Despite previously pinpointed capacity constraints and a slightly disappointing economic climate, Afrox’s operational results for 15-month period ending December 2007 were good and the company is actively looking ahead for sustained growth.
Core headline earnings per share were 19% higher than the equivalent prior period at 217.5 cents per share and 19% higher at 176.8 cents per share on a 12-month basis. Operating cash flow was a robust R1.3bn but in turn there were high demands on cash flow, not least R1bn in capex, and a special dividend of R185m to shareholders.
Particularly good growth was seen in CO2 with volumes up 12%, Healthcare up 6% and LPG volumes up 4%.
Afrox’s African operations are now in excess of 15% of group operating profit and capacity enhancements in South Africa will ensure reliability of product into the sub-Saharan markets, placing Afrox in a strong position.
Looking forward, Managing Director Tjaart Kruger said, “To re-establish a high performance, customer-orientated company we have redefined the strategy; changed the operating model to create focus, accountability and the culture to deliver.”
“We have introduced new, skilled, people and redeployed existing capabilities and we have ensured these are all in place as we near completion of the capital expansion programme. We are now well positioned to compete, to deliver sustainable, superior results and restore Afrox’s core strength – that of being customer focused.”
Meanwhile, Afrox had already invested in the continent’s future and introduced a welding and cutting process development service to assist large industrial customers to overcome skills and capacity shortages, which impact on production throughput, quality and profitability.
Johan Pieterse, Afrox Application Manager - process development, noted the department is staffed by process and application specialists whose brief is to assist Afrox’s industrial customers improve efficiencies and quality, and also contain the costs of their welding and cutting processes.
“As the leading supplier of gas, welding consumables and equipment to the industrial welding and cutting market, we are ideally positioned to anticipate the needs of the general fabrication industry,” he said.
“We have identified a need for high-level welding engineering skills which South African manufacturers are sometimes unable to obtain in-house.”
In essence the development specialists will look at complete processes with an eye to enhancing these. When specialist knowledge is required, for instance for plasma cutting or submerged arc welding, the relevant support specialist with the knowledge for that process will be called on to assist. The Afrox process development department also undertakes equipment and programme audits and can make recommendations on critical issues such as equipment and work procedure safety requirements and the use of personal protective equipment.
“We are also backed by our holding company, the Linde group as well as leading global equipment and consumable suppliers with which we have long standing relationships,” Pieterse added.
“The complete service, for which we are already receiving enquiries, aims to provide world-class expertise aimed at enhancing the quality, output, safety, and profitability of the South African industrial manufacturing base. This can be achieved, we believe, through a service that harmonises all aspects of cutting and welding processes - consumable, gas and equipment, combined with safety - into seamless processes.”
On a less bubbly note however, the South African soft drink market is apparently still battling a countrywide shortage of carbon dioxide. One of the badly hit companies, Coca-Cola SA, indicated recently that it was working on a plan to reduce its dependence on external carbon dioxide suppliers such as Afrox.
Afrox processes and sells carbon dioxide that is captured as a by-product of chemical processes of companies such as Sasol. The company is in the middle of commissioning a new 25-tpd carbon dioxide purification plant at Sasolburg and has recently been experiencing supply shortages of carbon dioxide, warning customers that the situation would arise.
Afrox said it had also carried out maintenance on some of its carbon dioxide purification facilities, but Coca-Cola SA spokesman Kaizer Nyatsumba commented recently, “Considerable progress has been made since then, but much still remains to be done, pending permission from the relevant authorities.”
South African Breweries (SAB) spokeswoman Janine van Stolk said the impact on ABI, SAB's soft drink division, had been small and sporadic.