AFX
AFX
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 Produced by the JSE SENS Department.
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