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AFRICAN OXYGEN LIMITED - Audited Group Financial Results for the year ended 31 December 2012

Release Date: 28/02/2013 15:30:00      Code(s): AFX     
for the year ended 31 December 2012


for the year ended 31 December 2012

Revenue: R5.6 billion (6%)
EBITDA: R24 million (3%)
Headline earnings per share: 91.0 cents

Performance summary
On the back of tough trading conditions, which affected all major market segments in which Afrox operates, 2012 revenue
increased 6% to R5.6 billion and EBITDA increased 3% to R798 million. Profit for the year was R283 million. Headline earnings
per share were flat at 91.0 cents for the year (2011: 91.6 cents). Afrox continued with its programme of investing in plant
modernisation, additional capacity and efficiency enhancements, and for the year under review invested R546 million (2011: R416
million). The Group ended the year with net borrowings of R615 million (2011: R716 million) and gearing of 15.5% (2011: 17.4%).

Business review
During the year, market activity remained depressed and cost pressures continued as rising fuel and electricity prices had an
effect on margins and production. An unsettled labour environment, which was characterised by strikes and violence, saw
production in key industries, such as mining and manufacturing, negatively impacted. The consequential drop in demand for gases
and hard goods had a negative effect on Afrox's volumes sold in the second half of the year.

Investments made during the year included improving plant capacity and reliability, the acquisition of cylinders for the packaged
and LPG businesses and distribution vehicles to bolster service levels to customers and provide a platform for future growth. In
addition R78 million (2011: R115 million) was invested in commissioning the Pretoria ASU, the largest single investment Afrox has
made to date. The new plant is far more energy efficient than the plant it replaces. This plant will provide additional capacity to
serve the merchant market.

Working capital at R472 million for 2012 improved from R568 million in 2011. Afrox's debt/equity ratio, at 32.3%, was considerably
lower than that of the comparative gas companies, reflecting significant headroom for Afrox to take on new initiatives.

Basic earnings per share were favourably influenced by lower impairments being recorded during 2012, at R31 million compared
to R153 million in 2011. In the current year, impairments totalling R16 million were made as a consequence of sub-economic
performance, and RECO's property, plant and equipment was impaired by R15 million as the division was prepared for sale. The
sale was concluded in February 2013.

Competition in the LPG sector rose sharply as small operators took advantage of the fact that they can now access refineries
directly for their product, both on the spot or contracted market. Due to the size of Afrox's off-take, and to ensure availability of
supply, Afrox procures primarily through the contracted market. The reliable supply in 2012 was generally at higher price levels
than obtainable on the spot market, which had a negative impact on margins where end-user prices were set by reference to the
spot market.

In addition, the levels of illicit dealing in LPG are still of major concern within the industry. In many cases, these dealers may not
adhere to the safety regulations regarding filling of cylinders. They also do not always invest in their own cylinders, but use
cylinder stock that belongs to other dealers thereby unfairly reducing their cost of doing business. These factors, among others
and including a warm winter, contributed to LPG volumes reducing in 2012. LPG revenue was up 5% due to higher refinery
product cost being passed on to customers. To avoid winter shortages, which have been common in the market for several years,
the company invested in new 9kg cylinders, most of which were pre-filled prior to their distribution to eliminate supply chain
bottlenecks, as well as importing LPG despite the negative impact on margins.

Hard goods revenue increased 6%. This was achieved in the face of continued pressure on pricing and increased competition
from importers of low-cost products. Significant investments in the Brits electrode factory during the last two years has seen new
equipment installed and scrap rates reduced. The continual rise in steel prices is a major impediment to the production of low-cost
welding products. To counter these costs, innovative production techniques have been introduced to increase output and grow
market share.

The year under review was challenging for the Atmospheric gases business, which continued to be impacted by the rising cost of
electricity and the reduced demand for product experienced in some sectors of the economy, especially the steel industry.
Production availability of ASU installations rose steadily to 98% during the year, which is in line with world-class standards.

Energy management programmes are an essential part in efficient management of the plants. The cost of electricity in our air
separation operations is the major element in Afrox's energy cost. Through our energy management programme, energy
consumption was reduced by about 8%. Tonnage volumes were stable in 2012.

Merchant CO2 volumes were in line with those achieved in 2011. During 2012, Afrox became the first gases company in South
Africa to receive the Global Food Safety Initiative rating for the production of CO2, the most widely used gas in the beverage and
food sectors.

Sales of bulk oxygen decreased 10% largely due to the closure of a large production facility at a customer site. On the merchant
industrial side, good growth was experienced for shielding gases used in welding applications.

Medical atmospheric gases, provided to the state and private healthcare sector, performed well. Growth was stimulated by
hospitals undergoing refurbishments and moving from cylinder supplies to bulk schemes.

As a major supplier of products to the government sector, particularly the public healthcare sector, the timeous collection of
receivables remains challenging. This has led to a build up in days receivables. State hospitals are a key segment of Afrox's
healthcare market and a new tender for a three-year contract period to 2015 is expected to be awarded early in 2013.
Although the manufacturing sector was significantly affected by prevailing economic conditions, the general reduction in demand
for packaged gases from this sector was offset to a degree by new demand from vital infrastructure projects. This led to Afrox
securing new contracts for the supply of oxygen, argon, carbon dioxide, LPG and welding consumables.

One of the main factors influencing the positive growth trend in the rest of Africa has been the wide range of commodities mined
and the exploitation of newly discovered reserves of oil and natural gas. For Afrox this activity has translated into a year of
sustained growth with revenues of R849 million being generated. The region's GPADE (Gross Profit after Distribution Expenses)
was R314 million which translates into 21% (2011: 20%) of the Group's GPADE.

The Group has made good progress in developing and executing its new funding strategy. A R600 million short-term bridging
facility is currently in place. This will meet our cash requirements whilst long-term funding is negotiated and instituted during the
first half of 2013.

The Board declared a final cash dividend of 18.0 cents per share (2011: 23 cents), which together with the interim cash dividend
of 27 cents per share (2011: 22 cents), makes a total of 45.0 cents per share (2011: 45 cents) that has been declared out of the
after tax profits of the year and which is covered 2.0 times by headline earnings per share.

Board of Directors
Brett Kimber was appointed Managing Director from 1 January, 2012, from a position as CEO of Linde operations in South Korea.
He brings to Afrox a desirable blend of local and global experience that will be invaluable going forward.

Nick Thomson was appointed Financial Director and joined the Board in April, 2012. Prior to joining Afrox, Nick was Chief
Financial Officer for Transnet Freight Rail for six years and before that was a partner in the accounting services firm Ernst and
Young. He replaces Frederick Kotzee who served the company well during his tenure.

Louis van Niekerk, the lead independent non-executive director, who has served on the Board since 2005, announced that he
would not be available for re-election as Director at the company's AGM in May 2013.

Christopher Wells and Sipho Maseko were appointed to the Board as independent non-executive directors with effect from
November 2012.

Although overall trading conditions were challenging throughout the year, the Group's prospects remain positive and are supported
by a well developed business footprint and distribution network.

While increased capital investment will continue, attention will be paid to improving margins through greater efficiency, growth and
reduction of costs to levels that are appropriate to the business.

Afrox is poised to move into the second phase of its 'turnaround' strategy, which will involve concentrating on growth and
improving the EBITDA level from the current levels. To assist in this, an integrated business planning approach to Afrox's activities
has been adopted, which will assist in identifying where investment is required to increase customer service levels, as well as
identifying where future growth can be expected. In addition, the company has introduced a new integrated business line structure
which will improve accountability, allow clear performance goals and objectives to be set and ensure that there is appropriate
bottom-line accountability as well as effecient asset utilisation.

In the coming year, attention will be focused on market opportunities supported by investment in new projects. An anticipated R1.5
billion will be devoted to the capital projects programme which will boost capacity and improve customer service in KwaZulu-Natal,
Gauteng and the Eastern Cape. Our outlook remains optimistic.

Mike Huggon

Brett Kimber
Managing Director

28 February 2013

Notice is hereby given that a gross final cash dividend of 18.0 cents per ordinary share, being the final dividend for the year ended
31 December 2012, has been declared payable to all shareholders of African Oxygen Limited recorded in the register on Friday,
19 April 2013.

The salient dates for the declaration and payment of the final dividend are as follows:
Last day to trade ordinary shares ''cum'' dividend
Friday, 12 April 2013

Ordinary shares trade ''ex'' the dividend
Monday, 15 April 2013

Record date
Friday, 19 April 2013

Payment date
Monday, 22 April 2013
Share certificates may not be dematerialised or rematerialised between Monday, 15 April 2013 and Friday, 19 April 2013, both
days inclusive.
The local net dividend amount is 15.3 cents per share for shareholders liable to pay the new Dividend Tax and 18.0 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 declared out of income reserves;
- the local Dividends Tax rate is 15%, subject to double tax agreement;
- 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
Company Secretary

28 February 2013

Forward looking statements disclaimer: This annual 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.

Summarised consolidated statement of cash flows
for the year ended 31 December 2012
                                                               2012             2011
R'million                                                   Audited          Audited
Earnings before interest and tax (EBIT)                         439              338
Adjustments for:
Depreciation, amortisation and impairments                      359              436
Other                                                           103               19
EBIT before working capital adjustments                         901              793
Working capital adjustments                                      35               51
Cash generated from operations                                  936              844
Net finance expenses and tax paid                             (150)            (221)
Net cash available from operating activities                    786              623
Dividends paid to owners of the parent                        (154)             (93)
Dividends to non-controlling interests                         (17)             (10)
Net cash inflow from operating activities                       615              520
Additions to property, plant and equipment and
intangibles                                                   (558)            (447)
Other investing cash flows                                       58               53
Net cash outflow from investing activities                    (500)            (394)
Decrease in borrowings                                         (78)            (186)
Incentive share scheme share purchased
on behalf of employees                                         (14)               -
Net cash outflow from financing activities                     (92)            (186)
Net increase/(decrease) in cash and cash
equivalents                                                      23             (60)
Cash and cash equivalents at the beginning of the
year                                                            232              292
Cash and cash equivalents at the end of the year                255              232

Summarised consolidated income statement
for the year ended 31 December 2012
                                                            2012       2011
R'million                                       Note     Audited    Audited
Revenue                                                    5 558      5 246
Operating expenses                                       (4 760)    (4 472)
Earnings before interest, tax,
depreciation, amortisation and
impairments (EBITDA)                                        798         774
Depreciation and amortisation                             (328)       (283)
Impairments                                                (31)       (153)
Earnings before interest and tax (EBIT)                     439         338
Net finance expense                                        (24)        (46)
Income from associate                                         4           3
Profit before taxation                                      419         295
Income tax expense                                        (136)       (100)
Profit for the year                                         283         195
Attributable to:
Equity holders of the company                               270         183
Non-controlling interests                                    13          12
                                                            283         195
Basic and diluted earnings per ordinary
share - cents                                       4      87.5        59.2

Summarised consolidated statement of group
comprehensive income
for the year ended 31 December 2012
                                                           2012        2011
R'million                                               Audited     Audited
Profit for the year                                         283         195
Other comprehensive (loss)/income after tax               (154)          48
Translation differences for foreign operations             (18)          23
Translation differences relating to
non-controlling interests                                   (7)           5
Changes in fair value of cash flow hedges (net of
tax)                                                          4          10
Actuarial (losses)/gains on defined-benefit funds         (184)          13
Deferred tax relating to actuarial losses/(gains)            51         (3)

Total comprehensive income for the year                     129         243
Total comprehensive income attributable to:
Equity holders of the company                               123         226
Non-controlling interests                                     6          17
                                                            129         243

Statistics and ratios
                                                           2012        2011
                                                        Audited     Audited
Average no of shares in issue during the year
('000)                                                  308 568     308 568
Shares in issue ('000)                                  308 568     308 568
Dividends per share (cents)                                45.0        45.0
Final                                                      18.0        23.0
Interim                                                    27.0        22.0
EBITDA margin (%)                                          14.4        14.8
Interest cover on EBITDA (times)                           33.3        16.8
Effective tax rate (%)                                     32.5        33.9
Gearing (%)                                                15.5        17.4
Dividend cover - headline earnings (times)                  2.0         2.0

Summarised consolidated statement of changes in equity

                                               share and
                             Share capital   share based      FCTR and                                     Non-
                                 and share       payment       hedging        Actuarial   Retained  controlling
                     R'million     premium      reserves      reserves   gains/(losses)   earnings    interests   Total equity
Balance at 31 December
2010                                   552             -          (86)              277      1 952           32          2 727
Other comprehensive income               -             -            33               10          -            5             48
Profit for the year                      -             -             -                -        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
Other comprehensive income               -             -          (14)            (133)                     (7)          (154)
Profit for the year                      -             -             -                -        270           13            283
Shares purchased on behalf
of employees                             -          (14)             -                -          -            -           (14)
Share based payments net of
tax                                      -            22             -                -          -            -             22
Dividends paid                           -             -             -                -      (154)         (17)          (171)
Balance at 31 December 2012            552             8          (67)              154      2 157           27          2 831

Business segments
                                                           2012             2011
R'million                                               Audited          Audited
Revenue                                                   5 558            5 246
 Atmospheric gases                                        1 817            1 696
 LPG                                                      2 018            1 913
 Hard goods                                                 874              822
 Rest of Africa                                             849              815
Gross profit after distribution expenses (GPADE)          1 510            1 422
 Atmospheric gases                                          568              513
 LPG                                                        362              378
 Hard goods                                                 266              242
 Rest of Africa                                             314              289
Reconciliation of GPADE to EBIT
GPADE for business segments                               1 510            1 422
Other operating expenses                                (1 040)            (931)
Impairments                                                (31)            (153)
Earnings before interest and taxation (EBIT)                439              338

Summarised consolidated statement of financial position
as at 31 December 2012
                                                           2012             2011
R'million                                    Notes      Audited          Audited
Property, plant and equipment                    3        2 854            2 657
Other non-current assets                                    604              880
Non-current assets                                        3 458            3 537
Inventories                                                 685              678
Trade and other receivables                                 841              830
Other current assets                                         32               16
Taxation receivable                                          30               50
Cash and cash equivalents                                   297              243
Current assets                                            1 885            1 817
Assets held-for-sale                             5           44                -
Total assets                                              5 387            5 354
Shareholders' equity                                      2 804            2 827
Non-controlling interests                                    27               38
Total equity                                              2 831            2 865
Long-term borrowings                                        132              446
Deferred tax liability                                      528              524
Non-current liabilities                                     660              970
Trade, other payables and financial
liabilities                                               1 078              981
Taxation payable                                             38               25
Short-term portion of long-term
borrowings                                                  738              502
Bank overdrafts                                              42               11
Current liabilities                                       1 896            1 519
Total equity and liabilities                              5 387            5 354

Notes to the financial statements
African Oxygen Limited (''Afrox'' or the ''Company'') is a South African registered company. The summarised consolidated financial
statements of the Company for the year ended 31 December 2012 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 summarised 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 SAICA financial reporting pronouncements issued by the Financial Reporting Standards Council and the
South African Companies Act 71 of 2008.

2 Basis of preparation
The accounting policies are those presented in the annual financial statements for the year ended 31 December 2012 and have
been consistently applied in these summarised consolidated financial statements and by all Group entities.

These summarised consolidated financial statements have been prepared under the supervision of the Financial Director, 
Nick Thomson (CA) SA.

3 Property, plant and equipment
                                                             2012              2011
R'million                                                 Audited           Audited
Property, plant and equipment
Opening carrying value                                      2 657             2 637
Additions                                                     546               416
Transfer to assets held-for-sale                             (15)                -
Impairments                                                  (16)             (152)
Disposals                                                    (14)               (3)
Depreciation                                                (296)             (253)
Translation differences                                       (8)               12
Closing carrying value                                      2 854             2 657

4 Earnings and headline earnings per share
Earnings per share are calculated on earnings of R270 million (2011: R183 million).
Headline earnings per share are calculated on headline earnings of R281 million (2011: R283 million).

Reconciliation between earnings and headline earnings
                                                            2012              2011
R'million                                                 Audited          Audited
Profit for the year                                           270              183
Adjusted for the after-tax effects of:
Profit on disposal of subsidiary                             (11)                -
Profit on disposal of property, plant and
equipment                                                       -             (10)
Impairment of property, plant and equipment
(net of tax)                                                   22              110
Headline earnings                                             281              283
Basic and diluted earnings per share - cents                 87.5             59.2
Headline earnings per share - cents                          91.0             91.6

5 Assets held-for-sale
A decision to dispose of one of the Group's businesses (RECO) was taken in May
2012, as the nature of the business operations was not aligned to the Group's
principal lines of business. The sale was completed in February 2013. The assets
of the business have been accounted for as a disposal group, however, not as a
discontinued operation, as the business does not represent a major line of
business. As at 31 December 2012, the major classes of assets disposed of are
detailed below:
R'million                                               Audited
Property, plant and equipment                                15
Inventories                                                  52
Impairment of property, plant and equipment                (15)
Inventory held-for-sale written-off                         (8)
Total assets held-for sale                                   44

6 Subsequent events
The sale of RECO was completed in February 2013.

7 Audit opinion
The independent auditors, KPMG Inc, have issued their opinion on the Group's
annual financial statements for the year ended 31 December 2012. A copy of
their unqualified audit report is available for inspection at the company's registered
office. These summarised financial statements have been derived from the group
annual financial statements.

The auditor's report does not necessarily cover all of the information contained
in this announcement. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor's work they should obtain a copy of
that report together with the accompanying financial information from the
registered office of the company.

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**, SN Maseko, CF Wells** *German **British
Company Secretary: Carnita Low
Auditors: KPMG Inc.

Date: 28/02/2013 03:30:00 Supplied by www.sharenet.co.za                     
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