Wrap Text
Afrox pays shareholders R2.1 billion and expects sound growth from new
businesses
PRESS RELEASE - AFRICAN OXYGEN LIMITED
29 APRIL 2005
AFROX PAYS SHAREHOLDERS R2,1 BILLION
AND EXPECTS SOUND GROWTH FROM NEW BUSINESSES
African Oxygen Limited (Afrox) is paying shareholders R2,1 billion for the sale
of its healthcare subsidiary and expects sound future growth from new
initiatives such as a new safety business, Gas & Gear retail outlets, and new
export markets for both welding electrodes and gas equipment and accessories.
The board of directors has decided to distribute the net proceeds from the
disposal of the company"s 68 percent shareholding in Afrox Healthcare Limited in
the form of a share buy back and a special dividend. A special cash dividend
amounting to 415,0 cents per ordinary share has been declared, and the
distribution of the remainder of the net proceeds, through a share buy back,
amounts to 193,0 cents. The total distribution will therefore be 608 cents per
Afrox share.
In addition, the board of directors has declared an interim cash dividend from
the industrial operations of 40 cents per share (2004: 33 cents per share), an
increase of 21 percent on the comparable results this time last year.
For the six months ended 31 March 2005, the consolidated results of both Afrox
industrial and healthcare, have shown a 9 percent increase in revenue to R4,1
billion (2004: R3,7 billion) with operating profit up 7 percent at R641,2
million (2004: R598,3 million) and headline earnings per share 12 percent higher
than the comparable period last year.
On a comparative basis for the six months under review, the Afrox industrial
business stripped of healthcare results, showed a pleasing 12 percent increase
in revenue at R1,6 billion (2004: R1,4 billion) with net profit 7 percent higher
at R222,8 million (2004: R207,4 million).
Chief executive of Afrox, Rick Hogben said, "Our results were in line with
expectations. The first quarter in particular, was characterised by the rapid
escalation in costs of liquefied petroleum gas (LPG) and steel. High steel
prices impact on the manufacturing of our gas equipment and welding electrodes.
After an initial lag in the recovery of these costs, by the end of the second
quarter they had been fully recovered with an increase in selling prices. There
was a marked improvement with a pleasing growth in profits in the second
quarter."
"Our Process Gas Solutions (PGS) business was affected by reduced plant
efficiencies, which have now been rectified through planned plant maintenance."
The sale of Afrox Healthcare was granted final approval by the Competition
Tribunal and became effective on 22 March 2005. Bidco, a BEE consortium, led by
Brimstone Investment Corporation Limited and Mvelaphanda Strategic Investments
(Pty) Limited, became the registered holder of all of the issued shares of Afrox
Healthcare Limited. On 23 March 2005, Afrox Healthcare Limited"s listing on the
JSE Securities Exchange was terminated and all its shareholders have been paid
in full.
Hogben said that without the healthcare subsidiary, the company had a broad base
and could be considered as more than an industrial business. "Our strategy is
to sustain our core business while utilising our strong branding and
distribution network to grow into new markets and new geographies."
He cited entry into the global export market with the company"s Vitemax general-
purpose electrodes as an example. Repeat orders have been obtained from sales
of electrodes, marketed as BOC SmoothArc, to parent company BOC"s operations in
Australia and New Zealand.
"Competing internationally, we won the contract to supply BOC in the United
Kingdom with our redesigned range of gas equipment and accessories," said
Hogben. "This follows successful exports of our world benchmark Afrox designed
and manufactured gas and welding equipment to Australia, New Zealand and SE
Asia."
Referring to the new Afrox Gas & Gear retail centres that have opened recently
to cater for Afrox"s smaller collect customers, Hogben said, "Afrox Gas & Gear
is a new concept in industrial retailing. We are converting, re-locating or
upgrading our existing chain of retail outlets countrywide and plan to have 16
operational by the year-end and to introduce 24 more centres within the next two
years."
"In April, we acquired Twinco, a leading safety products company that will
position us to compete successfully in the safety products market. In addition,
sales of the AfroxPac 35 self-contained self-rescuer, launched in 2003, are on
track to achieve stringent stretch targets by year-end. Growth in the safety
business has led to the consolidation of our safety products under a single
business unit called Afrox Safety, which already has an annualised turnover in
excess of R180 million," said Hogben.
Afrox is also investing R100 million, in the expansion and re-engineering of its
gases operations centre in Germiston. This will enlarge what is already the
biggest gas production, cylinder filling and distribution centre in the southern
hemisphere. Here Afrox manufactures, produces and distributes its entire range
of industrial, medical and scientific gases. The re-engineering will
incorporate an improved logistics layout, a world-class nitrous oxide facility,
a test station and medical gases filling facility.
Process Gas Solutions grew market share but, due to shutdowns for maintenance,
sales were affected. Plant efficiencies have now been rectified through the
planned maintenance, and PGS is again on target to make up any shortfall in the
second half.
Afrox is known as a strong performer through all economic cycles. Looking to the
future, Hogben said, "The challenges encountered in the first quarter were
foreseen and we have actions to offset these for the second half of the year.
As a result we expect increased revenues and profits from our new product and
service offerings. We look forward to the next six months with confidence and
expect earnings growth to be higher for the full year."
Ends
Issued by African Oxygen Limited
Contact Chris Fieldgate 011 490 0430 or
Ros Beart 011 490 0712
Date: 29/04/2005 03:00:27 PM Supplied by www.sharenet.co.za
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