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AFX - Afrox to Cut R200m in Costs
African Oxygen Limited
(Incorporated in the Republic of South Africa)
(Registration number 1927/000089/06)
JSE code: AFX
NSX code: AOX
ISIN: ZAE000067120
("Afrox" or "the company")
AFROX TO CUT R200M IN COSTS
Market leader announces raft of measures to counter economic crisis
Sub-Sahara`s leading gases and welding company, African Oxygen Limited, has
confirmed operational and structural changes to deliver R200 million in cost
savings by the end of 2009.
Measures announced at its annual general meeting held today (May 7, 2009)
include:
- A reduction in filling sites, elimination of minimally profitable or slow
moving product ranges, and optimisation of routes to market.
- A review of all outlets is complete and closure of branches that do not
meet minimum return thresholds is underway.
- A head-count reduction of close to 15% will be achieved by the third
quarter.
Managing Director, Tjaart Kruger, said: "The current actions being implemented,
albeit addressing immediate requirements, are in fact strategically correct to
ensure long-term sustainability.
"We look to these measures to mitigate the impact of the global crisis and,
together, I believe, they place the company firmly on the road to realising its
potential.
"In today`s economic climate, forecasting is difficult, leaving us with the only
option to manage efficiencies, reduce cost, and maximise cash to our full
ability.
"Change management requirements are huge. The current external pressures and
internal changes to the company require the biggest culture change Afrox has
ever experienced. The challenges of changing this culture should not be
underestimated."
Kruger warned the first quarter of 2009 "has been a continuation of the trends
set in the last quarter of 2008".
He said: "Volumes, sales, pricing, cash-flow, manpower, production costs, are
all under market-reflected pressure and we don`t expect any significant reversal
in the short term. Customer cutbacks in capex are evident which will undoubtedly
affect expansion opportunities in tonnage and we see spare capacity for the
foreseeable future."
Kruger told shareholders that 2008 was less a year of two halves and more a year
of quarters, with each period progressively worse than the previous and, by the
fourth quarter, each month was significantly more depressed than the last.
He reported that the company`s African operations achieved excellent results at
good margin, contributing a record 23% of group profits.
"The R1-billion of capital expenditure programme, referred to in the previous
trading period, continued in 2008 with the remaining project, the Gases
Operations Centre in Germiston, to be finished this year," said Kruger.
He added: "As a result, the carbon dioxide plant was successfully commissioned
in the last quarter of 2008, and the Kuilsriver air separation unit has now been
commissioned.
"Competitor activity was noticeably fiercer in 2008 as economic conditions
worsened and, going forward, a rigorous pricing regime is the order of the day
to protect market share."
Further strengthening Afrox`s position is its `A`-rating, or Level 4, BEE
certification.
Said Kruger: "We are making excellent progress with our black economic
empowerment objectives and remain committed as ever to creating opportunities
for black people to contribute to the economy.
"The new rating means Afrox is the first chemicals company listed on the JSE to
achieve a Level 4 value adding status for our commitment to BEE. In line with
the Department of Trade and Industry`s generic scorecard, customers can now
claim 125% in BEE recognition on all goods and services purchased.
"This is already having a positive impact on customer retention and State-
related tenders, an invaluable source of new business in the current climate."
Johannesburg
7 May 2009
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Date: 07/05/2009 16:07:01 Supplied by www.sharenet.co.za
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