Wrap Text
Financial results and dividend declaration for the year ended 31 December 2017
African Oxygen Limited
(Incorporated in the Republic of South Africa)
Registration number: 1927/000089/06
ISIN: ZAE000067120 JSE code: AFX
NSX code: AOX
FINANCIAL RESULTS AND DIVIDEND DECLARATION
for the year ended 31 December 2017
Financial features
Revenue
R5 693 million
Earnings per share
203.6 cents
HEPS
201 cents per share
2017 Dividend
100 cents per share
Commentary
Performance highlights
During the year under review, Afrox increased revenue by 2.8% from improved volumes in the segments Atmospheric Gases and
LPG and effective price cost recovery across all four segments. Adjusting for non-recurring item (2016 litigation
settlement with ArcelorMittal South Africa Limited (AMSA)), Afrox Group revenue increased by 6% on a comparable basis.
The growth in revenue was achieved despite the continued weakness of the South African economy.
Earnings before interest, tax, depreciation and amortization (EBITDA) margin reduced by 160 basis points (bps) to 20.7%
(2016: 22.3%) resulting in a 4.4% reduction in reported EBITDA. However, on a comparable basis EBITDA improved by 9.9%,
adjusting for the impact from the non-recurring item in 2016. Despite the reduction in EBITDA, headline earnings per
share increased by 6.1% to 201.0 cents (2016: 189.4 cents), and basic earnings per share increasing by 5.3% to 203.6
cents (2016: 193.3 cents) with an underlying growth in headline earnings per share of 32.3% and 30.7% growth in earnings
per share, adjusting for the 2016 litigation settlement.
Effective balance sheet management and cost containment resulted in a further increase in the cash position to R1 344
million (December 2016: R1 153 million). Included in net investment activities is capital expenditure of R350 million
(2016: R389 million), and reflects the adequate production capacity of the Group at present and the expected relatively
low economic growth.
Return on capital employed (ROCE) as reported, reduced by 90 bps to 23.7% (2016: 24.6%), adjusting for the impact of the
2016 settlement however, ROCE improved by 370 bps compared to 2016. The adjusted improvement in ROCE reflects the
continued balance sheet optimisation.
Business review
Atmospheric Gases
Revenue for this segment increased by 5.9% after adjusting for the impact of the litigation settlement received in 2016.
This underlying growth was achieved on the back of better volumes in all sectors in combination with continued effective
price cost management. Volume growth from new business and the strong interest in Afrox's innovative industrial gas
products, applications and solutions led to an increase compared to 2016 volumes. Afrox offers innovative products and
solutions within a broad range of applications for most sectors of sub Saharan industry. New and regained business within
the industrial market demonstrated Afrox's ability to successfully compete in its core segment. Within Industrial Gases
(acetylene, oxygen, nitrogen and argon), the demand for our bulk products from new business and expansion at existing
customers, lead to an increase in volume, despite the impact of a major plant outage during the first half of 2017.
Packaged gases volumes were above prior year levels, with good recoveries in demand for oxygen from various applications.
Afrox successfully introduced the new cylinder tracking and management system, "Track and Trace" and the implementation
of more effective price cost management, resulted in an improvement in revenue compared to the comparative period. Our
Bulk Gases volumes increased compared to 2016 and within our healthcare business, Medical Gases revenue continued to
increase from higher volumes. This reflects Afrox's strength in the Healthcare market due to its combined product and
service offering and a tailor-made solution for the increase in demand in the public and private hospital sector, as well
as the growing Homecare market. The investment into our new fully automated filling plant for Healthcare Gases
demonstrates Afrox's commitment and leadership in this key area. Hospitality Gases and Special Gases have shown, good
volume growth in most areas. CO2 volumes have increased despite constrained product availability from our major source.
Gross profit after distribution expenses (GPADE) margins further improved due to efficiencies in operations and
distribution. Improved cost recoveries across most businesses, coupled with the contribution from the achievement of
higher volumes, resulted in a 130bps improvement in the underlying margin. The reported GPADE was however 10.5% lower
than the prior year due to the AMSA settlement received in 2016.
Liquefied Petroleum Gas (LPG)
Robust growth in revenue of 11% compared to 2016 from a 10.4% increase in volumes despite a decrease in market prices.
Margins were however higher than prior year levels. The continuation of Afrox's LPG import strategy has proven to be
effective. Afrox managed to grow the LPG business as a result of a stable supply chain, resulting in continued strong
GPADE levels, with a margin of 21.3% (2016: 20.5%). Adjusted for the change in market prices, GPADE increased by 18.2% to
R425 million. Afrox's total volumes sold increased by 10.4% demonstrating Afrox's ability to grow the LPG market. A 35%
increase in imported LPG in conjunction with the stable supply from the local refineries supported Afrox in maintaining
its service level to its industrial customers and justified the current year investment in 120 thousand cylinders for the
domestic and hospitality markets that arrived in South Africa at the beginning of 2017. The strategy to supply the
domestic market from a combination of imports and refinery off-takes has clearly paid off and Afrox's could further
improve its position in the African LPG market being one of the most efficient and reliable suppliers.
Afrox focuses on efficient supply of LPG for various applications and industry sectors, which results in a very reliable,
environmentally friendly and cost-effective alternative source of energy. The investments of the past years impacted on
the overall market development and significantly reduced the supply constraints throughout the regions.
GPADE margin increased by 80bps to 21.3% or 21.8% at comparable LPG market prices. The final report from the Competition
Commission (the Commission) was issued in March 2017. Afrox continues to cooperate with, and has introduced the agreed
recommendations of the Commission.
Hard Goods
Total revenue in this segment decreased by 0.9% to R660 million (2016: R666 million) as a result of non-repeating
business and the continued subdued demand in the mining and manufacturing industry. The continuation of various
efficiency programs in combination with good price cost recovery, led to an increase in margins from 34.9% to 36.7%, an
increase of (+180bps) and resulted in a GPADE of R242 million (2016: R232 million). The retention of key customers,
favourable import deals and various improvements in Afrox's premium product ranges supported this positive development.
Even though most volumes in welding and gas equipment products are impacted by the continued slow growth in the mining,
iron and steel and the manufacturing industry, the Hard Goods segment has seen improved volumes at our welding consumable
factory, the biggest factory of its kind on the African continent. Afrox's renowned Self Rescue Pack units for the mining
industry sold at similar levels compared to 2016 benefiting from various long-term service contracts.
Afrox continues its focus on further improving supply, production and logistics within the segment in order to create
additional economies of scale. With the combination of overseas exports complementing our portfolio, strong cost
containment from procurement and good price cost management, our Hard Goods business further stabilised despite the
difficult economic environment for this segment and the uncertainty in the mining sector.
The reported improvement of 190 bps in the GPADE margin to 36.7% is a result of higher efficiencies and improved price
cost recovery. The business segment experienced steep declines in GPADE and revenue in 2016. Continued investment in
innovation and the introduction of new applications should ensure continued growth in this sector.
Emerging Africa
Excluding adverse effects from weakening currencies in our subsidiaries, the revenue of our segment
Emerging Africa at R756 million remained consistent with 2016 levels (2016: R755 million) or 3% growth without currency
effects. Emerging Africa economies are experiencing the first signs of an improvement, due to a modest recovery in
commodity prices.
GPADE increased by 6.5% to R326 million (2016: R306 million), or 12% excluding the currency effect, with an increase in
the reported margin of 200bps compared to 2016. This robust performance was achieved mainly as a result of good LPG
volumes, strong discipline in price cost recovery and the initial implementation of our group wide SWIFT program,
allowing the business to benefit from proven cost reduction and operational efficiency measures.
Emerging Africa continues to invest in its combined product offering of Industrial Gases, Hard Goods and the reliable
supply from its established position in the LPG market.
Dividend
It is the Company's policy to consider dividends bi-annually. The Board of directors has declared a final cash dividend
of 54.0 cents per share (2016: 56.0 cents), declared out of the after-tax profits for the year ended 31 December 2017.
The total dividend for the year amounts to 100 cents (2016: 94 cents), based on Afrox's policy, of the dividend being
covered two times by headline earnings per share.
Outlook
Afrox believes in its products, people and its strong value contribution to its customers. Despite the expected continued
low economic growth in 2018 Afrox will continue to seek specific growth opportunities, maintain its control over cost
increases and continue its productivity improvement initiatives.
Bernd Eulitz Schalk Venter Matthias Vogt 22 February 2018
Chairman Managing Director Group Financial Director Johannesburg
NOTICE OF FINAL DIVIDEND DECLARATION NUMBER 182 AND SALIENT FEATURES
Notice is hereby given that a gross cash dividend of 54.0 cents per ordinary share, being the final dividend for the year
ended 31 December 2017, has been declared payable to all shareholders of Afrox recorded in the register on Friday,
6 April 2018.
The salient dates for the declaration and payment of the final dividend are as follows:
Last day to trade ordinary shares "cum" dividend Tuesday, 3 April 2018
Ordinary shares trade "ex" the dividend Wednesday, 4 April 2018
Record date Friday, 6 April 2018
Payment date Monday, 9 April 2018
Shares may not be dematerialised or rematerialised between Wednesday, 4 April 2018 and Friday, 6 April 2018, both days
inclusive.
The local net dividend amount is 43.2 cents (2016: 44.8 cents) per share for shareholders liable to pay Dividends Tax and
54.0 cents (2016: 56.0 cents) per share for shareholders exempt from Dividends Tax.
In terms of the Dividends Tax, the following additional information is disclosed:
- The dividend has been declared out of income reserves.
- The local Dividends Tax rate is 20%, subject to double tax agreement.
- Afrox currently has 308 567 602 ordinary shares (excluding treasury shares of 34 285 308) in issue.
- Afrox's income tax reference number is 9350042710.
By order of the Board
Cheryl Singh 22 February 2018
Company Secretary Johannesburg
Forward-looking statements disclaimer: This 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. Forward-looking statements are the
responsibility of the Board of directors of Afrox.
Summarised consolidated financial statements
Summarised consolidated income statement
for the year ended 31 December 2017
R'million 31 December 31 December
2017 2016
Audited Audited
Revenue 5 693 5 537
Operating expenses (4 510) (4 300)
Earnings before interest, taxation, depreciation,
amortisation and impairments (EBITDA) 1 183 1 237
Depreciation and amortisation (328) (379)
Impairment of tangible assets - (10)
Earnings before interest and taxation (EBIT) 855 848
Finance expense (108) (112)
Finance income 133 126
Income from associate net of tax - 2
Profit before taxation 880 864
Taxation (242) (264)
Profit for the year 638 600
Attributable to:
Owners of the company 628 597
Non-controlling interests 10 3
Profit for the year 638 600
Earnings per share - cents
Basic earnings per share - cents 203,6 193,3
Diluted earnings per share - cents 201,8 192,9
Summarised consolidated statement of comprehensive income
for the year ended 31 December 2017
R'million 31 December 31 December
2017 2016
Audited Audited
Profit for the year 638 600
Other comprehensive income/ (loss) 45 (106)
Items that are or may be reclassified to profit or loss 9 (51)
Translation differences on foreign operations 9 (43)
Translation differences relating to non-controlling interests (1) (4)
Cash flow hedges - effective portion of changes
in fair value (net of tax) 1 (4)
Items that will not be reclassified to profit or loss 36 (55)
Remeasurement of retirement benefits (net of tax) 36 (55)
Total comprehensive income for the year 683 494
Total comprehensive income attributable to:
Owners of the Company 674 495
Non-controlling interests 9 (1)
683 494
Summarised consolidated statement of financial position
at 31 December 2017
R'million Note 31 December 31 December
2017 2016
Audited Audited
ASSETS
Property, plant and equipment 3 2 964 2 952
Retirement benefits assets 484 406
Lease receivables 66 72
Other non-current assets 39 52
Deferred taxation assets 13 15
Non-current assets 3 566 3 497
Inventories 710 611
Trade and other receivables 1 094 1 044
Lease receivables 12 16
Receivables from fellow subsidiaries of holding company 130 66
Taxation receivable 57 38
Cash and cash equivalents 1 387 1 175
Current assets 3 390 2 950
Total assets 6 956 6 447
EQUITY AND LIABILITIES
Shareholders' equity 4 001 3 657
Non-controlling interests 33 27
Total equity 4 034 3 684
Long-term borrowings 1 000 1 000
Other long-term financial liability 20 26
Deferred taxation liability 591 553
Non-current liabilities 1 611 1 579
Trade, other payables and provisions 1 126 1 065
Taxation payable 26 26
Payables to fellow subsidiaries of holding company 96 60
Derivative financial instruments 20 11
Bank overdrafts 43 22
Current liabilities 1 311 1 184
Total equity and liabilities 6 956 6 447
Summarised consolidated statement of cash flows
for the year ended 31 December 2017
R'million Note 31 December 31 December
2017 2016
Audited Audited
Earnings before interest and taxation (EBIT) 855 848
Adjustments for:
Depreciation, amortisation and impairments 328 389
Movements in trade receivables and inventory impairment allowances
and provisions (58) (40)
Other non cash movements (26) (27)
Operating cash flows before working capital adjustments 1 099 1 170
Working capital adjustments (102) (11)
Cash generated from operations before restructuring costs 997 1 159
Restructuring costs paid - (60)
Cash generated from operations 997 1 099
Interest paid (105) (104)
Interest received 74 38
Taxation paid (235) (177)
Dividends received 1 1
Cash available from operating activities 732 857
Dividends paid to owners of the parent (315) (275)
Dividends to non-controlling interests (3) (9)
Net cash inflow from operating activities 414 573
Additions to property, plant and equipment (350) (379)
Intangible assets acquired - (10)
Proceeds from disposal of property, plant and equipment 106 84
Other investing activities 28 33
Net cash outflow from investing activities (216) (272)
Long term borrowings raised 600 -
Long term borrowings repaid (600) -
Incentive share scheme shares purchased on behalf of employees (7) -
Net cash outflow from financing activities (7) -
Net increase in cash and cash equivalents 191 301
Cash and cash equivalents at the beginning of the year 1 153 852
Cash and cash equivalents at the end of the year 1 344 1 153
Summarised consolidated statement of changes in equity
for the year ended 31 December 2017
Attributable to owners of the Company
R'million Incentive
scheme
shares and
share based FCTR* and Remeasurement Non-
Share payment hedging of retirement Retained controlling Total
capital reserves reserves benefits earnings interests equity
Balance at 1 January 2016 552 - (50) 317 2 612 37 3 468
Total comprehensive income - - (47) (55) 597 (1) 494
Profit for the year - - - - 597 3 600
Other comprehensive income, net of taxation - - (47) (55) - (4) (106)
Share based payments, net of tax - 6 - - - - 6
Forfeited shares - (11) - - 11 - -
Dividends - - - - (275) (9) (284)
Transfer to retained earnings - 5 - (262) 257 - -
Balance at 31 December 2016 552 - (97) - 3 202 27 3 684
Total comprehensive income - - 10 - 664 9 683
Profit for the year - - - - 628 10 638
Other comprehensive income, net of tax - - 10 - 36 (1) 45
Transactions with owners
Shares purchased on behalf of employees - - - - (7) - (7)
Share based payments, net of tax - - - - (8) - (8)
Transfer to retained earnings - - - - - -
Dividends - - - - (315) (3) (318)
Balance at 31 December 2017 552 - (87) - 3 536 33 4 034
* Foreign currency translation reserve.
Segmental report
for the year ended 31 December 2017
Business segments are identified on the basis of internal reports that are regularly reviewed by the Group's and
Company's chief operating decision making body, the Executive Directors, in order to allocate resources to the segment
and assess its performance. The performance of the segments is managed and evaluated using revenue and gross profit after
distribution expenses only. Assets and liabilities are centrally managed at a corporate level and therefore not used in
the decision to allocate resources to operating segments. Segments have been determined based on business segments:
Atmospheric Gases, LPG, Hard Goods and Emerging Africa.
R'million 31 December 31 December
2017 2016
Audited Audited
Revenue* 5 693 5 537
Atmospheric gases 2 283 2 319
LPG 1 994 1 797
Hard goods 660 666
Emerging Africa 756 755
Gross profit after distribution expenses (GPADE) 1 770 1 775
Atmospheric gases 777 868
LPG 425 369
Hard goods 242 232
Emerging Africa 326 306
Reconciliation of GPADE to EBIT
GPADE for business segments 1 770 1 775
Other operating expenses (915) (917)
Impairments - (10)
Earnings before interest and taxation (EBIT) 855 848
Geographical representation
Revenue 5 693 5 537
South Africa 4 937 4 782
Emerging Africa^ 756 755
Non-current assets 3 566 3 497
South Africa 3 311 3 242
Emerging Africa^ 255 255
* Revenue from external customers.
^ The revenue and non-current assets foreign country geographical split has been aggregated as Emerging Africa.
The individual amounts are considered to be immaterial.
Statistics and ratios
for the year ended 31 December 2017
31 December 31 December
2017 2016
Audited Audited
Average number of shares in issue during the period ('000) 308 568 308 568
Shares in issue ('000) 308 568 308 568
Dividends per share (cents) 100,0 94,0
Final 54,0 56,0
Interim 46,0 38,0
Ratios
EBITDA margin (%) 20,8 22,3
Return on capital employed 23,7 24,6
Effective taxation rate (%) 27,5 30,5
Gearing (%) (10) (4,4)
Dividend cover on headline earnings (times) 2,0 2,0
Notes to the summarised consolidated financial statements
for the year ended 31 December 2017
African Oxygen Limited ("Afrox" or the "Company") is a South African registered company. The summarised 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 and a trading trust.
1 Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for summary reports, and the requirements of the Companies Act of South Africa applicable to
summary financial statements. The listing requirements require a summary to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements,
from which the summary consolidated financial statements were derived, are in terms of IFRS and are consistent with the
accounting policies applied in the preparation of the previous consolidated annual financial statements.
The accounting policies applied in the presentation of the summarised consolidated financial statements are consistent
with those applied for the year ended 31 December 2016. The summarised consolidated financial statements are presented in
Rands which is the functional and presentation currency.
The summarised consolidated financial statements are prepared on the historical cost basis except for the following items
which are measured using an alternative basis at each reporting date:
- Derivative financial instruments measured at fair value through profit or loss;
- Retirement benefit assets and liabilities are measured at the fair value of the planned assets less the present value
of the defined benefit obligation; and
- Share based payment awards are measured at fair value. The fair value of the equity instruments granted is estimated
using industry accepted techniques.
The directors take full responsibility for the preparation of these summarised consolidated financial statements and that
the financial information has been correctly extracted from the full audited consolidated financial statements.
This report was compiled under the supervision of Matthias Vogt, Group Financial Director.
2 New standards and amendments
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with a date of initial application of 1 January 2017:
- Disclosure Initiative (Amendments to IAS 7); and
- Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12).
The adoption of the amendments to standards listed above did not have a significant impact on the consolidated financial
statements.
3 Property, plant and equipment
R'million 31 December 31 December
2017 2016
Audited Audited
Opening carrying value 2 952 2 988
Additions, net of transfers from assets under construction 350 379
Transfer to assets held-for-sale - (7)
Impairments - (10)
Disposals (8) (15)
Depreciation (316) (367)
Translation differences (14) (16)
Closing carrying value 2 964 2 952
4 FAIR VALUE CLASSIFICATION AND MEASUREMENT
Accounting classification and fair value
The classification of each class of financial assets and liabilities, and their fair values are:
R'million Fair Value
31 December 2017
Financial liability measured at fair value
Derivative financial instruments 20
31 December 2016
Financial liability measured at fair value
Derivative financial instruments 11
The derivatives are a level 2 measurement and the fair value of the derivative financial instruments is based on broker
quotes. Similar contracts are traded in an active market and the quote reflect the actual transactions in similar
instruments. The carrying value of all other financial instruments closely approximates their fair value due to their
short term nature.
5 Basic, diluted and headline earnings per share
Headline earnings and dilutive earnings per share are calculated on headline earnings of R620 million (2016: R585
million). A weighted average number of ordinary shares of 308 567 602 (2016: 308 567 602) in issue during the year was
used to calculate headline earnings per share and 311 275 880 (2016: 311 120 193) for dilutive earnings per share as
2 708 278 (2016: 2 552 591) shares had a dilutive impact.
R'million 31 December 31 December
2017 2016
Audited Audited
Profit for the period 628 597
Adjusted for the effects of:
Profit on disposal of property, plant and equipment (11) (26)
Impairment of property, plant and equipment - 10
617 581
Taxation 3 4
Headline earnings 620 585
Basic earnings per share - cents 203,6 193,3
Diluted earnings per share - cents 201,8 192,9
Headline earnings per share - cents 201,0 189,4
Diluted headline earning per share - cents 199,2 189,0
6 Related party transactions
During the year, Afrox, in the ordinary course of business, entered into various sale, purchase and service transactions
with associate, receivables from fellow subsidiaries of holding company, receivables from group companies, payables to
fellow subsidiaries of holding company and payables to group companies. These transactions were subject to terms that are
no less favourable than those offered by third parties.
7 Update on key litigation matters
Afrox is presently a respondent in an investigation by the Competition Commission of South Africa with respect to the LPG
sector. Afrox is cooperating fully with the Commission's investigation. As at the date of this report, there is no other
outstanding litigation of a material nature against the Group.
8 Subsequent events
The directors are not aware of any material matter or circumstance arising between 31 December 2017 and the date of
this report on which comment is required.
9 Summarised consolidated financial statements
This summarised consolidated financial statements are extracted from audited consolidated financial statements, but is
not itself audited. The consolidated financial statements were audited by KPMG Inc., who expressed an unmodified
opinion thereon. The audited consolidated annual financial statements and the auditor's report thereon are available for
inspection at the company's registered office. The directors take full responsibility for the preparation of these
summarised consolidated financial statements and that the financial information has been correctly extracted from the
underlying annual financial statements.
Corporate information
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor in South Africa: One Capital
Sponsor in Namibia: Namibia Equity Brokers (Pty) Limited
Directors: S Venter (Managing Director), M Vogt* (Group Financial Director), B Eulitz* (Chairman), M von Plotho*, Dr KDK
Mokhele, CF Wells**, NVL Qangule, GJ Strauss, VN Fakude
* German** British
Company Secretary: C Singh
Auditors: KPMG Inc.
Registered office
Afrox House, 23 Webber Street, Selby
Johannesburg 2001
PO Box 5404, Johannesburg 2000 Telephone +27 (11) 490 0400
Date: 22/02/2018 07:05:00 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.
Sharenet Sites 
