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AFX - African Oxygen Limited - Unaudited financial results for the six months
ended 30 June 2011 and renewal of cautionary announcement
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")
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011 AND RENEWAL
OF CAUTIONARY ANNOUNCEMENT
- Revenue R2,5 billion
- Headline earnings 52,8 cent
PERFORMANCE SUMMARY
Revenue for the six months to 30 June 2011 was R2,5 billion, an increase of
10% with R416 million in earnings before interest, tax, depreciation and
amortisation (EBITDA) up 18% compared to the same period last year. EBITDA
margin improved to 16,4%. Net profit was R58 million (2010: R125 million) and
headline earnings per share were 52,8 cents (2010: 38,8 cents). Capital
expenditure was R154 million (2010: R93 million) for the period. Net
borrowings were R688 million (2010: R941 million). The Group`s gearing was
17,4% compared to 21,5% for the same period last year.
Business review
Effective cost management, improved plant reliability and changes to the
manufacturing strategy drove an improved performance which saw headline
earnings for the period increase by 37%. These results include a once-off pre-
tax benefit fund gain of R30 million (7 cents impact per share resulting in
adjusted headline earnings of 45,9 cents).
The Group has been advised that it has been unsuccessful in the renewal of
the Highveld Steel supply agreement and thus, the decision was taken to
impair the R152 million assets associated with the Witbank plant. The
existing supply contract has a two year notice period.
Trading conditions were mixed. Good volume growth was experienced in the
liquefied petroleum gas (LPG) business, mostly driven by the automotive
industry, whilst demand for bulk industrial product did not meet
expectations. Sales of compressed gases grew satisfactorily.
The decision to introduce a new manufacturing strategy has led to a
significant steady increase in the margin on hardgoods. The demand for
hardgoods is improving and this will position the Group well for future
growth.
Operations in African countries outside South Africa contributed 26% (2010:
29%) to the Group`s half-year EBITDA in what was a challenging market
characterised by static demand from many markets on the continent. The
outlook for sub-Saharan Africa remains positive and the region continues to
be focus for future growth.
Capital expenditure accelerated during the first half of the year, growing to
R154 million (2010: R93 million). The majority of this investment was focused
on the new Pretoria plant, to be commissioned towards the end of 2012, which
is expected to cost approximately R200 million. Working capital remains a
focus and has continued to improve.
The Group emphasis on cash management resulted in several achievements. Good
progress has been made with the collection of long outstanding state debt, an
area that will continue to get focus. Inventory management has improved
significantly with the implementation of a new planning system.
Although overall trading conditions remain challenging for the industry as a
whole, the fundamental position of Afrox as a leading supplier of atmospheric
gases, hardgoods and LPG remains unchanged. The organisational drive to
achieve desired High Performance Organisation (HPO) status is continuing and
has already resulted in significant benefits for the company.
Dividend
It is the Group`s policy to consider dividends twice annually. The board of
directors have declared an interim cash dividend of 22,0 cents per share for
the six months ended June 2011 (2010: 19.0 cents). The dividend is covered 2
times by earnings per share adjusted for benefit fund gains.
Board of directors
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.
Kent Masters resigned as a Non-Executive Director and Chairman of the Afrox
Board from 20 May 2011, and Karen Oliver resigned as Non-Executive Director
from 31 March 2011.
Resignation of Managing Director, Mr. T.N. Kruger
During the reporting period, Tjaart Kruger, Managing Director, tendered his
resignation to the Board. During his five years with the company he made a
major contribution to Afrox. The Board thanks him for his contribution and
wishes him well with his future endeavours.
Outlook
Market conditions, compared to the corresponding 2010 period, remain
challenging for the remainder of the year, with only minimal growth in the
South African economy expected. Growth in Africa, which traditionally lags
that of South Africa, is expected to be muted.
We are optimistic that the continued focus on current business strategies,
backed by continued cost management will contribute to an improved
performance during the second six months of 2011, compared to the same period
of last year.
Mike Huggon Tjaart Kruger 19 July 2011
Chairman Managing Director Johannesburg
NOTICE OF INTERIM DIVIDEND DECLARATION NUMBER 170 AND SALIENT FEATURES
Notice is hereby given that a cash dividend of 22,0 cents per ordinary share,
being the interim dividend for the six-month period ended 30 June 2011, has
been declared payable to all shareholders of Afrox recorded in the register
on Friday, 21 October 2011.
The salient dates for the declaration and payment of the interim dividend are
as follows:
2011
Last day to trade ordinary shares "cum" dividend Friday, 14 October
Ordinary shares trade "ex" the dividend Monday, 17 October
Record date Friday, 21 October
Payment date Monday, 24 October
Share certificates may not be dematerialised or rematerialised between
Monday, 17 October 2011 and Friday, 21 October 2011, both days inclusive.
By order of the board
Carnita Low 19 July 2011
Company Secretary Johannesburg
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June 31 Dec
Rm Note 2011 2010 2010
ASSETS
Property, plant and equipment 4 2 502 2 688 2 637
Other non-current assets 868 974 859
Non-current assets 3 370 3 662 3 496
Inventories 684 654 663
Trade and other receivables 840 902 800
Cash and cash equivalents 368 494 327
Current assets 1 892 2 050 1 790
Total assets 5 262 5 712 5 286
EQUITY AND LIABILITIES
Shareholders` equity 2 733 2 839 2 695
Non-controlling interest 34 36 32
Total equity 2 767 2 875 2 727
Long-term borrowings 877 1 127 871
Deferred taxation 506 573 514
Non-current liabilities 1 383 1 700 1 385
Current portion of long-term 163 263 263
borrowings
Trade, other payables and 924 812 848
provision
Taxation payable 9 17 28
Bank overdrafts 16 45 35
Current liabilities 1 112 1 137 1 174
Total equity and liabilities 5 262 5 712 5 286
CONDENSED CONSOLIDATED INCOME STATEMENT
30 June 30 June 31 Dec
2011 2010 2010
Rm Note 6 months 6 months 12 months
Revenue 2 539 2 312 4 721
Operating expenses (2 123) (1 958) (4 115)
Earnings before interest, tax, 416 354 606
depreciation, amortisation and
impairments (EBITDA)
Depreciation and amortisation (152) (137) (283)
Impairments (152) - (104)
Earnings before interest and 112 217 219
tax (EBIT)
Net finance expense (28) (31) (63)
Income from associate - 3 6
Profit before taxation 84 189 162
Taxation (26) (64) (56)
Profit for the period 58 125 106
Attributable to:
Equity holders of the Company 53 118 94
Non-controlling interest 5 7 12
Net profit for the period 58 125 106
Basic and diluted earnings per 5 17,1 38,3 30,5
share (cents)
Headline earnings per share 5 52,8 38,8 55,5
(cents)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30 June 30 June 31 Dec
2011 2010 2010
Rm 6 months 6 months 12 months
Profit for the period 58 125 106
Translation differences for 3 (5) (27)
foreign operations
Translation differences 1 (1) (8)
relating to non-controlling
interest
Changes in fair value of cash 13 - (12)
flow hedges (net of tax)
Actuarial losses on defined- (7) (60) (97)
benefit funds
Deferred tax relating to 2 17 27
actuarial losses
Other comprehensive 12 (49) (117)
income/(loss) after tax:
Total comprehensive 70 76 (11)
income/(loss) for the period
Attributable to:
Equity holders of the Company 64 71 (15)
Non-controlling interest 6 5 4
Total comprehensive 70 76 (11)
income/(loss) for the period
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
30 June 30 June 31 Dec
2011 2010 2010
Rm 6 months 6 months 12 months
Earnings before interest and tax 112 217 219
(EBIT)
Adjustments for:
Depreciation, amortisation and 304 137 356
impairments
Other 14 11 67
Operating cash flow before working 430 365 642
capital changes
Working capital changes 4 (155) (36)
Cash generated from operations 434 210 606
Finance expenses and tax paid (84) (88) (197)
Other (29) - (3)
Cash available from operating 321 122 406
activities
Dividends paid (25) (59) (117)
Dividends to non-controlling interest (4) (1) (4)
Net cash inflow from operating 292 62 285
activities
Purchase of property, plant and (154) (93) (294)
equipment and intangibles
Net other investing cash flows net 16 4 81
Net cash outflow from investing (138) (89) (213)
activities
Decrease in borrowings (94) (100) (356)
Net cash outflow from financing (94) (100) (356)
activities
Net increase/(decrease) in cash and 60 (127) (284)
cash equivalents
Cash and cash equivalents at beginning 292 576 576
of period
Cash and cash equivalents at
end of period 352 449 292
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Non-
capital
and
Rm share Other Retained controlling Total
premium reserves earnings interest
Balance at 1 552 191 1 952 32 2 727
January 2011
Total - 11 - 1 12
comprehensive
income
Profit for the - - 53 5 58
period
Acquisition of - - (1) (1) (2)
additional
interest in
subsidiary
Dividends paid - - (25) (3) (28)
Balance at 30 552 202 1 979 34 2 767
June 2011
Balance at 1 552 300 1 975 32 2 859
January 2010
Total - (47) - (2) (49)
comprehensive
income
Profit for the - - 118 7 125
period
Dividends paid (59) (1) (60)
Balance at 30 552 253 2 034 36 2 875
June 2010
Balance at 1 552 300 1 975 32 2 859
January 2010
Total - (109) - (8) (117)
comprehensive
income
Profit for the - - 94 12 106
period
Dividends paid - - (117) (4) (121)
Balance at 31 552 191 1 952 32 2 727
December 2010
BUSINESS SEGMENTS
30 June 30 June 31 Dec
2011 2010 2010
Rm
Revenue 2 539 2 312 4 721
- Atmospheric gases 833 781 1 593
- LPG 919 811 1 645
- Hardgoods 396 369 752
- Rest of Africa 391 351 731
Gross profit after distribution 563 542 1 012
(GPADE)
- Atmospheric gases 249 257 436
- LPG 191 184 364
- Hardgoods 123 101 212
Reconciliation of GRADE to EBIT
- GPADE for business segments 563 542 1 012
- Other operating expenses (399) (422) (882)
- Impairments (152) - (104)
- EBIT Rest of Africa 100 97 193
Earnings before interest and taxation 112 217 219
(EBIT)
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, the AC 500
standards as issued by the Accounting Practices Board and the Listing
Requirements of the JSE Limited and the Companies Act of South Africa, as
amended.
2. Basis of preparation
The financial statements are prepared in millions of South African Rands (Rm)
on the historical cost basis.
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 2010.
The accounting policies are those presented in the annual financial
statements for the year ended 31 December 2010 and have been applied
consistently to the periods presented in these interim condensed consolidated
financial statements and by all Group entities.
3. Audit report
These consolidated interim financial statements have not been reviewed or
audited by the Group`s auditors.
30 June 30 June 31 Dec
2011 2010 2010
Rm 6 months 6 months 12 months
4. Capital expenditure
Property, plant and equipment
Opening carrying value 2 637 2 729 2 729
Additions 154 93 294
Impairments (152) - (96)
Disposals (3) (6) (14)
Depreciation (137) (121) (252)
Translation differences 3 (7) (24)
Closing carrying value 2 502 2 688 2 637
5. Earnings and headline earnings per share
* Earnings per share is calculated on earnings of R53 million
(2010: R118 million).
* Headline earnings per share is calculated on headline earnings
of R163 million (2010: R119 million).
All of the above are based on weighted average number of ordinary
shares of 308 567 602 (2010: 308 567 602) in issue during the
period.
Reconciliation between earnings
and headline earnings
Profit for the period 53 118 94
Loss on disposal of property, 1 1 2
plant and equipment
Impairments (net of tax) 109 - 75
Headline earnings 163 119 171
6. 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 an interim cash dividend of
22,0 cents per share on 19 July 2011. There is a possible R25 to R30 million
pre-tax gain on the disposal of small assets in a neighbouring country.
Claims of approximately R400m still remain against the Group. These claims
refer to supply disruptions, predominantly as a result of power outages and
equipment failure. The Group has continued to obtain legal advice and the
Board of Directors is of the opinion that various robust defences exist in
respect of the two claims and material success in either of these matters by
the claimants is improbable. Accordingly, no provision for any liability has
been made in these financial statements.
Circumstances may arise in future that could potentially result in an
existing supply contract becoming onerous during the next few years.
Discussions are being held to mitigate this risk and the impact is uncertain
at this time.
7. Renewal of cautionary announcement
Further to the cautionary announcement published on SENS on 1 July 2011 and
in the press on 4 July 2011, Afrox shareholders are advised that the
circumstances relating to the Company are still being determined, which may
have a material effect on the price of the Company`s securities.
Accordingly, Afrox shareholders are advised to continue exercising caution
when dealing in the Company`s securities until a full announcement is made in
this regard.
STATISTICS AND RATIOS
30 June 30 June 31 Dec
2011 2010 2010
6 months 6 months 12 months
Average number of shares in issue 308 568 308 568 308 568
during the period (`000)
Shares in issue (`000) 308 568 308 568 308 568
Net asset value excluding actuarial 798 822 784
gain/loss per share (cents)
Dividends per share (cents) 22,0 19,0 27,0
Final - - 8,0
Interim 22,0 19,0 19,0
Ratios
EBITDA margin (%) 16,4 15,3 12,8
Interest cover on EBITDA (times) 14,9 11,4 9,6
Effective tax rate (%) 31,7 33,8 34,6
Gearing (%) 17,4 21,5 20,6
Dividend cover - (times) 0.8 2.0 1,1
AFRICAN OXYGEN LIMITED
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: TN Kruger (Managing Director), FT Kotzee (Financial Director), J
Narayadoo(Director MPG Operations), MS Huggon*** (Chairman), M von Plotho**,
DM Lawrence, M Malebye, Dr KDK Mokhele,
SM Pityana, LL van Niekerk, DM Woodrow***
**German ***British
Company Secretary: Carnita Low
Auditors: KPMG Inc.
www.afrox.com
Afrox is a member of The Linde Group
Johannesburg
19 July 2011
Date: 19/07/2011 16:22:01 Supplied by www.sharenet.co.za
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