff increases impacted                      
the bottom line.                                                                
LPG volumes were up 3%, driven by the automotive sector,                        
while the LPG cylinder business was down amid increased                         
competitor activity. The regulation of retail prices of LPG                     
cylinders sold to residential customers commenced on July                       
14, 2010, and Afrox has factored the impact of these changes                    
into its business strategy.                                                     
Healthcare performed well with an increase in volumes during                    
this reporting period.                                                          
Operations in other African countries contributed 29% (2009:                    
28%) to the Group`s half-year EBITDA following a challenging                    
first-half. Afrox will continue to aggressively grow its                        
business in rapidly expanding sub-Saharan economies,                            
aligning with existing customer strategies and investments                      
in order to take advantage of increasing consumer demand in                     
the region.                                                                     
The Group`s underlying business remains strong and, as the                      
leading gases and welding company in Africa, Afrox remains                      
the supplier of choice in key markets. Our Level 4 Broad-                       
Based Black Economic Empowerment rating continues to have a                     
positive effect while solid progress is being made in                           
respect of Afrox`s BEE transformation programme and drive                       
for High Performance Organisation status.                                       
Dividend                                                                        
It is the Group`s policy to consider dividends twice                            
annually. The board of directors have declared an interim                       
cash dividend of 19,0 cents per share for the six months                        
ended June 2010 (2009: 19,0 cents). The dividend is covered                     
2,0 times by earnings per share.                                                
Board of directors                                                              
Frederick Kotzee was appointed financial director from 1                        
April 2010 and Dynes Woodrow was appointed as non-executive                     
director effective 20 May 2010.                                                 
Outlook                                                                         
No significant improvement is expected in the South African                     
economy in the second-half of 2010 with only moderate                           
recovery expected in the rest of Africa. Focus will remain                      
on cost management and customer service. As such Afrox                          
maintains a cautious outlook.                                                   
Kent Masters        Tjaart Kruger       26 August 2010                          
Chairman            Managing Director   Johannesburg                            
NOTICE OF INTERIM DIVIDEND DECLARATION NUMBER 168 AND                           
SALIENT FEATURES                                                                
Notice is hereby given that a cash dividend of 19,0 cents                       
per ordinary share, being the interim dividend for the six-                     
month period ended 30 June 2010, has been declared payable                      
to all shareholders of Afrox recorded in the register on                        
Friday, 22 October 2010.                                                        
The salient dates for the declaration and payment of the                        
interim dividend are as follows:                                                
                                       2010                                     
Last day to trade ordinary shares       Friday, 15 October                      
"cum" dividend                                                                  
Ordinary shares trade "ex" the          Monday, 18 October                      
dividend                                                                        
Record date                             Friday, 22 October                      
Payment date                            Monday, 25 October                      
Share certificates may not be dematerialised or                                 
rematerialised between Monday, 18 October 2010 and Friday,                      
22 October 2010, both days inclusive.                                           
By order of the board                                                           
A Meer-Seedat                             26 August 2010                        
Acting Company Secretary                  Johannesburg                          
                                                                                
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION                          
30 June   30 June   31 Dec                       
Rm                       Note   2010      2009      2009                        
ASSETS                                                                          
Property, plant and      4      2 688     2 766     2 729                       
equipment                                                                       
Other non-current assets        974       999       1 020                       
Non-current assets              3 662     3 765     3 749                       
Inventories                     654       711       573                         
Trade and other                 902       1 081     865                         
receivables                                                                     
Cash and cash                   494       187       609                         
equivalents                                                                     
Current assets                  2 050     1 979     2 047                       
Total assets                    5 712     5 744     5 796                       
EQUITY AND LIABILITIES                                                          
Shareholders` equity            2 839     2 749     2 827                       
Non-controlling interest        36        33        32                          
Total equity                    2 875     2 782     2 859                       
Long-term borrowings            1 127     790       1 127                       
Deferred tax liabilities        573       538       562                         
Non-current liabilities         1 700     1 328     1 689                       
Current portion of long-        263       600       363                         
term borrowings                                                                 
Trade, other payables           812       964       843                         
and provision                                                                   
Taxation payable                17        37        9                           
Bank overdrafts                 45        33        33                          
Current liabilities             1 137     1 634     1 248                       
Total equity and                5 712     5 744     5 796                       
liabilities                                                                     
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
                            30 June    30 June   31 Dec                         
2010       2009      2009                           
                                       Restated  Restated                       
Rm                     Note  6 months   6 months  12 months                     
Revenue                      2 312      2 374     4 795                         
Operating cost               (1 958)    (1 969)   (4 012)                       
EBITDA                       354        405       783                           
Depreciation and             (137)      (151)     (301)                         
amortisation                                                                    
Operating profit             217        254       482                           
Net finance expense          (31)       (68)      (116)                         
Income from associate        3          2         2                             
Profit before taxation       189        188       368                           
Income tax expense           (64)       (61)      (125)                         
Profit for the period        125        127       243                           
                                                                                
Attributable to:                                                                
Equity holders of the        118        120       232                           
Company                                                                         
Non-controlling              7          7         11                            
interest                                                                        
Net profit for the           125        127       243                           
period                                                                          
                                                                                
Basic and diluted      5     38,3       39,0      75,2                          
earnings per share                                                              
(cents)                                                                         
Headline earnings per  5     38,8       38,7      74,6                          
share (cents)                                                                   

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                        
                       30 June      30 June     31 Dec                          
                       2010         2009        2009                            
Restated    Restated                        
Rm                      6 months     6 months    12 months                      
Profit for the period   125          127         243                            
Exchange differences    (5)          (31)        (27)                           
for foreign operations                                                          
Exchange differences    (1)          (8)         (4)                            
relating to non-                                                                
controlling interest                                                            
Changes in fair value   -            (4)         (2)                            
of cash flow hedges                                                             
Actuarial               (60)         -           26                             
gains/(losses) on                                                               
defined-benefit funds                                                           
Deferred tax relating   17           -           (7)                            
to actuarial                                                                    
gains/losses                                                                    
Other comprehensive     (49)         (43)        (14)                           
income after tax:                                                               
Total comprehensive     76           84          229                            
income for the period                                                           

Attributable to:                                                                
Equity holders of the   71           85          222                            
Company                                                                         
Non-controlling         5            (1)         7                              
interest                                                                        
Total comprehensive     76           84          229                            
income for the period                                                           
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                  
                                       30 June     30 June     31 Dec           
                                       2010        2009        2009             
                                                   Restated    Restated         
Rm                                      6 months    6 months    12 months       
Operating profit                        217         254         482             
Adjustments for:                                                                
Depreciation and amortisation           137         151         301             
Other                                   11          (44)        28              
Operating cash flow before working      365         361         811             
capital changes                                                                 
Working capital changes                 (155)       247         422             
Cash generated from operations          210         608         1 233           
Finance costs and taxation paid         (88)        (140)       (288)           
Other                                   -           -           (3)             
Cash available from operating           122         468         942             
activities                                                                      
Dividends paid                          (59)        (77)        (136)           
Net cash inflow from operating          63          391         806             
activities                                                                      
Purchase of property, plant and         (93)        (115)       (307)           
equipment and intangibles                                                       
Net other investing cash flows          4           25          133             
Net cash outflow from investing         (89)        (90)        (174)           
activities                                                                      
Dividends to non-controlling interest   (1)         (5)         (14)            
(Decrease)/increase in borrowings       (100)       -           100             
Net cash (outflow)/inflow from          (101)       (5)         86              
financing activities                                                            
Net (decrease)/increase in cash and                                             
cash                                                                            
equivalents                             (127)       296         718             
Cash and cash equivalents at beginning  576         (142)       (142)           
of period                                                                       
Cash and cash equivalents at                                                    
end of period                           449         154         576             
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                           
             Share                       Non-                                   
             capital                                                            
             and                                                                
Rm            share    Other    Retained  controlling Total                     
             premium  reserves earnings  interest                               
Balance at 1  552      300      1 975     32           2                        
January 2010                                          859                       
Total         -        (47)     118       5           76                        
comprehensive                                                                   
income                                                                          
Dividends     -        -        (59)      (1)         (60)                      
paid                                                                            
Balance at 30 552      253      2 034     36          2 875                     
June 2010                                                                       
                                                                                
Balance at 1  552      310      1 879     39          2 780                     
January 2009                                                                    
Total         -        (35)     120       (1)         84                        
comprehensive                                                                   
income                                                                          
Dividends                       (77)      (5)         (82)                      
paid                                                                            
Balance at 30 552      275      1 922     33          2 782                     
June 2009                                                                       
                                                                                
Balance at 1  552      310      1 879     39           2                        
January 2009                                          780                       
Total         -        (10)     232        7           229                      
comprehensive                                                                   
income                                                                          
Dividends     -        -         (136)     (14)                                 
paid                                                  (150)                     
Balance at 31 552      300      1 975     32           2                        
December 2009                                         859                       
COMPARATIVE ANALYSIS                                                            
30 June                        31 Dec                              
             2010                           2009                                
             6 months                       12                                  
                                            months                              
Rm            Reported  Adjustment Restated  Reported Adjustment  Restated      
Revenue       2 374     -          2 374     4 795     -          4 795         
Operating     (1 941)   (28)       (1 969)   (3 957)  (55)        (4 012)       
cost                                                                            
EBITDA        433       (28)       405       838      (55)        783           
Depreciation  (151)     -          (151)     (301)    -           (301)         
and                                                                             
amortisation                                                                    
Operating     282       (28)       254       537      (55)        482           
profit                                                                          
Net finance   (96)      28         (68)      (171)    55          (116)         
expense                                                                         
Income from   2         -          2         2        -           2             
associate                                                                       
Profit before 188       -          188       368      -           368           
taxation                                                                        
Income tax    (61)      -          (61)      (125)    -           (125)         
expense                                                                         
Profit for    127       -          127       243      -           243           
the period                                                                      

Attributable                                                                    
to:                                                                             
Equity        120       -           120       232      -           232          
holders of                                                                      
the Company                                                                     
Non-          7         -          7         11        -          11            
controlling                                                                     
interest                                                                        
Net profit    127       -          127       243      -           243           
for the                                                                         
period                                                                          

Basic and     39,0      -          39,0      75,2     -           75,2          
diluted                                                                         
earnings per                                                                    
share (cents)                                                                   
Headline      38,7      -          38,7      74,6     -           74,6          
earnings per                                                                    
share (cents)                                                                   
The adjustment relates to:                                                      
Net financing cost for pensions is shown as finance expense and                 
investment income and not within operating profit.                              
GEOGRAPHICAL SEGMENTS                                                           
30 June   30 June    31 Dec                         
                            2010      2009       2009                           
                                                                                
Rm                                     Restated   Restated                      
Revenue                      2 312     2 374      4 795                         
- South Africa               1 955     1 998      4 070                         
- Rest of Africa             357       376        725                           
                                                                                
EBITDA                       354       405        783                           
- South Africa               252       290        577                           
- Rest of Africa             102       115        206                           
                                                                                
Total assets                 5 712     5 744      5 796                         
- South Africa               5 390     5 263      5 273                         
- Rest of Africa             322       481        523                           
NOTES TO THE FINANCIAL STATEMENTS                                               
African Oxygen Limited ("Afrox" or the "Company") is a South                    
African registered company.  The condensed consolidated                         
interim financial statements of the Company comprise the                        
Company and its subsidiaries (together referred to as the                       
"Group") and the Group`s interest in an associate.                              
1    Statement of compliance                                                    
These condensed consolidated interim financial statements                       
have been prepared in accordance with the recognition and                       
measurement criteria of International Financial Reporting                       
Standards ("IFRS"), the presentation as well as disclosure                      
requirements of IAS34 Interim Financial Reporting, the                          
Listing Requirements of the JSE Limited and the Companies                       
Act of South Africa, as amended.                                                
2.   Basis of preparation and accounting policies                               
The financial statements are prepared in millions of South                      
African Rands (Rm) on the historical cost basis.                                
The interim condensed consolidated financial statements do                      
not include all the information and disclosures required in                     
the annual financial statements, and should be read in                          
conjunction with the Group`s annual financial statements as                     
at 31 December 2009.                                                            
The accounting policies are those presented in the annual                       
financial statements for the year ended 31 December 2009 and                    
have been applied consistently to the periods presented in                      
these condensed consolidated interim financial statements                       
and by all Group entities, except where the Group has                           
adopted new or revised accounting statements and                                
interpretations of these standards.  The Group has changed                      
the disclosure option per IAS 19.                                               
3    Audit report                                                               
These consolidated interim financial statements have not                        
been reviewed or audited by the Group`s auditors.                               
30 June   30 June     31 Dec              
                                      2010      2009        2009                
   Rm                                 6 months  6 months    12 months           
4.  Capital expenditure                                                         
Property, plant and equipment                                                
   Opening carrying value             2 729     2 817       2 817               
   Additions                          93        115         293                 
   Disposals                          (6)       (3)         (83)                
Depreciation                       (121)     (136)       (271)               
   Foreign exchange differences       (7)       (27)        (27)                
   Closing carrying value             2 688     2 766       2 729               
                                                                                
5.  Earnings and headline earnings per share                                    
   * Earnings per share are calculated on earnings of R118 million              
   (2009: R120 million).                                                        
   * Headline earnings per share are calculated on headline earnings            
of R119 million (2009: R119 million).                                        
   All of the above are based on weighted average number of ordinary            
   shares of 308 567 602 (2009: 308 567 602) in issue during the                
   period.                                                                      
Reconciliation between earnings                                              
   and headline earnings                                                        
   Profit for the period               118        120         232               
   Loss/(profit) on disposal of        1          (1)         (9)               
property, plant and equipment                                                
   Net impairment of intangibles       -          -           8                 
   Headline earnings                   119        119         231               
                                                                                
6.   Subsequent events                                                          
The directors are not aware of any material matter or                           
circumstance arising since the end of the period and up to                      
the date of this report, not otherwise dealt with in this                       
report.  The Group declared an interim cash dividend of 19,0                    
cents per share on 26 August 2010.                                              
STATISTICS AND RATIOS                                                           
                            30 June    30 June    31 Dec                        
2010       2009       2009                          
                            6 months   6 months   12                            
                                                  months                        
Average number of shares in  308 568    308 568    308 568                      
issue during the period                                                         
(`000)                                                                          
Shares in issue (`000)       308 568    308 568    308 568                      
Net asset value excluding    822        785        804                          
actuarial gain/loss per                                                         
share (cents)                                                                   
Dividends per share (cents)  19,0       19,0       38,0                         
  Final                     -          -          19,0                          
Interim                   19,0       19,0       19,0                          
                                                                                
Ratios                                                                          
EBITDA margin (%)            15,3       17,1       16,3                         
Interest paid cover on       7,0        3,7        4,2                          
operating profit (times)                                                        
Effective tax rate (%)       33,8       32,6       34,0                         
Gearing (%)                  21,5       27,1       21,1                         
Dividend cover - (times)     2.0        2,1        2,0                          
AFRICAN OXYGEN LIMITED                                                          
Registered office: Afrox House, 23 Webber Street, Selby,                        
Johannesburg 2001. PO Box 5404, Johannesburg 2000. Telephone                    
(+27 11) 490-0400.                                                              
Transfer secretaries: Computershare Investor Services (Pty)                     
Limited,                                                                        
Sponsor in South Africa: Barnard Jacobs Mellet Corporate                        
Finance (Pty) Limited.                                                          
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited.                       
Directors:  JK Masters* (Chairman), TN Kruger (Managing                         
Director),                                                                      
FT Kotzee (Financial Director), J Narayadoo(Director MPG                        
Operations),                                                                    
DM Lawrence, M Malebye, Dr KDK Mokhele, J Nowicki**,                            
KJ Oliver, SM Pityana, LL van Niekerk, DM Woodrow***                            
*American    **German    ***British                                             
Acting Company Secretary:  A Meer-Seedat                                        
Auditors:  KPMG Inc.                                                            
26 August 2010                                                                  
www.afrox.com                                                                   
Afrox is a member of The Linde Group                                            
Date: 26/08/2010 15:07:01 Supplied by www.sharenet.co.za                     
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