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African Oxygen Limited - Unaudited Interim Financial Results For The Six Months Ended 30 June 2012

Release Date: 23/08/2012 16:30:00      Code(s): AFX     
African Oxygen Limited	
(Incorporated in the Republic of South Africa)	
Registration number: 1927/000089/06	
ISIN: ZAE000067120 JSE code: AFX 	
NSX code: AOX	

UNAUDITED INTERIM FINANCIAL RESULTS
for the six months ended 30 June 2012

UP Revenue: R2.8 billion
UP Headline earnings per share: 55.1 cents

Performance summary
Revenue for the six months to 30 June 2012 was up 9% to R2.8 billion. Earnings before interest, tax,
depreciation and amortisation (EBITDA) increased 7% to R446 million compared to the same period last
year. EBITDA margin was 16%, down from 16.4% compared to the same period last year. Net profit was
R187 million (2011: R58 million) and headline earnings per share were 55.1 cents (2011: 52.8 cents). Capital
expenditure was R222 million (2011: R154 million) for the period. Net borrowings were R757 million
(2011: R688 million). The Group's gearing was 17.9% compared to 17.4% for the same period last year.

Business Review
Effective cost management, improved plant reliability and a drive to continuously raise customer service levels
have been the focus of the new management team during the six months to 30 June 2012.

Trading conditions during the period were mixed. A mild winter in South Africa led to reduced demand for
liquefied petroleum gas (LPG), while demand for bulk gases remained flat. Sales of compressed gases
continue to decline reflecting the reduction in activity in the manufacturing sector. An exception was the
Healthcare atmospheric gases which performed well with an increase in volumes during this reporting
period.The demand for hardgoods remains sluggish, but new product developments are expected to position
the Group well for future growth.

In the key area of LPG, Afrox imported product to act as a buffer in case of winter shortages, a scenario that
has dogged the industry for several years. The company also invested in nearly 200,000 new 9kg cylinders,
most of which were prefilled to eliminate supply chain bottlenecks. The unexpected mild winter conditions,
however, combined with high availability of LPG locally, dampened peak season consumer demand.

High winter electricity tariffs have resulted in output reduction from key large customers with a consequential
reduction in demand for our gases.

Operations in African countries outside South Africa contributed 21% (2011: 26%) to the Group's half-year
EBITDA, in an environment characterised by electricity shortages and distribution challenges. The outlook for
sub-Saharan Africa remains positive and the region continues to be central to future growth.

EBITDA margin reduced from 16.4% to 16%, primarily due to the impact of high LPG prices and increased
competitor activity across all markets. Plant reliability of 98% has been achieved in this reporting period.
Independently monitored customer satisfaction levels, with Afrox and our National Customer Service Centre,
stand at 94%.

Capital expenditure accelerated during the first half of the year, increasing to R222 million (2011: R154 million).
The majority of this investment was on the new Pretoria plant, which is expected to be commissioned by
the end of the financial year. In addition, the company has made significant investments in cylinders for
both LPG and industrial gases and augmented its distribution fleet capacity to improve customer service
levels. The result is a supply chain that is considerably more robust than in the past.

Working capital remains a key focus. Good progress has been made on the collection of long outstanding
debt, an area of ongoing effort.

Although overall trading conditions are challenging, 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 3 Broad-Based Black Economic Empowerment rating continues to have a positive effect on gaining sales
while solid progress is being made in respect of Afrox's BEE transformation programme and our drive for
High Performance Organisation status.

Outlook
Economic conditions remain challenging, with low market growth expected, particularly in the key manufacturing,
mining and steel production sectors of the South African economy. Future growth prospects in the rest of
Africa, which have traditionally lagged South Africa, hold exciting new opportunities. Afrox is moving from a
'turnaround' phase to a sustained and aggressive growth phase in which market opportunities will be assessed
and new projects undertaken where appropriate. The projected growth in 2013 and beyond will be driven by
an anticipated R1.5 billion capital projects programme which is aimed at boosting capacity and improving
customer service levels in KwaZulu-Natal, Gauteng and the Eastern Cape. Overall, our outlook for the
remainder of the financial year remains optimistic albeit in a challenging business environment.

Dividend
It is the Group's policy to consider dividends twice annually. The Board of Directors have declared a gross
interim cash dividend of 27.0 cents per share for the six months ended 30 June 2012 (2011: 22.0 cents). The
dividend is covered 2.0 times by headline earnings per share.

Board of Directors
Frederick Kotzee resigned as Financial Director effective 31 March 2012, and was replaced by Nick Thomson,
with effect from 2 April 2012. The Board thanks Mr Kotzee for his contribution and wishes him well with his
future endeavours.

Mike Huggon	                        Brett Kimber	                          23 August 2012
Chairman	                        Managing Director                         Johannesburg

NOTICE OF INTERIM DIVIDEND DECLARATION NUMBER 172
AND SALIENT FEATURES

Notice is hereby given that a gross interim cash dividend of 27.0 cents per ordinary share, being the interim
dividend for the six-month period ended 30 June 2012, has been declared payable to all shareholders of
African Oxygen Limited recorded in the register on Friday, 12 October 2012.

The salient dates for the declaration and payment of the interim dividend are as follows:

Last day to trade ordinary shares "cum" dividend	                                   Friday, 5 October 2012
Ordinary shares trade "ex" the dividend	                                                   Monday, 8 October 2012
Record date	                                                                          Friday, 12 October 2012
Payment date	                                                                          Monday, 15 October 2012

Share certificates may not be dematerialised or rematerialised between Monday, 8 October 2012 and
Friday, 12 October 2012, both days inclusive.

The local net dividend amount is 22.95 cents per share for shareholders liable to pay the new dividend tax
and 27.0 cents per share for shareholders exempt from the new Dividends Tax (2011: 22.0 cents).

In terms of the new Dividends Tax effective 1 April 2012, the following additional information is disclosed:
 the dividend has been delcared out of income reserves;
 the local Dividends Tax rate is 15%;
 no Secondary Tax on Companies (STC) credits were utilised;
 Afrox currently has 308 567 602 ordinary shares in issue; and
 Afrox's income tax reference number is 9350042710.

By order of the Board

Carnita Low	                            23 August 2012
Company Secretary	                     Johannesburg

Forward looking statements disclaimer: This interim results review contains statements related to our future
business and financial performance and future events or developments involving Afrox that may constitute
forward-looking statements. Such statements are based on current expectations and certain assumptions of
Afrox's management are therefore, subject to certain risks and uncertainties. A variety of factors, many of which
are beyond Afrox's control, affect our operations, performance, business strategy and results and could cause
the actual results, performance or achievements of Afrox to be materially different from any future results,
performance or achievements that may be expressed or implied by such forward-looking statements or
anticipated on the basis of historical trends.

Condensed consolidated income statement
                                                        30 June      30 June  31 December
                                                           2012         2011         2011
                                                       6 Months     6 Months    12 Months
R'million                                     Note    Unaudited    Unaudited      Audited
Revenue                                                   2 779        2 539        5 246
Operating expense                                       (2 333)      (2 123)      (4 472)
Earnings before interest, tax, depreciation
and amortisation (EBITDA)                                   446          416          774
Depreciation and amortisation                             (154)        (152)        (283)
Impairments                                                           (152)        (153)
Earnings before interest and tax (EBIT)                     292          112          338
Net finance expense                                        (24)         (28)         (46)
Income from associate                                         2                        3
Profit before taxation                                      270           84          295
Taxation                                                   (83)         (26)        (100)
Profit for the period                                       187           58          195
Profit for the period attributable to:
Equity holders of the Company                               181           53          183
Non-controlling interest                                      6            5           12
                                                            187           58          195
Basic and diluted earnings per share  cents      5        58.7         17.1         59.2
Headline earnings per share  cents               5        55.1         52.8         91.6

Condensed consolidated statement of comprehensive income

                                                    30 June      30 June  31 December
                                                       2012         2011         2011
                                                   6 Months     6 Months    12 Months
R'million                                         Unaudited    Unaudited      Audited
Profit for the period                                   187           58          195
Other comprehensive (loss)/income:                     (60)           12           48
Translation differences for foreign operations         (14)            3           23
Translation differences relating to
non-controlling interest                                (6)            1            5
Changes in fair value of cash flow hedges
(net of tax)                                              2           13           10
Actuarial (loss)/gain on defined-benefit funds         (58)          (7)           13
Deferred tax relating to actuarial loss/(gain)           16            2          (3)
Total comprehensive income for the period               127           70          243
Total comprehensive income attributable to:
Equity holders of the Company                           127           64          226
Non-controlling interest                                              6           17
                                                        127           70          243

Statistics and ratios
                                                    30 June     30 June  31 December
                                                       2012        2011         2011
                                                   6 Months    6 Months    12 Months
                                                  Unaudited   Unaudited      Audited
Average number of shares in issue
during the period ('000)                            308 568     308 568      308 568
Shares in issue ('000)                              308 568     308 568      308 568
Net asset value per share excluding actuarial 
gain/loss (cents)                                       862         798          823
Dividends per share (cents)                            27.0        22.0         45.0
 Final                                                                          23.0
 Interim                                               27.0        22.0         22.0
Ratios
EBITDA margin (%)                                      16.0        16.4         14.8
Interest cover on EBITDA (times)                       19.4        14.9         16.8
Effective tax rate (%)                                 30.7        31.7         33.9
Gearing (%)                                            17.9        17.4         17.4
Dividend cover on headline earnings (times)             2.0         2.4          2.0

Condensed consolidated statement of cash flows
                                                  30 June      30 June     31 December
                                                     2012         2011            2011
                                                 6 Months     6 Months       12 Months
R'million                                       Unaudited    Unaudited         Audited
Earnings before interest and tax (EBIT)               292          112             338
Adjustments for:
Depreciation, amortisation and impairments            154          304             436
Other                                                  41           14              19
Operating cash flow before working
capital changes                                       487          430             793
Working capital adjustments                         (199)            4              51
Cash generated from operations                        288          434             844
Finance expenses and tax paid                        (81)         (84)           (221)
Other                                                            (29)               
Cash available from operating activities              207          321             623
Dividends paid                                       (71)         (25)            (93)
Dividends to non-controlling interest                 (5)          (4)            (10)
Net cash inflow from operating activities             131          292             520
Purchase of property, plant and equipment and
intangibles                                         (222)        (154)           (416)
Other investing cash flows net                         51           16              22
Net cash outflow from investing activities          (171)        (138)           (394)
Decrease in borrowings                               (20)         (94)           (186)
Net cash outflow from financing activities           (20)         (94)           (186)
Net (decrease)/increase in cash and cash
equivalents                                          (60)           60            (60)
Cash and cash equivalents at start of period          232          292             292
Cash and cash equivalent at end of period             172          352             232

Condensed consolidated statement of changes in equity

                               Share
                             capital      FCTR     Share                              Non-
                                 and       and     based                              con-
                               share   hedging   payment  Actuarial   Retained    trolling     Total
R'million                    premium   reserve   reserve      gains   earnings    interest    equity
Balance at 1 January 2012        552      (53)                 287      2 041          38     2 865
Employee share
based payment                                       23                                       23
Other comprehensive loss                 (12)                (42)                   (6)      (60)
Profit for the period                                                  181           6       187
Dividends paid                                                        (71)         (2)      (73)
Balance at 30 June 2012          552      (65)        23        245      2 151          36     2 942
Balance at 1 January 2011        552      (86)                 277      1 952          32     2 727
Other comprehensive
income/(loss)                              16                 (5)                     1        12
Profit for the period                                                   53           5        58
Change in subsidiary
shareholding                                                           (1)         (1)       (2)
Dividends paid                                                        (25)         (3)      (28)
Balance at 30 June 2011          552      (70)                 272      1 979          34     2 767
Balance at 1 January 2011        552      (86)                 277      1 952          32     2 727
Other comprehensive
income                                     33                  10                     5        48
Profit for the period                                                  183          12       195
Change in subsidiary
shareholding                                                           (1)         (1)       (2)
Dividends paid                                                        (93)        (10)     (103)
Balance at
31 December 2011                 552      (53)                 287      2 041          38     2 865

Business segments
                                                 30 June     30 June  31 December
                                                    2012        2011         2011
                                                6 Months    6 Months    12 Months
R'million                                      Unaudited   Unaudited      Audited
Revenue                                            2 779       2 539        5 246
 Atmospheric gases                                   914         833        1 696
 LPG                                               1 034         919        1 913
 Hardgoods                                           418         396          822
 Rest of Africa                                      413         391          815
Gross profit after distribution (GPADE)              819         748        1 481
 Atmospheric gases                                   315         249          513
 LPG                                                 197         191          378
 Hardgoods                                           126         123          242
 Rest of Africa                                      181         185          348
Reconciliation of GPADE to EBIT
GPADE for business segments                          819         748        1 481
Other operating expenses                           (527)       (484)        (990)
Impairments                                                   (152)        (153)
Earnings before interest and taxation (EBIT)         292         112          338

Condensed consolidated statement of financial position

                                                30 June    30 June  31 December
                                                   2012       2011         2011
R'million                              Note   Unaudited  Unaudited      Audited
ASSETS
Property, plant and equipment             4       2 712      2 502        2 657
Other non-current assets                            709        868          880
Non-current assets                                3 421      3 370        3 537
Inventories                                         685        684          678
Trade and other receivables                       1 005        840          846
Taxation receivable                                  22         18           50
Cash and cash equivalents                           189        368          243
Current assets                                    1 901      1 910        1 817
Assets held-for-sale                      6         112                      
Total assets                                      5 434      5 280        5 354
EQUITY AND LIABILITIES
Shareholders' equity                              2 906      2 733        2 827
Non-controlling interest                             36         34           38
Total equity                                      2 942      2 767        2 865
Long-term borrowings                                365        877          446
Deferred tax liability                              519        506          524
Non-current liabilities                             884      1 383          970
Short-term portion of long-term
borrowings                                          564        163          502
Trade, other payables and provisions                994        924          981
Taxation payable                                     28         27           25
Bank overdrafts                                      17         16           11
Current liabilities                               1 603      1 130        1 519
Liabilities held-for-sale                 6           5                      
Total equity and liabilities                      5 434      5 280        5 354

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 and
   the Listing Requirements of the JSE Limited and the Companies Act of South Africa, 2008.

2  Basis of preparation
   The financial statements are prepared in millions of South African Rands (R'million) on a historical
   cost basis, except derivative financial instruments which have been measured at fair value. 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 2011. The accounting policies are
   those presented in the annual financial statements for the year ended 31 December 2011 and
   have been applied consistently to the periods presented in these interim condensed consolidated
   financial statements and by all Group entities.

   These interim financial results have been prepared under the supervision of the Financial Director,
   Nick Thomson (CA) SA.

3  Audit report
   These consolidated interim financial statements have not been reviewed or audited by the
   Group's auditors.
                                                            30 June     30 June   31 December
                                                               2012        2011          2011
                                                           6 Months    6 Months     12 Months
  R'million                                               Unaudited   Unaudited       Audited
4 Property, plant and equipment
  Opening carrying value                                      2 657       2 637         2 637
  Additions                                                     222         154           416
  Impairments                                                            (152)         (152)
  Disposals                                                    (10)         (3)           (3)
  Depreciation                                                (138)       (137)         (253)
  Translation differences                                       (8)           3            12
  Non-current assets held-for-sale                             (11)                        
  Closing carrying value                                      2 712       2 502         2 657

5  Earnings and headline earnings per share
   Earnings per share are calculated on earnings of R181 million (2011: R53 million).

   Headline earnings per share are calculated on headline earnings of R170 million (2011: R163 million)

   All of the above are based on a weighted average number of ordinary shares of 308 567 602
   (2011: 308 567 602) in issue during the period.

Reconciliation between earnings and headline earnings

  Profit for the period                                         181          53           183
  Adjusted for the after-tax effect of:
  Loss/(profit) on disposal of property,
  plant and equipment                                                        1          (10)
  Profit on disposal of subsidiary                             (11)                        
  Impairments                                                              109           110
  Headline earnings                                             170         163           283
  Basic and diluted earnings per share  cents                 58.7        17.1          59.2
  Headline earnings per share  cents                          55.1        52.8          91.6

6 Assets and liabilities held-for-sale
  A decision to dispose of one of the Group's divisions was taken in May 2012, as the nature of
  the division's operations is not aligned to the Group's principal lines of business. A transaction
  is expected to be completed by the end of the Financial year, 31 December 2012. The assets and
  liabilities of the division have been accounted for as a disposal group, rather than a discontinued
  operation, as the division does not represent a major line of business. As at 30 June 2012, the
  major classes of assets of R112 million less liabilities of R5 million are detailed below:

  Property, plant and equipment                                  11
  Intangible assets                                               4
  Inventories                                                    70
  Trade and other receivables                                    27
  Trade and other payables                                      (3)
  Taxation payable                                              (2)
  Total net assets held-for-sale                                107

7 Employee share based payment scheme
  The Group has changed its share appreciation rights scheme from being cash settled to being
  equity settled with effect from 1 January 2012. The change did not have a significant impact on
  the Group's interim financial results and has been disclosed in the statement of changes in equity
  within share based payment reserve.

8 Update on key litigation matters
  In the 2011 annual financial statements we referred to ongoing litigation with a major customer
  who had claimed R207 million as a consequence of supply disruptions experienced by the Company
  This matter continues and there has been no significant change in the status of the matter.

  During the period under review, one of our large customers, who has a take or pay agreement
  with a Group company, has disputed the legal status of the contract and is currently withholding
  payments due in terms of the take or pay provisions in the contract. At the reporting date, the
  outstanding debt was approximately R24 million. Afrox is confident that the agreement is legally
  binding and is taking the appropriate steps to safeguard the Group's interests.

  The company has received notice from the Competition Tribunal of South Africa that a complaint
  has been referred to it by the Competition Commission of South Africa regarding an alleged
  contravention of the Competition Act.

9 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 gross interim cash dividend of 27.0 cents per share on 23 August 2012.

Corporate information

African Oxygen Limited	
(Incorporated in the Republic of South Africa)	
Registration number: 1927/000089/06	
ISIN: ZAE000067120 JSE code: AFX 	
NSX code: AOX	

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: B Kimber (Managing Director), NA Thomson*** (Financial Director), J Narayadoo (Director
           MPG Operations), MS Huggon*** (Chairman), M von Plotho**, DM Lawrence, M Malebye,
           Dr KDK Mokhele, LL van Niekerk, DM Woodrow***	              ** German ***British

Company Secretary: Carnita Low	                    Auditors: KPMG Inc.

www.afrox.com
www.afrox.co.za
Date: 23/08/2012 04:30:00 Supplied by www.sharenet.co.za                     
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