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Afx - African Oxygen Limited - Unaudited Financial Results For The Six Months

Release Date: 19/07/2011 16:22:01      Code(s): AFX
AFX - African Oxygen Limited - Unaudited financial results for the six months   
ended 30 June 2011 and renewal of cautionary announcement                       
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 FOR THE SIX MONTHS ENDED 30 JUNE 2011 AND RENEWAL   
OF CAUTIONARY ANNOUNCEMENT                                                      
-    Revenue R2,5 billion                                                       
-    Headline earnings 52,8 cent                                                
PERFORMANCE SUMMARY                                                             
Revenue for the six months to 30 June 2011 was R2,5 billion, an increase of     
10% with R416 million in earnings before interest, tax, depreciation and        
amortisation (EBITDA) up 18% compared to the same period last year. EBITDA      
margin improved to 16,4%. Net profit was R58 million (2010: R125 million) and   
headline earnings per share were 52,8 cents (2010: 38,8 cents). Capital         
expenditure was R154 million (2010: R93 million) for the period. Net            
borrowings were R688 million (2010: R941 million). The Group`s gearing was      
17,4% compared to 21,5% for the same period last year.                          
Business review                                                                 
Effective cost management, improved plant reliability and changes to the        
manufacturing strategy drove an improved performance which saw headline         
earnings for the period increase by 37%. These results include a once-off pre-  
tax benefit fund gain of R30 million (7 cents impact per share resulting in     
adjusted headline earnings of 45,9 cents).                                      
The Group has been advised that it has been unsuccessful in the renewal of      
the Highveld Steel supply agreement and thus, the decision was taken to         
impair the R152 million assets associated with the Witbank plant.  The          
existing supply contract has a two year notice period.                          
Trading conditions were mixed. Good volume growth was experienced in the        
liquefied petroleum gas (LPG) business, mostly driven by the automotive         
industry, whilst demand for bulk industrial product did not meet                
expectations. Sales of compressed gases grew satisfactorily.                    
The decision to introduce a new manufacturing strategy has led to a             
significant steady increase in the margin on hardgoods.  The demand for         
hardgoods is improving and this will position the Group well for future         
growth.                                                                         
Operations in African countries outside South Africa contributed 26% (2010:     
29%) to the Group`s half-year EBITDA in what was a challenging market           
characterised by static demand from many markets on the continent. The          
outlook for sub-Saharan Africa remains positive and the region continues to     
be focus for future growth.                                                     
Capital expenditure accelerated during the first half of the year, growing to   
R154 million (2010: R93 million). The majority of this investment was focused   
on the new Pretoria plant, to be commissioned towards the end of 2012, which    
is expected to cost approximately R200 million. Working capital remains a       
focus and has continued to improve.                                             
The Group emphasis on cash management resulted in several achievements. Good    
progress has been made with the collection of long outstanding state debt, an   
area that will continue to get focus.  Inventory management has improved        
significantly with the implementation of a new planning system.                 
Although overall trading conditions remain challenging for the industry as a    
whole, the fundamental position of Afrox as a leading supplier of atmospheric   
gases, hardgoods and LPG remains unchanged. The organisational drive to         
achieve desired High Performance Organisation (HPO) status is continuing and    
has already resulted in significant benefits for the company.                   
Dividend                                                                        
It is the Group`s policy to consider dividends twice annually. The board of     
directors have declared an interim cash dividend of 22,0 cents per share for    
the six months ended June 2011 (2010: 19.0 cents). The dividend is covered 2    
times by earnings per share adjusted for benefit fund gains.                    
Board of directors                                                              
Mike Huggon was appointed as a Non-Executive Director of Afrox from 11 April    
2011 and as Chairman of the Afrox Board from 20 May 2011. Matthias von Plotho   
was appointed as a Non-Executive Director from 20 May 2011.                     
Kent Masters resigned as a Non-Executive Director and Chairman of the Afrox     
Board from 20 May 2011, and Karen Oliver resigned as Non-Executive Director     
from 31 March 2011.                                                             
Resignation of Managing Director, Mr. T.N. Kruger                               
During the reporting period, Tjaart Kruger, Managing Director, tendered his     
resignation to the Board. During his five years with the company he made a      
major contribution to Afrox. The Board thanks him for his contribution and      
wishes him well with his future endeavours.                                     
Outlook                                                                         
Market conditions, compared to the corresponding 2010 period, remain            
challenging for the remainder of the year, with only minimal growth in the      
South African economy expected. Growth in Africa, which traditionally lags      
that of South Africa, is expected to be muted.                                  
We are optimistic that the continued focus on current business strategies,      
backed by continued cost management will contribute to an improved              
performance during the second six months of 2011, compared to the same period   
of last year.                                                                   
Mike Huggon             Tjaart Kruger            19 July 2011                   
Chairman                Managing Director        Johannesburg                   
NOTICE OF INTERIM DIVIDEND DECLARATION NUMBER 170 AND SALIENT FEATURES          
Notice is hereby given that a cash dividend of 22,0 cents per ordinary share,   
being the interim dividend for the six-month period ended 30 June 2011, has     
been declared payable to all shareholders of Afrox recorded in the register     
on Friday, 21 October 2011.                                                     
The salient dates for the declaration and payment of the interim dividend are   
as follows:                                                                     
                                                 2011                           
Last day to trade ordinary shares "cum" dividend  Friday, 14 October            
Ordinary shares trade "ex" the dividend           Monday, 17 October            
Record date                                       Friday, 21 October            
Payment date                                      Monday, 24 October            
Share certificates may not be dematerialised or rematerialised between          
Monday, 17 October 2011 and Friday, 21 October 2011, both days inclusive.       
By order of the board                                                           
Carnita Low                                         19 July 2011                
Company Secretary                                   Johannesburg                
                                                                                
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION                          
                                     30 June     30 June     31 Dec             
Rm                             Note   2011        2010        2010              
ASSETS                                                                          
Property, plant and equipment  4      2 502       2 688       2 637             
Other non-current assets              868         974         859               
Non-current assets                    3 370       3 662       3 496             
Inventories                           684         654         663               
Trade and other receivables           840         902         800               
Cash and cash equivalents             368         494         327               
Current assets                        1 892       2 050       1 790             
Total assets                          5 262       5 712       5 286             
EQUITY AND LIABILITIES                                                          
Shareholders` equity                  2 733       2 839       2 695             
Non-controlling interest              34          36          32                
Total equity                          2 767       2 875       2 727             
Long-term borrowings                  877         1 127       871               
Deferred taxation                     506         573         514               
Non-current liabilities               1 383       1 700       1 385             
Current portion of long-term          163         263         263               
borrowings                                                                      
Trade, other payables and             924         812         848               
provision                                                                       
Taxation payable                      9           17          28                
Bank overdrafts                       16          45          35                
Current liabilities                   1 112       1 137       1 174             
Total equity and liabilities          5 262       5 712       5 286             
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
                                     30 June     30 June     31 Dec             
                                     2011        2010        2010               
Rm                             Note   6 months    6 months    12 months         
Revenue                               2 539       2 312       4 721             
Operating expenses                    (2 123)     (1 958)     (4 115)           
Earnings before interest, tax,        416         354         606               
depreciation, amortisation and                                                  
impairments (EBITDA)                                                            
Depreciation and amortisation         (152)       (137)       (283)             
Impairments                           (152)       -           (104)             
Earnings before interest and          112         217         219               
tax (EBIT)                                                                      
Net finance expense                   (28)        (31)        (63)              
Income from associate                 -           3           6                 
Profit before taxation                84          189         162               
Taxation                              (26)        (64)        (56)              
Profit for the period                 58          125         106               
                                                                                
Attributable to:                                                                
Equity holders of the Company         53          118         94                
Non-controlling interest              5           7           12                
Net profit for the period             58          125         106               

Basic and diluted earnings per 5      17,1        38,3        30,5              
share (cents)                                                                   
Headline earnings per share    5      52,8        38,8        55,5              
(cents)                                                                         
                                                                                
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                        
                             30 June         30 June       31 Dec               
2011            2010          2010                 
Rm                            6 months        6 months      12 months           
Profit for the period         58              125           106                 
Translation differences for   3               (5)           (27)                
foreign operations                                                              
Translation differences       1               (1)           (8)                 
relating to non-controlling                                                     
interest                                                                        
Changes in fair value of cash 13              -             (12)                
flow hedges (net of tax)                                                        
Actuarial losses on defined-  (7)             (60)          (97)                
benefit funds                                                                   
Deferred tax relating to      2               17            27                  
actuarial losses                                                                
Other comprehensive           12              (49)          (117)               
income/(loss) after tax:                                                        
Total comprehensive           70              76            (11)                
income/(loss) for the period                                                    
                                                                                
Attributable to:                                                                
Equity holders of the Company 64              71            (15)                
Non-controlling interest      6               5             4                   
Total comprehensive           70              76            (11)                
income/(loss) for the period                                                    
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                  
                                       30 June     30 June     31 Dec           
                                       2011        2010        2010             
Rm                                      6 months    6 months    12 months       
Earnings before interest and tax        112         217         219             
(EBIT)                                                                          
Adjustments for:                                                                
Depreciation, amortisation and          304         137         356             
impairments                                                                     
Other                                   14          11          67              
Operating cash flow before working      430         365         642             
capital changes                                                                 
Working capital changes                 4           (155)       (36)            
Cash generated from operations          434         210         606             
Finance expenses and tax paid           (84)        (88)        (197)           
Other                                   (29)        -           (3)             
Cash available from operating           321         122         406             
activities                                                                      
Dividends paid                          (25)        (59)        (117)           
Dividends to non-controlling interest   (4)         (1)         (4)             
Net cash inflow from operating          292         62          285             
activities                                                                      
Purchase of property, plant and         (154)       (93)        (294)           
equipment and intangibles                                                       
Net other investing cash flows net      16          4           81              
Net cash outflow from investing         (138)       (89)        (213)           
activities                                                                      
Decrease in borrowings                  (94)        (100)       (356)           
Net cash outflow from financing         (94)        (100)       (356)           
activities                                                                      
Net increase/(decrease) in cash and     60          (127)       (284)           
cash equivalents                                                                
Cash and cash equivalents at beginning  292         576         576             
of period                                                                       
Cash and cash equivalents at                                                    
end of period                           352         449         292             
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        191         1 952      32            2 727         
January 2011                                                                    
Total             -          11          -          1            12             
comprehensive                                                                   
income                                                                          
Profit for the    -          -           53         5            58             
period                                                                          
Acquisition of    -          -           (1)        (1)          (2)            
additional                                                                      
interest in                                                                     
subsidiary                                                                      
Dividends paid    -          -           (25)       (3)          (28)           
Balance at 30     552        202         1 979      34           2 767          
June 2011                                                                       

Balance at 1      552        300         1 975      32            2 859         
January 2010                                                                    
Total             -          (47)        -          (2)          (49)           
comprehensive                                                                   
income                                                                          
Profit for the    -          -           118        7            125            
period                                                                          
Dividends paid                           (59)       (1)          (60)           
Balance at 30     552        253         2 034      36           2 875          
June 2010                                                                       
                                                                                
Balance at 1      552        300         1 975      32            2 859         
January 2010                                                                    
Total             -          (109)       -          (8)          (117)          
comprehensive                                                                   
income                                                                          
Profit for the    -          -           94         12           106            
period                                                                          
Dividends paid    -          -           (117)      (4)          (121)          
Balance at 31     552        191         1 952      32           2 727          
December 2010                                                                   
BUSINESS SEGMENTS                                                               
                                     30 June      30 June    31 Dec             
2011         2010       2010               
Rm                                                                              
Revenue                               2 539        2 312      4 721             
- Atmospheric gases                   833          781        1 593             
- LPG                                 919          811        1 645             
- Hardgoods                           396          369        752               
- Rest of Africa                      391          351        731               
                                                                                
Gross profit after distribution       563          542        1 012             
(GPADE)                                                                         
- Atmospheric gases                   249          257        436               
- LPG                                 191          184        364               
- Hardgoods                           123          101        212               
                                                                                
Reconciliation of GRADE to EBIT                                                 
- GPADE for business segments         563          542        1 012             
- Other operating expenses            (399)        (422)      (882)             
- Impairments                         (152)        -          (104)             
- EBIT Rest of Africa                 100          97         193               
Earnings before interest and taxation 112          217        219               
(EBIT)                                                                          
NOTES TO THE FINANCIAL STATEMENTS                                               
African Oxygen Limited ("Afrox" or the "Company") is a South African            
registered company.  The interim condensed consolidated 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 interim condensed consolidated 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 AC 500        
standards as issued by the Accounting Practices Board and the Listing           
Requirements of the JSE Limited and the Companies Act of South Africa, as       
amended.                                                                        
2.   Basis of preparation                                                       
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 2010.                                              
The accounting policies are those presented in the annual financial             
statements for the year ended 31 December 2010 and have been applied            
consistently to the periods presented in these interim condensed consolidated   
financial statements and by all Group entities.                                 
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              
                                      2011      2010        2010                
   Rm                                 6 months  6 months    12 months           
4.  Capital expenditure                                                         
Property, plant and equipment                                                
   Opening carrying value             2 637     2 729       2 729               
   Additions                          154       93          294                 
   Impairments                        (152)     -           (96)                
Disposals                          (3)       (6)         (14)                
   Depreciation                       (137)     (121)       (252)               
   Translation differences            3         (7)         (24)                
   Closing carrying value             2 502     2 688       2 637               

5.  Earnings and headline earnings per share                                    
   * Earnings per share is calculated on earnings of R53 million                
   (2010: R118 million).                                                        
* Headline earnings per share is calculated on headline earnings             
   of R163 million (2010: R119 million).                                        
   All of the above are based on weighted average number of ordinary            
   shares of 308 567 602 (2010: 308 567 602) in issue during the                
period.                                                                      
   Reconciliation between earnings                                              
   and headline earnings                                                        
   Profit for the period               53         118         94                
Loss on disposal of property,       1          1           2                 
   plant and equipment                                                          
   Impairments (net of tax)            109        -           75                
   Headline earnings                   163        119         171               

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      
22,0 cents per share on 19 July 2011. There is a possible R25 to R30 million    
pre-tax gain on the disposal of small assets in a neighbouring country.         
Claims of approximately R400m still remain against the Group. These claims      
refer to supply disruptions, predominantly as a result of power outages and     
equipment failure. The Group has continued to obtain legal advice and the       
Board of Directors is of the opinion that various robust defences exist in      
respect of the two claims and material success in either of these matters by    
the claimants is improbable. Accordingly, no provision for any liability has    
been made in these financial statements.                                        
Circumstances may arise in future that could potentially result in an           
existing supply contract becoming onerous during the next few years.            
Discussions are being held to mitigate this risk and the impact is uncertain    
at this time.                                                                   
7.   Renewal of cautionary announcement                                         
Further to the cautionary announcement published on SENS on 1 July 2011 and     
in the press on 4 July 2011, Afrox shareholders are advised that the            
circumstances relating to the Company are still being determined, which may     
have a material effect on the price of the Company`s securities.                
Accordingly, Afrox shareholders are advised to continue exercising caution      
when dealing in the Company`s securities until a full announcement is made in   
this regard.                                                                    
STATISTICS AND RATIOS                                                           
                                     30 June     30 June     31 Dec             
2011        2010        2010               
                                     6 months    6 months    12 months          
Average number of shares in issue     308 568     308 568     308 568           
during the period (`000)                                                        
Shares in issue (`000)                308 568     308 568     308 568           
Net asset value excluding actuarial   798         822         784               
gain/loss per share (cents)                                                     
Dividends per share (cents)           22,0        19,0        27,0              
Final                              -           -           8,0                
  Interim                            22,0        19,0        19,0               
                                                                                
Ratios                                                                          
EBITDA margin (%)                     16,4        15,3        12,8              
Interest cover on EBITDA (times)      14,9        11,4        9,6               
Effective tax rate (%)                31,7        33,8        34,6              
Gearing (%)                           17,4        21,5        20,6              
Dividend cover - (times)              0.8         2.0         1,1               
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: One Capital                                            
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited.                       
Directors:  TN Kruger (Managing Director), FT Kotzee (Financial Director), J    
Narayadoo(Director MPG Operations), MS Huggon*** (Chairman), M von Plotho**,    
DM Lawrence, M Malebye, Dr KDK Mokhele,                                         
SM Pityana, LL van Niekerk, DM Woodrow***                                       
**German    ***British                                                          
Company Secretary:  Carnita Low                                                 
Auditors:  KPMG Inc.                                                            
www.afrox.com                                                                   
Afrox is a member of The Linde Group                                            
Johannesburg                                                                    
19 July 2011                                                                    
Date: 19/07/2011 16:22:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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employees and agents accept no liability for (or in respect of) any direct,     
indirect, incidental or consequential loss or damage of any kind or nature,     
howsoever arising, from the use of SENS or the use of, or reliance on,          
information disseminated through SENS.                                          



                                        
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