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AFX - African Oxygen Limited - Audited group financial results and dividend

Release Date: 23/02/2012 15:00:03      Code(s): AFX
AFX - African Oxygen Limited - Audited group financial results and dividend     
announcement for the year ended 31 December 2011                                
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")                                       
31 DECEMBER 2011                                                                
*    Revenue increased 11% to R5,2 billion                                  
    *    EBITDA up 28% to R774 million                                          
    *    EPS up 65% to 91,6 cents per share                                     
    *    sh generated from operations R844 million                              
PERFORMANCE SUMMARY                                                             
For the year ended 31 December 2011 revenue increased 11% to R5,2 billion       
and EBITDA increased 28% to R774 million. Net profit including impairments      
was R183 million.  Headline earnings per share was 91,6 cents for the year,     
up 65%. Afrox continued with its programme to invest in plant modernisation,    
additional capacity and efficiency enhancements, and for the year under         
review spent R416 million (2010: R294 million). The Group ended the year        
with net borrowings of R716 million and gearing of 17,4% (2010: 20.6%).         
BUSINESS REVIEW                                                                 
At the heart of our improved financial performance in 2011 are operational      
efficiencies, cost management and effective procurement.                        
South Africa`s manufacturing sector recovery, a key economic indicator for      
Afrox, did not consolidate on the path that began towards the end of 2010.      
As a result, Afrox was unable to achieve the projected growth in sales          
A combination of scheduled maintenance and unplanned outages at South           
African oil refineries impacted negatively on Afrox`s bulk and packaged LPG     
sales.  As a result of these issues, demand far outstripped supply for          
several months, leaving the company unable to meet the needs of its diverse     
customer base. LPG had to be imported to correct the shortfall at               
significantly higher costs.                                                     
During 2011, industrial action by unions affiliated to Cosatu spilled over      
into most sectors of the local economy and Afrox was unable to avoid being      
affected. During July, this had a negative impact on Afrox`s transport fleet    
and consequently on production and distribution of product, despite our         
transport labour being spread across several unions/contractors.                
The decision to impair the assets of the MIG plant at Brits and cease           
production at the end of December 2010 proved to be sound. Annual savings of    
R23 million were achieved.  The full benefits from the change to our            
manufacturing strategy are still to be realised during 2012.                    
Afrox`s Atmospheric Gases business came under pressure in 2011 and volumes      
were 3% down on 2010.  In addition to maintenance and the upgrading of the      
company`s air separation units (ASUs), Afrox has spent R71 million in 2011      
on the new ASU to be built at its Pretoria site. The ASU will have Argon        
capability and will commence production in 2013.                                
Volumes in the welding consumables (hard goods) market, which is                
traditionally linked to infrastructure development, managed to achieve a 3%     
growth in 2011.                                                                 
African operations outside South Africa increased revenue to R815 million       
(2010 R731 million), with EBITDA of R203 million, contributing 26% to the       
Group EBITDA. This continued growth is backed not only by the demand for        
commodities and infrastructure, but also a regional population that is          
characterised by the growth of a middle class. This has created demand for      
consumer products, beverages and healthcare, all areas served by Afrox.         
As previously reported, an unforeseen structural failure at the Witbank air     
separation unit in 2010 resulted in the disruption of service delivery to       
Evraz Highveld Steel (EHVS), Witbank, and via pipeline to Columbus Stainless    
in Middelburg. EHVS has given Afrox notice that it would not renew the          
supply agreements with Afrox effective 20 December 2013 and a decision was      
taken to impair the R152 million Witbank plant.  Afrox also settled the         
claim from EHVS regarding the supply interruption suffered in 2010.             
The Board declared a final cash dividend of 23 cents per share (2010: 8         
cents). Together with the interim cash dividend of 22 cents per share (2010:    
19 cents), a total of 45 cents per share (2010: 27 cents) was declared for      
the year and is covered 2,0 times in headline earnings per share.               
Board of Directors                                                              
Kent Masters resigned as a non-executive director and Chairman of the Afrox     
Board from 20 May 2011, Karen Oliver resigned as non-executive director from    
31 March 2011, Tjaart Kruger resigned as Managing Director from 31 August       
2011, and 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. Sipho Pityana resigned as independent director from 31 December 2011.     
At this challenging juncture in Afrox`s history, it is vital that our           
company has a Managing Director who has the necessary industry experience       
and understands the Afrox culture, and has had the benefit of international     
management experience.  Therefore, it is with pleasure that we can confirm      
that Brett Kimber, a South African and former senior Afrox employee, has        
been appointed as Managing Director from 1 January 2012. His appointment        
coincides with changes that have been made in the Linde global structure to     
reflect operations in three major time zones across the globe, bringing the     
UK/Ireland and Africa closer together and achieving this through sharing of     
applicable best practices, skills and competencies.                             
Many of the internal factors that restrained growth during 2010 have been       
resolved, clearing the way for an incremental return to operational and         
financial strength, barring unforeseen events. Continued low economic           
growth, which impact on manufacturing and infrastructure spend in South         
Africa, remains a real concern and as a result our outlook remains              
cautiously optimistic.                                                          
Mike Huggon              Frederick Kotzee          23 February 2012             
Chairman                 Financial Director        Johannesburg                 
Notice is hereby given that a cash dividend of 23 cents per ordinary share,     
being the final dividend for the year ended 31 December 2011, has been          
declared payable to all shareholders of African Oxygen Limited recorded in      
the register on Friday, 20 April 2012.                                          
The salient dates for the declaration and payment of the final dividend are     
as follows:                                                                     
Last day to trade ordinary shares "cum" dividend  Friday, 13 April              
Ordinary shares trade "ex" the dividend           Monday, 16 April              
Record date                                       Friday, 20 April              
Payment date                                      Monday, 23 April              
Share certificates may not be dematerialised or rematerialised between          
Monday, 16 April 2012 and Friday, 20 April 2012, both days inclusive.           
By order of the board                                                           
C Low                                                 23 February 2012          
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 2011.  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.                         
                                             31 December  31 December           
Rm                                  Note      2011         2010                 
Property, plant and equipment       3         2 657        2 637                
Investment in associate                       19           17                   
Other non-current assets                      861          842                  
Non-current assets                            3 537        3 496                
Inventories                                   678          663                  
Trade and other receivables                   846          780                  
Cash and cash equivalents                     243          327                  
Taxation receivable                           50           20                   
Current assets                                1 817        1 790                
Total assets                                  5 354        5 286                
EQUITY AND LIABILITIES                                                          
Attributable to equity holders of             2 827        2 695                
the company                                                                     
Non-controlling interest                      38           32                   
Total equity                                  2 865        2 727                
Long-term borrowings                          446          871                  
Deferred tax liabilities                      524          514                  
Non-current liabilities                       970          1 385                
Short-term portion of long-term               502          263                  
Trade and other payables                      981          848                  
Taxation payable                              25           28                   
Bank overdrafts                               11           35                   
Current liabilities                           1 519        1 174                
Total equity and liabilities                  5 354        5 286                
CONDENSED CONSOLIDATED INCOME STATEMENT                                         
Rm                                    Note      31 December  31 December        
                                               2011         2010                
Revenue                                         5 246        4 721              
Operating cost                                  (4 472)      (4 115)            
Earnings before interest, tax,                  774          606                
depreciation, amortisation and                                                  
impairments (EBITDA)                                                            
Depreciation and amortisation                   (283)        (283)              
Impairments                                     (153)        (104)              
Earnings before interest and tax                338          219                
Net finance expense                             (46)         (63)               
Income from associate                           3            6                  
Profit before taxation                4         295          162                
Income tax expense                              (100)        (56)               
Profit for the period                           195          106                
Attributable to:                                                                
Equity holders of the Company                   183          94                 
Non-controlling interest                        12           12                 
Profit for the period                           195          106                
Basic and diluted earnings per                  59,2         30,5               
ordinary share (cents)                                                          
Rm                                              31 December  31 December        
                                               2011         2010                
Profit for the period                           195          106                
Other comprehensive income/(loss)               48           (117)              
after tax:                                                                      
Translation differences for foreign             23           (27)               
Translation differences relating to             5            (8)                
non-controlling interest                                                        
Changes in fair value of cash flow              10           (12)               
Actuarial gains/(losses) on defined-            13           (97)               
benefit funds                                                                   
Deferred tax relating to actuarial              (3)          27                 
Total comprehensive income/(loss)               243          (11)               
for the period                                                                  
Attributable to:                                                                
Equity holders of the Company                   226          (15)               
Non-controlling interest                        17           4                  
Total comprehensive income/(loss)               243          (11)               
for the period                                                                  
Rm                  and       Other      Retained   Non-        Total           
                   share     reserves   earnings   controlling                  
                   premium                         interest                     
Balance at          552       300        1 975      32          2 859           
1 January 2010                                                                  
Other movements      -        (109)      -          (8)         (117)           
Profit for the       -         -         94         12          106             
Dividends paid       -         -         (117)      (4)         (121)           
Balance at 31       552       191        1 952      32          2 727           
December 2010                                                                   

Balance at 1        552       191        1 952      32          2 727           
January 2011                                                                    
Other movements      -        43         -          5           48              
Profit for the       -         -         183        12          195             
Changes in          -         -          (1)        (1)         (2)             
interest in                                                                     
Dividends paid       -         -         (93)       (10)        (103)           
Balance at          552       234        2 041      38          2 865           
31 December 2011                                                                
CONDENSED CONSOLIDATED CASH FLOW STATEMENT                                      
Rm                                            31 December  31 December          
                                             2011         2010                  
Earnings before interest and tax (EBIT)       338          219                  
Adjustments for:                                                                
Depreciation and amortisation                 283          283                  
Impairments of tangible and intangible        153          104                  
Other                                         19           36                   
Operating cash flow before working capital    793          642                  
Working capital adjustments                   51           (36)                 
Cash generated from operations                844          606                  
Net finance expense and taxation paid         (221)        (197)                
Other                                         -            (3)                  
Cash available from operating activities      623          406                  
Dividends paid                                (93)         (117)                
Dividends to non-controlling interest         (10)         (4)                  
Net cash inflow from operating activities     520          285                  
Additions to property, plant and equipment    (447)        (294)                
and intangibles                                                                 
Other net investing cash flows                53           81                   
Net cash outflow from investing activities    (394)        (213)                
Decrease in borrowings                        (186)        (356)                
Net cash outflow from financing activities    (186)        (356)                
Net decrease in cash and cash equivalents     (60)         (284)                
Cash and cash equivalents at beginning of     292          576                  
Cash and cash equivalents at end of period    232          292                  
BUSINESS SEGMENTS                                                               
                                                 31        31 December          
                                                 2011      2010                 
Revenue                                           5 246     4 721               
- Atmospheric gases                               1 696     1 593               
- LPG                                             1 913     1 645               
- Hardgoods                                       822       752                 
- Rest of Africa                                  815       731                 

Gross profit after distribution (GPADE)           1 133     1 012               
- Atmospheric gases                               513       436                 
- LPG                                             378       364                 
- Hardgoods                                       242       212                 
Reconciliation of GRADE to EBIT                                                 
- GPADE for business segments                     1 133     1 012               
- Other operating expenses                        (831)     (882)               
- Impairments                                     (153)     (104)               
- EBIT Rest of Africa                             189       193                 
Earnings before interest and taxation (EBIT)      338       219                 
NOTES TO THE FINANCIAL STATEMENTS                                               
African Oxygen Limited ("Afrox" or the "Company") is a South African            
registered company.  These 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.   FINANCIAL PERIOD                                                           
    The year end results hereby presented are for twelve months ended 31        
    December 2011.                                                              
    The financial statements are prepared in millions of South African          
    Rands (Rm).                                                                 
    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 2011, except where the group has adopted new or      
    revised IFRS statements.                                                    
                                                 31 December    31 December     
Rm                                        2011           2010            
   3.  Capital expenditure and commitments                                      
       Property, plant and equipment                                            
       Opening carrying value                    2 637          2 729           
Additions                                 416            294             
       Disposals                                 (3)            (14)            
       Depreciation                              (253)          (252)           
       Impairments                               (152)          (96)            
Translation differences                   12             (24)            
       Closing carrying value                    2 657          2 637           
       Capital commitments                                                      
        - authorised but not contracted          290            231             
- authorised and contracted              173            59              
       Total capital commitments                 463            290             
   4.  Profit before taxation                                                   
       Included in profit before taxation are:                                  
Amortisation of intangible assets         30             31              
       Depreciation                              253            252             
5.   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 a final        
    cash dividend of 23,0 cents per share on 23 February 2012.                  
    A claim of approximately R207 million still remain against the Group.       
This claim refers to supply disruptions, predominantly as a result of       
    power outages and equipment failure. The Group has sought legal advice      
    and the Board of Directors is of the opinion that various robust            
    defences exist in respect of the claim and material success by the          
claimants is improbable.                                                    
STATISTICS AND RATIOS                                                           
Rm                                        31 December    31 December            
2011           2010                    
Reconciliation between earnings and       183            94                     
headline earnings                                                               
Total profit for the period attributable                                        
to equity holders of the company                                                
(Profit)/loss on disposal of property,    (10)           2                      
plant and equipment                                                             
Impairments (net of tax)                  110            75                     
Headline earnings                         283            171                    
                                         59,2           30,5                    
Basic and diluted earnings per ordinary                                         
share - Group (cents)                                                           
Headline earnings per ordinary share -    91,6           55,5                   
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)               45,0           27,0                   
Net asset value per share (cents)         823            784                    

EBITDA margin (%)                         14,8           12,8                   
Interest cover (times)                    7,3            3,5                    
Effective tax rate (%)                    33,9           34,6                   
Gearing (%)                               17,4           20,6                   
Dividend cover based on headline          2,0            2,1                    
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: One Capital.                                           
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited.                       
Directors:  MS Huggon** (Chairman), BD Kimber (Managing director),              
FT Kotzee (Financial director), DM Lawrence, M Malebye, Dr KDK Mokhele,    J    
Narayadoo, LL van Niekerk, M von Plotho*, DM Woodrow**                          
*German     **British                                                           
Company secretary:  C Low                                                       
Afrox is a member of The Linde Group                                            
23 February 2012                                                                
Date: 23/02/2012 15:00:02 Supplied by www.sharenet.co.za                     
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