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AFX - African Oxygen Limited - Audited group financial results and dividend

Release Date: 23/02/2012 15:00
Code(s): AFX
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AFX - African Oxygen Limited - Audited group financial results and dividend announcement for the year ended 31 December 2011 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") AUDITED GROUP FINANCIAL RESULTS AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2011 * Revenue increased 11% to R5,2 billion * EBITDA up 28% to R774 million * EPS up 65% to 91,6 cents per share * sh generated from operations R844 million PERFORMANCE SUMMARY For the year ended 31 December 2011 revenue increased 11% to R5,2 billion and EBITDA increased 28% to R774 million. Net profit including impairments was R183 million. Headline earnings per share was 91,6 cents for the year, up 65%. Afrox continued with its programme to invest in plant modernisation, additional capacity and efficiency enhancements, and for the year under review spent R416 million (2010: R294 million). The Group ended the year with net borrowings of R716 million and gearing of 17,4% (2010: 20.6%). BUSINESS REVIEW At the heart of our improved financial performance in 2011 are operational efficiencies, cost management and effective procurement. South Africa`s manufacturing sector recovery, a key economic indicator for Afrox, did not consolidate on the path that began towards the end of 2010. As a result, Afrox was unable to achieve the projected growth in sales volumes. A combination of scheduled maintenance and unplanned outages at South African oil refineries impacted negatively on Afrox`s bulk and packaged LPG sales. As a result of these issues, demand far outstripped supply for several months, leaving the company unable to meet the needs of its diverse customer base. LPG had to be imported to correct the shortfall at significantly higher costs. During 2011, industrial action by unions affiliated to Cosatu spilled over into most sectors of the local economy and Afrox was unable to avoid being affected. During July, this had a negative impact on Afrox`s transport fleet and consequently on production and distribution of product, despite our transport labour being spread across several unions/contractors. The decision to impair the assets of the MIG plant at Brits and cease production at the end of December 2010 proved to be sound. Annual savings of R23 million were achieved. The full benefits from the change to our manufacturing strategy are still to be realised during 2012. Afrox`s Atmospheric Gases business came under pressure in 2011 and volumes were 3% down on 2010. In addition to maintenance and the upgrading of the company`s air separation units (ASUs), Afrox has spent R71 million in 2011 on the new ASU to be built at its Pretoria site. The ASU will have Argon capability and will commence production in 2013. Volumes in the welding consumables (hard goods) market, which is traditionally linked to infrastructure development, managed to achieve a 3% growth in 2011. African operations outside South Africa increased revenue to R815 million (2010 R731 million), with EBITDA of R203 million, contributing 26% to the Group EBITDA. This continued growth is backed not only by the demand for commodities and infrastructure, but also a regional population that is characterised by the growth of a middle class. This has created demand for consumer products, beverages and healthcare, all areas served by Afrox. As previously reported, an unforeseen structural failure at the Witbank air separation unit in 2010 resulted in the disruption of service delivery to Evraz Highveld Steel (EHVS), Witbank, and via pipeline to Columbus Stainless in Middelburg. EHVS has given Afrox notice that it would not renew the supply agreements with Afrox effective 20 December 2013 and a decision was taken to impair the R152 million Witbank plant. Afrox also settled the claim from EHVS regarding the supply interruption suffered in 2010. Dividend The Board declared a final cash dividend of 23 cents per share (2010: 8 cents). Together with the interim cash dividend of 22 cents per share (2010: 19 cents), a total of 45 cents per share (2010: 27 cents) was declared for the year and is covered 2,0 times in headline earnings per share. Board of Directors Kent Masters resigned as a non-executive director and Chairman of the Afrox Board from 20 May 2011, Karen Oliver resigned as non-executive director from 31 March 2011, Tjaart Kruger resigned as Managing Director from 31 August 2011, and 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. Sipho Pityana resigned as independent director from 31 December 2011. At this challenging juncture in Afrox`s history, it is vital that our company has a Managing Director who has the necessary industry experience and understands the Afrox culture, and has had the benefit of international management experience. Therefore, it is with pleasure that we can confirm that Brett Kimber, a South African and former senior Afrox employee, has been appointed as Managing Director from 1 January 2012. His appointment coincides with changes that have been made in the Linde global structure to reflect operations in three major time zones across the globe, bringing the UK/Ireland and Africa closer together and achieving this through sharing of applicable best practices, skills and competencies. Outlook Many of the internal factors that restrained growth during 2010 have been resolved, clearing the way for an incremental return to operational and financial strength, barring unforeseen events. Continued low economic growth, which impact on manufacturing and infrastructure spend in South Africa, remains a real concern and as a result our outlook remains cautiously optimistic. Mike Huggon Frederick Kotzee 23 February 2012 Chairman Financial Director Johannesburg NOTICE OF FINAL DIVIDEND DECLARATION NUMBER 171 AND SALIENT FEATURES Notice is hereby given that a cash dividend of 23 cents per ordinary share, being the final dividend for the year ended 31 December 2011, has been declared payable to all shareholders of African Oxygen Limited recorded in the register on Friday, 20 April 2012. The salient dates for the declaration and payment of the final dividend are as follows: 2012 Last day to trade ordinary shares "cum" dividend Friday, 13 April Ordinary shares trade "ex" the dividend Monday, 16 April Record date Friday, 20 April Payment date Monday, 23 April Share certificates may not be dematerialised or rematerialised between Monday, 16 April 2012 and Friday, 20 April 2012, both days inclusive. By order of the board C Low 23 February 2012 Company Secretary Johannesburg AUDIT OPINION The independent auditors, KPMG Inc., have issued their opinion on the Group`s financial statements for the year ended 31 December 2011. The audit was conducted in accordance with International Standards on Auditing. A copy of their unqualified audit report is available for inspection at the Company`s registered office. These condensed financial statements have been derived from the Group financial statements and are consistent, in all material respects, with the Group financial statements. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 31 December Rm Note 2011 2010 ASSETS Property, plant and equipment 3 2 657 2 637 Investment in associate 19 17 Other non-current assets 861 842 Non-current assets 3 537 3 496 Inventories 678 663 Trade and other receivables 846 780 Cash and cash equivalents 243 327 Taxation receivable 50 20 Current assets 1 817 1 790 Total assets 5 354 5 286 EQUITY AND LIABILITIES Attributable to equity holders of 2 827 2 695 the company Non-controlling interest 38 32 Total equity 2 865 2 727 Long-term borrowings 446 871 Deferred tax liabilities 524 514 Non-current liabilities 970 1 385 Short-term portion of long-term 502 263 borrowings Trade and other payables 981 848 Taxation payable 25 28 Bank overdrafts 11 35 Current liabilities 1 519 1 174 Total equity and liabilities 5 354 5 286 CONDENSED CONSOLIDATED INCOME STATEMENT Rm Note 31 December 31 December 2011 2010 Revenue 5 246 4 721 Operating cost (4 472) (4 115) Earnings before interest, tax, 774 606 depreciation, amortisation and impairments (EBITDA) Depreciation and amortisation (283) (283) Impairments (153) (104) Earnings before interest and tax 338 219 (EBIT) Net finance expense (46) (63) Income from associate 3 6 Profit before taxation 4 295 162 Income tax expense (100) (56) Profit for the period 195 106 Attributable to: Equity holders of the Company 183 94 Non-controlling interest 12 12 Profit for the period 195 106 Basic and diluted earnings per 59,2 30,5 ordinary share (cents) CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Rm 31 December 31 December 2011 2010 Profit for the period 195 106 Other comprehensive income/(loss) 48 (117) after tax: Translation differences for foreign 23 (27) operations Translation differences relating to 5 (8) non-controlling interest Changes in fair value of cash flow 10 (12) hedges Actuarial gains/(losses) on defined- 13 (97) benefit funds Deferred tax relating to actuarial (3) 27 (gains)/losses Total comprehensive income/(loss) 243 (11) for the period Attributable to: Equity holders of the Company 226 (15) Non-controlling interest 17 4 Total comprehensive income/(loss) 243 (11) for the period CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital
Rm and Other Retained Non- Total share reserves earnings controlling premium interest Balance at 552 300 1 975 32 2 859 1 January 2010 Other movements - (109) - (8) (117) Profit for the - - 94 12 106 period Dividends paid - - (117) (4) (121) Balance at 31 552 191 1 952 32 2 727 December 2010
Balance at 1 552 191 1 952 32 2 727 January 2011 Other movements - 43 - 5 48 Profit for the - - 183 12 195 period Changes in - - (1) (1) (2) interest in subsidiary Dividends paid - - (93) (10) (103) Balance at 552 234 2 041 38 2 865 31 December 2011 CONDENSED CONSOLIDATED CASH FLOW STATEMENT Rm 31 December 31 December 2011 2010 Earnings before interest and tax (EBIT) 338 219 Adjustments for: Depreciation and amortisation 283 283 Impairments of tangible and intangible 153 104 assets Other 19 36 Operating cash flow before working capital 793 642 adjustments Working capital adjustments 51 (36) Cash generated from operations 844 606 Net finance expense and taxation paid (221) (197) Other - (3) Cash available from operating activities 623 406 Dividends paid (93) (117) Dividends to non-controlling interest (10) (4) Net cash inflow from operating activities 520 285 Additions to property, plant and equipment (447) (294) and intangibles Other net investing cash flows 53 81 Net cash outflow from investing activities (394) (213) Decrease in borrowings (186) (356) Net cash outflow from financing activities (186) (356) Net decrease in cash and cash equivalents (60) (284) Cash and cash equivalents at beginning of 292 576 period Cash and cash equivalents at end of period 232 292 BUSINESS SEGMENTS 31 31 December December
2011 2010 Rm Revenue 5 246 4 721 - Atmospheric gases 1 696 1 593 - LPG 1 913 1 645 - Hardgoods 822 752 - Rest of Africa 815 731
Gross profit after distribution (GPADE) 1 133 1 012 - Atmospheric gases 513 436 - LPG 378 364 - Hardgoods 242 212 Reconciliation of GRADE to EBIT - GPADE for business segments 1 133 1 012 - Other operating expenses (831) (882) - Impairments (153) (104) - EBIT Rest of Africa 189 193 Earnings before interest and taxation (EBIT) 338 219 NOTES TO THE FINANCIAL STATEMENTS African Oxygen Limited ("Afrox" or the "Company") is a South African registered company. These 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. FINANCIAL PERIOD The year end results hereby presented are for twelve months ended 31 December 2011. 2. STATEMENT OF COMPLIANCE AND ACCOUNTING POLICIES The financial statements are prepared in millions of South African Rands (Rm). These condensed year end group financial statements have been prepared in accordance with the recognition and measurement of International Financial Reporting Standards (IFRS), AC 500 Standards as issued by the Accounting Practices Board or its successor, and are in compliance with IAS 34: presentation and disclosure Interim Financial Reporting, the JSE Limited`s Listing Requirements and in the manner required by the South African Companies Act. The accounting policies applied are consistent with those followed in the preparation of the consolidated annual financial statements for the year ended 31 December 2011, except where the group has adopted new or revised IFRS statements. 31 December 31 December Rm 2011 2010 3. Capital expenditure and commitments Property, plant and equipment Opening carrying value 2 637 2 729 Additions 416 294 Disposals (3) (14) Depreciation (253) (252) Impairments (152) (96) Translation differences 12 (24) Closing carrying value 2 657 2 637 Capital commitments - authorised but not contracted 290 231 - authorised and contracted 173 59 Total capital commitments 463 290 4. Profit before taxation Included in profit before taxation are: Amortisation of intangible assets 30 31 Depreciation 253 252 5. 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 final cash dividend of 23,0 cents per share on 23 February 2012. A claim of approximately R207 million still remain against the Group. This claim refers to supply disruptions, predominantly as a result of power outages and equipment failure. The Group has sought legal advice and the Board of Directors is of the opinion that various robust defences exist in respect of the claim and material success by the claimants is improbable. STATISTICS AND RATIOS Rm 31 December 31 December 2011 2010
Reconciliation between earnings and 183 94 headline earnings Total profit for the period attributable to equity holders of the company (Profit)/loss on disposal of property, (10) 2 plant and equipment Impairments (net of tax) 110 75 Headline earnings 283 171 59,2 30,5 Basic and diluted earnings per ordinary share - Group (cents) Headline earnings per ordinary share - 91,6 55,5 Group (cents) Average number of ordinary shares in 308 568 308 568 issue during the period and on which earnings per share are based (`000) Dividends per share (cents) 45,0 27,0 Net asset value per share (cents) 823 784
RATIOS EBITDA margin (%) 14,8 12,8 Interest cover (times) 7,3 3,5 Effective tax rate (%) 33,9 34,6 Gearing (%) 17,4 20,6 Dividend cover based on headline 2,0 2,1 earnings per share(times) Registered office: Afrox House, 23 Webber Street, Selby, Johannesburg 2001. PO Box 5404, Johannesburg 2000. Telephone +27 (0) 11 490-0400. Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107. Telephone: +27 (0) 11 370-5000. Sponsor in South Africa: One Capital. Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited. Directors: MS Huggon** (Chairman), BD Kimber (Managing director), FT Kotzee (Financial director), DM Lawrence, M Malebye, Dr KDK Mokhele, J Narayadoo, LL van Niekerk, M von Plotho*, DM Woodrow** *German **British Company secretary: C Low www.afrox.com Afrox is a member of The Linde Group 23 February 2012 Date: 23/02/2012 15:00:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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