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Afx - African Oxygen Limited - Audited Group Financial Results And Dividend

Release Date: 16/02/2011 15:00:03      Code(s): AFX
AFX - African Oxygen Limited - Audited Group financial results and dividend     
announcement for the year ended 31 December 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")                                       
AUDITED GROUP FINANCIAL RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 31 
DECEMBER 2010                                                                   
*    Revenue decreased 2% to R4,7 billion                                       
*    EBITDA down 24% to R606 million                                            
*    HEPS down 26% to 55,5 cents per share                                      
*    Cash generated from operations R606 million                                
PERFORMANCE SUMMARY                                                             
For the year ended 31 December 2010 revenue decreased 2% to R4,7 billion and    
earnings before interest, tax, depreciation, amortisation and impairments       
(EBITDA) reduced 24% to R606 million. Net profit was R106 million, including    
impairments. Headline earnings per share were 55,5 cents for the year, down 26%.
Afrox continued to invest in plant modernisation, additional capacity and       
efficiency enhancements to the value of R294 million (2009: R307 million). The  
Group ended the year with net borrowings of R842 million and gearing of 20,6%   
(2009: 21,1%).                                                                  
BUSINESS REVIEW                                                                 
Afrox continued to make sound progress in a number of key performance areas     
during 2010. Notwithstanding this, our financial performance was disappointing  
as trading conditions remained challenging and were exacerbated by the          
disruptive and unforeseeable equipment failures at the air separation unit (ASU)
in Witbank, during March.  The impairment of the MIG wire plant in Brits in     
November further impacted profitability.                                        
Input cost pressures in 2010, including an increase in electricity (44%), wages 
and commodities, were a challenge for the Group from a selling price/cost       
recovery point of view. Other factors such as strikes and supply disruptions    
presented additional challenges.                                                
A recovery was seen in LPG demand, with bulk volumes ahead of 2009. In packaged 
LPG, trading conditions were mixed. Legislated maximum pricing for domestic LPG 
came into being in July 2010 and pricing is now adjusted monthly in line with   
other petroleum products. Illegal filling continues to be a concern and Afrox is
assisting the authorities to address the issue. Tonnage volumes marginally      
increased for the year over 2009.                                               
Merchant bulk volumes were affected in the first half by supply disruptions,    
including the Witbank plant failure, and additional costs were incurred for     
trunking and sourcing. Claims have been received from two customers due to these
supply disruptions and a contingent liability note will be disclosed in the     
annual financial statements. The situation improved during the second half with 
volumes ending higher for the year.                                             
Industrial gases volumes remained weak and cylinder rental decreased. Afrox     
continues to focus on registering cylinders in advance of the Individual        
Cylinder Control Project as a means to ensure better inventory management and   
thus protect income. Special products and chemicals volume was ahead of 2009.   
Healthcare volumes were down by 5% compared to 2009, not unexpected given that  
four provincial tenders for government hospitals were not renewed. Sales and    
profits were within expectations. Growth is being achieved in the private       
homecare market.                                                                
Welding consumables volumes were down on 2009. Aggressive price-based import    
competition eroded market share. Sales in gas equipment reduced but gross margin
improved as low margin exports reduced. Afrox launched an industrial welding    
machine range with favourable customer response in the latter part of the year. 
The implementation of the manufacturing strategy, communicated last year, is on 
target.  The Germiston equipment factory has received the first components which
have been successfully assembled.  With the closure of the MIG wire plant       
importation of product plans are in place.                                      
In addition to major maintenance and upgrading of the company`s ASUs, Afrox is  
investing R200 million in a new ASU to be erected at the Pretoria site.  The ASU
will have Argon capability and will commence production in 2013.  The final     
commissioning of the CO2 plant in Sasolburg was completed in July.              
DIVIDEND                                                                        
The Board has resolved to declare a final cash dividend of 8 cents per share    
(2009: 19 cents). Together with the interim cash dividend of 19 cents per share 
(2009: 19 cents), a total of 27 cents per share (2009: 38 cents) is paid for the
year and is covered 2,1 times based on headline earnings per share (2009: 2,0   
times).                                                                         
CHANGES TO THE BOARD                                                            
Pursuant to the resignation of Alan Watkins as a director, Dynes Woodrow of the 
The Linde Group was appointed to the Board as a non-executive director effective
20 May 2010. Frederick Kotzee was appointed financial director of the company   
effective 20 May 2010.                                                          
OUTLOOK                                                                         
Afrox is focusing on protecting its strong position in industrial gases, LPG and
hardgoods with continued investment in plant expansion and modernisation, the   
benefits of which are likely to start coming through from 2011 onwards. A number
of sizeable one-off costs should not recur in 2011, and the Group is well geared
to benefit from improved market conditions and growth opportunities.            
Kent Masters             Tjaart Kruger             16 February 2011             
Chairman                 Managing director         Johannesburg                 
NOTICE OF FINAL DIVIDEND DECLARATION NUMBER 169 AND SALIENT FEATURES            
Notice is hereby given that a cash dividend of 8 cents per ordinary share, being
the final dividend for the year ended 31 December 2010, has been declared       
payable to all shareholders of African Oxygen Limited recorded in the register  
on Thursday, 21 April 2011.                                                     
The salient dates for the declaration and payment of the final dividend are as  
follows:                                                                        
                                                 2011                           
Last day to trade ordinary shares "cum" dividend  Thursday, 14 April            
Ordinary shares trade "ex" the dividend           Friday, 15 April              
Record date                                       Thursday, 21 April            
Payment date                                      Tuesday, 26 April             
Share certificates may not be dematerialised or rematerialised between Friday,  
15 April 2011 and Thursday, 21 April 2011, both days inclusive.                 
By order of the board                                                           
C Low                                                 16 February 2011          
Company Secretary                                     Johannesburg              
AUDIT OPINION                                                                   
The independent auditors, KPMG Inc., have issued their opinion on the Group`s   
financial statements for the year ended 31 December 2010.  The audit was        
conducted in accordance with International Standards on Auditing.  A copy of    
their unqualified audit report is available for inspection at the Company`s     
registered office.  These condensed financial statements have been derived from 
the Group financial statements and are consistent, in all material respects,    
with the Group financial statements.                                            
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION                          
                                                                                
                                             31 December  31 December           
Rm                                  Note      2010         2009                 
ASSETS                                                                          
Property, plant and equipment       3         2 637        2 729                
Investment in associate                       17           13                   
Other non-current assets                      842          1 007                
Non-current assets                            3 496        3 749                
Inventories                                   663          573                  
Trade and other receivables                   780          865                  
Cash and cash equivalents                     327          609                  
Taxation receivable                           20           -                    
Current assets                                1 790        2 047                
Total assets                                  5 286        5 796                
EQUITY AND LIABILITIES                                                          
Attributable to equity holders of             2 695        2 827                
the company                                                                     
Non-controlling interest                      32           32                   
Total equity                                  2 727        2 859                
Long-term borrowings                          871          1 127                
Deferred tax liabilities                      514          562                  
Non-current liabilities                       1 385        1 689                
Current portion of long-term                  263          363                  
borrowings                                                                      
Trade and other payables                      848          843                  
Taxation payable                              28           9                    
Bank overdrafts                               35           33                   
Current liabilities                           1 174        1 248                
Total equity and liabilities                  5 286        5 796                
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
                                                            Restated            
Rm                                    Note      31 December  31 December        
                                               2010         2009                
Revenue                                         4 721        4 795              
Operating cost                                  (4 115)      (3 994)            
Earnings before interest, tax,                  606          801                
depreciation, amortisation and                                                  
impairments (EBITDA)                                                            
Depreciation and amortisation                   (283)        (301)              
Impairments                                     (104)        (18)               
Earnings before interest and tax                219          482                
(EBIT)                                                                          
Net finance costs                               (63)         (116)              
Income from associate                           6            2                  
Profit before taxation                4         162          368                
Income tax expense                              (56)         (125)              
Profit for the period                           106          243                
Attributable to:                                                                
Equity holders of the Company                   94           232                
Non-controlling interest                        12           11                 
Profit for the period                           106          243                
Basic and diluted earnings per                  30,5         75,2               
ordinary share (cents)                                                          
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                        
                                                                                
Rm                                              31 December  31 December        
                                               2010         2009                
Profit for the period                           106          243                
Other comprehensive loss after tax:             (117)        (14)               
Translation differences for foreign             (27)         (27)               
operations                                                                      
Translation differences relating to             (8)          (4)                
non-controlling interest                                                        
Changes in fair value of cash flow              (12)         (2)                
hedges                                                                          
Actuarial (losses)/gains on defined-            (97)         26                 
benefit plan                                                                    
Deferred tax relating to actuarial              27           (7)                
gains/losses                                                                    
Total comprehensive (loss)/income               (11)         229                
for the period                                                                  
Attributable to:                                                                
Equity holders of the Company                   (15)         222                
Non-controlling interest                        4            7                  
Total comprehensive (loss)/income               (11)         229                
for the period                                                                  
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                           
                    Share                                                       
                    capital                                                     
Rm                   and       Other      Retained    Non-        Total         
                    share     reserves   earnings    controlling                
                    premium                          interest                   
Balance at 1         552       310        1 879       39          2 780         
January 2009                                                                    
Other movements       -        (10)       -           (4)         (14)          
Profit for the        -         -         232         11          243           
period                                                                          
Dividends paid        -         -         (136)       (14)        (150)         
Balance at 31        552       300        1 975       32          2 859         
December 2009                                                                   
                                                                                
Balance at 1         552       300        1 975       32          2 859         
January 2010                                                                    
Other movements       -        (109)      -           (8)         (117)         
Profit for the        -         -         94          12          106           
period                                                                          
Dividends paid        -         -         (117)       (4)         (121)         
Balance at 31        552       191        1 952       32          2 727         
December 2010                                                                   
CONDENSED CONSOLIDATED CASH FLOW STATEMENT                                      
                                                                                
Rm                                            31 December  31 December          
                                             2010         2009                  
Earnings before interest and tax (EBIT)       219          482                  
Adjustments for:                                                                
Depreciation and amortisation                 283          301                  
Impairments of tangible and intangible        104          18                   
assets                                                                          
Other                                         36           10                   
Operating cash flow before working capital    642          811                  
adjustments                                                                     
Working capital adjustments                   (36)         422                  
Cash generated from operations                606          1 233                
Interest paid and taxation paid               (197)        (288)                
Other                                         (3)          (3)                  
Cash available from operating activities      406          942                  
Dividends paid                                (117)        (136)                
Dividends to non-controlling interest         (4)          (14)                 
Net cash inflow from operating activities     285          792                  
Additions to property, plant and equipment    (294)        (307)                
and intangibles                                                                 
Other net investing cash flows                81           133                  
Net cash outflow from investing activities    (213)        (174)                
(Decrease)/increase in borrowings             (356)        100                  
Net cash (outflow)/inflow from financing      (356)        100                  
activities                                                                      
Net (decrease)/increase in cash and cash      (284)        718                  
equivalents                                                                     
Cash and cash equivalents at beginning of     576          (142)                
period                                                                          
Cash and cash equivalents at end of period    292          576                  
COMPARATIVE ANALYSIS                                                            
                                        31 Dec                                  
                                        2009                                    
                                        12 months                               
Previously                              
Rm                                       Reported   Adjustment  Restated        
Revenue                                  4 795       -          4 795           
Operating costs                          (3 957)    (37)        (3 994)         
EBITDA                                   838        (37)        801             
Depreciation and amortisation            (301)      -           (301)           
Impairments                              -          (18)        (18)            
EBIT                                     537        (55)        482             
Net finance costs                        (171)      55          (116)           
Income from associate                    2          -           2               
Profit before taxation                   368        -           368             
Income tax expense                       (125)      -           (125)           
Profit for the period                    243        -           243             
                                                                                
Attributable to:                                                                
Equity holders of the Company             232        -           232            
Non-controlling interest                 11          -          11              
Net profit for the period                243        -           243             
                                                                                
Basic and diluted earnings per share     75,2       -           75,2            
(cents)                                                                         
Headline earnings per share (cents)      74,6       -           74,6            
The adjustment relates to:                                                      
Net financing costs related to employee benefit funds are shown as              
finance costs and investment income and not within earnings before              
interest and tax.                                                               
GEOGRAPHICAL SEGMENTS                                                           
                                                                                
South      Rest of                      
Rm                                       Africa     Africa      Total           
Year ended 31 December 2010                                                     
- revenue                                 3 990      731         4 721          
- EBITDA                                 400        206         606             
Year ended 31 December 2009                                                     
- revenue                                 4 070      725         4 795          
- EBITDA                                 595        206         801             
NOTES TO THE FINANCIAL STATEMENTS                                               
1. FINANCIAL PERIOD                                                             
The year end results hereby presented are for twelve months ended 31 December   
2010.                                                                           
2. STATEMENT OF COMPLIANCE AND ACCOUNTING POLICIES                              
These condensed year end group financial statements have been prepared in       
accordance with the recognition and measurement of International Financial      
Reporting Standards (IFRS), AC 500 Standards as issued by the Accounting        
Practices Board or its successor, and are in compliance with IAS 34:            
presentation and disclosure Interim Financial Reporting, the JSE Limited`s      
Listing Requirements and in the manner required by the South African Companies  
Act.                                                                            
The accounting policies applied are consistent with those followed in the       
preparation of the consolidated annual financial statements for the year ended  
31 December 2009, except, for adjustments referred to in the comparative        
analysis or, where the group has adopted new or revised IFRS statements.        

                                             31 December   31 December          
  Rm                                         2010          2009                 
3. Capital expenditure and commitments                                          
Property, plant and equipment                                                 
  Opening carrying value                     2 729         2 817                
  Additions                                  294           293                  
  Disposals                                  (14)          (83)                 
Depreciation                               (252)         (271)                
  Impairments                                (96)          -                    
  Translation differences                    (24)          (27)                 
  Closing carrying value                     2 637         2 729                
Capital commitments                                                           
   - authorised but not contracted           231           62                   
   - authorised and contracted               59            33                   
  Total capital commitments                  290           95                   
4. Profit before taxation                                                       
  Included in profit before taxation are:                                       
  Amortisation of intangible assets          31            30                   
  Depreciation                               252           271                  
STATISTICS AND RATIOS                                                           
                                                                                
Rm                                        31 December    31 December            
                                         2010           2009                    
Reconciliation between earnings and       94             232                    
headline earnings                                                               
Total profit for the period attributable                                        
to equity holders of the company                                                
Profit on disposal of property, plant     2              (9)                    
and equipment                                                                   
Net impairment of plant and intangibles   75             8                      
Headline earnings                         171            231                    

                                         30,5           75,2                    
Basic and diluted earnings per ordinary                                         
share - Group (cents)                                                           
Headline earnings per ordinary share -    55,5           74,6                   
Group (cents)                                                                   
Average number of ordinary shares in      308 568        308 568                
issue during the period and on which                                            
earnings per share are based (`000)                                             
Dividends per share (cents)               27,0           38,0                   
Net asset value per share (cents)         784            804                    
                                                                                
RATIOS                                                                          
EBITDA margin (%)                         12,8           16,7                   
Interest cover (times)                    3,5            4,2                    
Effective tax rate (%)                    34,6           34,0                   
Gearing (%)                               20,6           21,1                   
Dividend cover based on headline          2,1            2,0                    
earnings per share(times)                                                       
Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO  
Box 5404, Johannesburg 2000. Telephone +27 (0) 11 490-0400.                     
Transfer secretaries: Computershare Investor Services (Pty) Limited,            
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107.         
Telephone: +27 (0) 11 370-5000.                                                 
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), DM Lawrence, M Malebye, Dr KDK Mokhele,    J    
Narayadoo, J Nowicki**, KJ Oliver, SM Pityana, LL van Niekerk,                  
DM Woodrow***                                                                   
*American    **German     ***British                                            
Company secretary:  C Low                                                       
www.afrox.com                                                                   
Afrox is a member of The Linde Group                                            
Date: 16/02/2011 15:00:02 Supplied by www.sharenet.co.za                     
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